Bulgaria government has approved a draft proposal to update the double taxation agreement with Romania, according to Sofia Globe.

The new agreement, which complies with Organisation for Economic Co-operation and Development (OECD) guidelines, will apply an entirely new model of distributing the tax burden to improve bilateral relations, stimulate economic co-operation and investment.

The new updated agreement, signed by Bulgaria finance minister Petar Chobanov, will replace the current agreement signed in 1994.

The DTA was initially discussed in a meeting in November 2013, co-chaired by Romanian prime minister Victor Ponta and his Bulgarian counterpart Plamen Oresharski.

The double taxation agreement to avoid and prevent tax evasion was signed under different economic conditions and legal regulations in the area of taxation.

Sofia Globe quoted Bulgarian Government saying: "This makes it an inefficient instrument to deal with cases in the domain of international double taxation and does not create sufficient stimulus for bilateral economic and investment co-operation between the two countries."