- Ivan Nikolaev, attorney-at-law,
Content
The Law on Local Taxes and Fees regulates that they are exempt from tax, in addition to all others listed, and the usual gifts (Art. 48, para. 1, item 5 ZMDT). Practically this means that the gift is not taxed as gratuitously acquired property, which, as a general rule, unless it is acquired by donation between direct relatives or spouses (Art. 44, Para. 6 ZMDT), is taxed by the municipality on the valuation of the property from 0.4 to 0.8 percent - in case of donation between siblings and their children; from 3.3 to 6.6 percent - in the case of a donation between persons other than those specified, if they are not persons under Art. 44, para. 6 ZMDT.
Also, according to Art. 13, para. 2 of the Personal Income Tax Act, assets acquired by donation are not considered taxable income, and donations are not necessarily declared, but at the option of the liable person in the annual tax return - art. 50a, para. 1 VAT. Usual gifts (which are donations) are also not subject to declaration, according to Art. 49, para. 4 of the ZMDT.
However, in cases where the received is not a customary gift within the meaning of Art. 48, para. 1, item 5 of the Income Tax Act, the property should be declared and taxed, payable within two months of its receipt - art. 49, para. 3 of the ZMDT.
This raises the question of the content of the concept "usual gifts" gifts in ZMDT, which is absent as a legal definition in the law.
Usual donations under ZN, ZZD and TZ
It cannot be denied that the concept usual gifts is borrowed from Law of Inheritance (Promulgation, SG No. 22 of 29.01.1949), and more specifically Art. 30, para. 1 ZN, who says that an heir entitled to a reserved portion, who cannot receive the full amount of this portion due to bequests or donations, may request their reduction to the amount necessary to supplement his reserved portion, after taking into account the bequests and donations made in his favor, except on the usual gifts.
The concept of customary gifts may also be borrowed from The Law on Obligations and Contracts (Official Gazette, SG No. 275 of 22.11.1950), and more precisely Art. 227, para. 2 ZZD, which states that the provisions for rescinding the grant “do not refer to the usual ones and rewarding gifts".
It is not unimportant that customary gifts are also mentioned in the Commercial Law as irrevocable contracts – Art. 647, para. 1, item 1 ТZ.
However, in all three laws - ЗН, ЗЗД and ТЗ, there is no legal definition of the concept usual gifts, which we can assume to be identical in content to usual gifts according to ZMDT. This poses the problem of distinguishing between gifts (donations) that are customary and those that are not, and accordingly subject to both declaration and taxation, and cancellation in the relevant cases.
Due to the similarities in the concepts of gifts, gifts and donations, I believe that they should be discussed together, as one type of donation, and that no distinction should be made between them, insofar as they are synonymous[1].
The cause of donation and the habit of donating
There is no dispute in doctrine and practice that, as a causal contract, the donation has a special basis, characteristic only of the donation contract - animus donandi. A donation can be distinguished according to the reasons for which it is made – rewarding, usual, mutual donation (art. 227, para. 2 PPE, art. 30 and art. 31 of the Labor Code), as well as disinterested donation, in which the donor will receive nothing and expects nothing.
Customary donations are accordingly accepted in the doctrine as those which are made at a particular occasion - events at which it is accepted in society to make donations (gifts), such as birthday, marriage, birth of a child[2]. The occasions on which it is customary to make gifts, however, cannot be exhaustively enumerated, and, in my opinion, cannot be considered the sole motive of customary donations, as will be made clear.
Legal customs are a recognized source of private law, but also of administrative law - art. 5 Civil Code, Art. 144 APC. It is accepted that legal custom (customary norm) becomes a source of law in the presence of two elements - continuous application of the rule "since time immemorial" (consuetudo inveterate) and the resulting creation conviction in the prevailing legal consciousness of its obligation (opinio necessitatis). However, legal customs are not equivalent to customs in practice (practice in the exchange and factual customs), as factual customs lack obligation, they are not a source of law, since they lack a conviction of obligation, but are observed only for convenience, security and saving time[3]. Accordingly, customs in practice may become legal customs as well as be taken into account in the assessment of other relationships.
Customary donations represent customs in practice in their more common manifestations, insofar as their non-performance often has no consequences, i.e. is not an inflexible rule of conduct. Even if accepted as legal customs, however, I consider that for the most part customary donations cannot meet the criterion of duration and for obligation.
