In a litigation initiated by a software company against the National Revenue Agency, the court revoked the tax assessment bill imposing 50 % fine on all dividents payments in cash. Acting as cassation instance with its final decision 4759 fo 14.7.2017, the Administrative Court in the City of Sofia confirmed the revocation by the lower instance court. Merits of the court provide fundamental contribution to the case-low in similar cases, in two separate directions:
I. Before imposing any sanction, tax authorities shall consider if cash payments were possible at all. A software company that has never had any cash inflow, and that had all of its income proceeds through bank transfer, could never be able to initiate any substantial cash payment. The National Revenue Agency may find violation and impose sanction based on accounting error and/or primary documents misstatement.
II. A shareholder can always conduct setting-off (netting-off) with its own company concerning mutually owed amounts.
Those conclusions of the court potentially may have wide practical implications in accounting for dividend payments, as well as in all financial relations between a shareholder and a company in general.