For example, it can be questioned whether the giving of gifts on the occasion of the Nativity of Christ (Christmas) is a custom from time immemorial, and whether it is obligatory according to the prevailing legal consciousness. Such a custom, for example, is not mentioned by Ivan Hadjiyski in "Life and Soul of Our People", Sofia: Link Editions, 2002, nor from Dimitar Marinov in "Bulgarian Customary Law", Sofia: AI Marin Drinov, 1995. It is debatable whether this tradition even has a history of more than a few centuries, and only in individual cities around the world, far from Bulgaria, and whether it has not become "common" only in recent decades[4]. However, there seems to be no doubt that this custom exists, rooted in society's overall understanding of celebrating and spending the last week of the month of December[5].
Occasions for gift giving
I believe that the law and even the custom cannot cover all occasions for making donations by way of gifts. There are some occasions that are common to entire cultures, but there are also those that are strictly individual to social units family, spouses, couples, friends, colleagues, etc. Giving a gift on a certain date coinciding with a religious or national holiday may qualify as a customary gift, but customary gifts can also be given for personal events – gifts on the occasion of a wedding and the birth of a child are undeniably rooted in the understandings of every society, including ours[6]. Birthday and name day gifts, like Christmas gifts, can be defined as a recent custom, and certainly not from time immemorial, but that does not make them any less traditional. Anniversary gifts are also relatively new holidays for husbands and couples, as well as occasions such as graduations (proms). A donation of a large sum of money is accepted as a normal donation[7] from a grandson's grandfather, on the occasion of the grandson's admission to university (Decision No. 260072 of 19.05.2022 of the RS - Burgas pursuant to City Decree No. 2103/2020.).
However, usual gifts can also be made without specific events - e.g. Undoubtedly, a gift between a couple, spouses, or between parents and children, as a surprise, in view of lasting relationships between people, should be considered as a customary gift and a customary donation. Usual gifts between friends and colleagues can also be given for no reason, but with a view to lasting or deep relationships.
They are not accepted as usual gifts (customary donations) according to Art. 48, para. 1, item 5 ZMDT, however tips, provided by customers, since they are given in connection with a service provided, which is not equivalent to a usual occasion, and represent taxable income according to Art. 35, item 6 of the Income Tax Act - Decision No. 1201 of 25.09.2020 of the AdmS - Burgas by adm. d. No. 1311/2020 However, tips can be accepted as remunerative donations, which does not change their taxability.
The usual gifts and value of the gift
However, a real problem in law enforcement is the question of the value of gifts and donations, when it is necessary to assess whether they are customary, and accordingly subject to taxation and cancellation or not, as well as their type - whether customary gifts and donations can be money, jewelry, real estate, etc.
The marriage gifts can be defined as an independent type of customary gifts in view of the occasion, but if the essence of gift-giving as a tradition is examined, curious conclusions can be reached - for example there is no unified understanding of the type and amount of donations over the years, and in view of the social stratum to which the husbands and participants in the ritual belong, the donations can be diametrically opposed. Thus, for example, the rural understanding of wedding celebrations in the 19th and 20th centuries did not necessarily include gifts from all the guests, but on the other hand, it did not include organizing a treat for all the guests, who usually represented the entire population of the village, who brought their own food[8], while nowadays you will hardly find a wedding where this happens, but there will also be rare guests who do not give a gift to the newlyweds.
Giving a bride's dowry as a marriage custom can consist of providing her with free items for ordinary consumption in everyday life, but it can also consist of giving money for the purchase of real estate[9] (Decision No. 878 of 12.07.2023 of the OS - Varna according to city decree No. 807/2023.), but also the gift of real estate (Decision No. 1220 of 30.10.2008 of the Supreme Court of Appeals pursuant to Administrative Procedure No. 4271/2007, IV year o. ., V year o.).
The value of a customary gift is not limited by law. The historical interpretation of the ZMDT shows that in the previous edition of the same Law on Local Taxes and Fees - Promulgation, Issue, no. 104 of 28.12.1951, repealed, no. 117 of 10.12.1997, in force since 1.01.1998, identical provision of the now effective art. 48, para. 1, item 5 ZMDT was adopted in 1963 - Art. 41a, b. "a" stated that they are exempt from tax "the usual gifts worth up to BGN 80".
Obviously, the limit on the value of the gift was dropped in 1998., when the current Act on Local Taxes and Fees enters into force - Promulgation, SG No. 117 of 10.12.1997, in force from 1.01.1998, as the provision of Art. 48, para. 1, item 5 ZMDT has not undergone revisions until now.
The value and type of customary gifts in judicial practice
Unfortunately, the jurisprudence is extremely divergent in its understanding of whether the value of the donation is relevant to its determination as customary[10]. In Decision No. 138 of 28.07.2014 of the Administrative Court - Pleven pursuant to No. 213/2013, Decision No. 7 of 13.02.2024 of the Administrative Court - Vidin pursuant to No. 23/2021. and Decision of 24.01.2018 of the Administrative Court - Vidin under No. 15/2017 it is assumed that "usual” is the donation of chattels of sentimental value or of insignificant sums of money, or as a donation made on a typical occasion: birth of a child, wedding, birthday, etc., which is usually of low value and there is some relation, usually of a moral character, and based on friendship and kinship.
The opposite is accepted in Decision of 05/09/2011 of the SRS under city decree No. 30337/2007., according to which the donation of BGN 5,000 by a grandfather to his granddaughter on the occasion of a graduation ball constitutes a customary donation. The sum of 4,000 euros, gifted by a grandfather to a grandson on the occasion of his admission to study at a university, is also considered a customary donation - Decision No. 260072 of 19.05.2022 of the RS - Burgas pursuant to City Decree No. 2103/2020.
IN Decision No. 1212 of 3.II.1994 under city decree No. 2305/93, IV year o. it is accepted that jewelry worth BGN 8,000 excludes their treatment as ordinary gifts. However, the opposite is accepted in Decision No. 238 of 03/07/2017 of the Administrative Court - Plovdiv pursuant to City Decree No. 74/2017. and Decision No. 353 of 18.11.2016 of RS - Asenovgrad under City Decree No. 2149/2015. - it was investigated that jewelry with a total value of BGN 4,580 are customary gifts, in view of the religious and ethnic traditions of the countries at the time of marriage and the gifts for the Bairam holiday.
IN Decision No. 339 of 18.12.2005 of RS - Petrich under n. a. x. e. No. 80/2005 it is assumed that the substantial value of the donation excludes its customary character, just as the donation of immovable property does not constitute a customary donation. The same is accepted in the Decision dated 7.01.2010 of the OS - Stara Zagora pursuant to city ordinance No. 561/2009, Decision No. 714 dated 21.07.2009 of the RS - Stara Zagora pursuant to city ordinance No. 175/2008 y., Decision No. 114 of 07/08/2019 of the PAS according to city ordinance No. 270/2019, according to which the donation of immovable property cannot be customary.
On the other hand, the provision of funds for the construction of a house from parents to a son, worth about BGN 73,940.36, is considered a normal donation. given the permanently established national custom of parents building homes for their children – Decision No. 157 of 16.01.2014 of the BAS in accordance with City Law No. 207/2013. It is also customary to donate a house from parents to a daughter on the occasion of her 30th anniversary and her marriage - Decision No. 48 of 06/08/2018 of the RS - Sredets according to City Decree No. 600/2017. The provision of the amount of BGN 4,000 for the acquisition of real estate, as a gift, from a sister to a brother is also accepted as a usual donation - Decision No. 251 of 30.10.2019 of the OS - Gabrovo according to the city of the city of d. No. 219/2019.
Particular attention should be paid to the problem arising from the lack of obligation to declare customary gifts, according to Art. 49, para. 4 of the ZMDT. C Decision No. 809 of 7.12.2010 of the PAS under city ordinance No. 660/2010 and Decision No. 522 of 19.04.2010 of OS - Plovdiv pursuant to city ordinance No. 2961/2008., formed at the request of the Commission for the establishment of property acquired from criminal activity /KUIPPD/, a case was examined in which it is claimed that the sum of over BGN 100,000 was received on various occasions - a wedding celebration and a baptism, at which many guests and relatives were present, including from abroad. In the court acts, it is accepted that it is not possible to prove the receipt of procedural sums as gifts from the guests of the celebrations, insofar as the witness statements are inadmissible for some of them, concerning sums over BGN 5,000, and on the other hand - according to the court, such celebrations required incurring significant costs. The development of production is similar in Decision No. 168 of 14.07.2016 of the State Administrative Court of Ukraine under Administrative Law No. 481/2015. – the defendants failed to prove the receipt of the sums of BGN 40,000 from a wedding celebration and BGN 30,000 from a baptism. In a similar sense, the proceedings under a revision act developed, claiming that the amount of BGN 20,000 was received from a wedding celebration, which the court did not accept as proven, despite the fact that the best man was present when the money was counted - Decision No. 987 of 19.07.2022 of the AdmS - Varna by adm. d. No. 875/2022 A wedding gift of BGN 40,000 could also not be proven with witness statements - Decision No. 796 of 22.04.2019 of the AdmS - Burgas according to adm. e. No. 3210/2018
The problem in these cases is the subjective perception of donations - there is no legal reason for individuals to accept gifts of significant value not as donations, which are tax-free, but as income or taxable donations, especially if there is a specific occasion (wedding, baptism, birthday, etc.) .n.) and lack of a limit on the value of usual gifts under ZMDT or in another regulatory act. Next, it is unusual in everyday life to collect written evidence when receiving cash donations at a wedding, so that usual gifts of more than BGN 5,000 can be proven. However, cases of non-provability of customary gifts of similar size are present, along with the consequences thereof.
Instead of a conclusion
Customary gifts, exempt from taxation and obligation to declare, are not framed by law by value, type, or occasion. "Smallness" and "sentimentality" are not their defining features, as is wrongly assumed in some case law.
In modern realities, gift-giving is a custom that has become an art, in which there is often a desire for increasing originality and value of the gift, which is invariably linked to the way of thinking of the consumer society. The normality of the gift is not excluded by its originality, value or type of good, nor by the moment of gifting. These elements depend solely on the will and capabilities of the donor and donations, as well as on their understanding of a gift, which circumstances are relevant in the assessment of custom, and are objective criteria. Or as they say, if you live in Rome, live like the Romans (Si vivis Romae, Romano vivito more).
What makes it impossible to frame the normality of the gift is the inability to evaluate human relationships, and feelings of love, affection, and closeness. The only thing that needs to be examined in qualifying customary gifts as such is the totality of circumstances that led to the act of donation, which may be extremely different in each individual case, but which must logically lead to their natural conclusion - the gift to pleased its recipient.
Ivan Nikolaev, attorney-at-law
[1] https://ibl.bas.bg/rbe/lang/bg/gift/
[2] Kozhuharov, Al. Obligation law - separate types of obligation relations, Sofia: Jurispress, 2002, p. 152.
[3] Ruschev, I. Normative acts source of private law.. Sofia: Albatros, 2008, p. 16 et seq.
[4] A popular understanding of the tradition of giving gifts at Christmas is associated with St. Nicholas, Archbishop of Mirliki, Miracle Worker, born in 270 in Patara, a city in the Asia Minor region of Lycia, died on December 6, 342. It is believed that St. Nicholas (in Dutch Sint-Nicolaas) is the origin of the figure of Sinterklaas, who became the Santa Claus (St. Nick) or Father Christmas, revered by the Dutch. The holiday of Sinterklaas was revived in the early 19th century and popularized by New Yorkers with Dutch roots, wanting to preserve the memory of the Dutch founding of the city, which was called New Amsterdam until 1664. However, the real commercialization of the holiday began in 1932 again in America by painting it with in red and white colors, as an advertisement for a famous soft drink, which image has survived to this day and is associated with gifts.
[5] In my childhood memories, gifts were not always given at Christmas, but sometimes at New Year's. I have heard stories from my parents that this tradition was far from widespread in the small settlements outside the cities in the 60s and 70s of the 20th century in Bulgaria.
[6] Marinov, D. "Bulgarian customary law", Sofia: AI Marin Drinov, 1995, pp. 154, 171.
[7] The amount of 4,000 euros is indicated in the case study.
[8] Hadjiyski, I. "Life and soul of our people", Sofia: Link Editions, 2002, p. 129.
[9] The gift of property in dowry can find curious examples in history and religion. For example, the Holy Scriptures mention that the wife of King Solomon received the city of Gezer as a dowry from her father, the Pharaoh of Egypt (1 Kings 9:16). The story of the marriage between Tsar Ivan Assen II and the daughter of the Hungarian king Andrew II (Andras II) - Anna-Maria Arpad in 1221 is also known. The regions of Belgrade and Branichevo - Zlatarski were given as a dowry. History of the Bulgarian state in the Middle Ages centuries, T. III. Sofia: Science and Art, 1972, p. 326.
[10] The question was asked as a ground for a cassation appeal, which was not allowed - Decision No. 383 of 20.03.2013 of the Supreme Court of Appeals under City Decree No. 1314/2012, IV year o., GK.
