I. Changes in the Bulgarian Corporate Income Taxation Act
New chapters of the Act, introduce the requirements of two European directives (Council Directive (EU) 2016/1164 of July 12, 2016 - twentieth chapter and Council Directive (EU) 2017/952 of May 29, 2017 - chapter nine “B "). The provisions are directed to restrict aggressive tax practices aimed at tax avoidance by transferring assets outside of Bulgaria and in case of hybrid discrepancies and other with a taxpayer who is a subject to corporate taxation in one or more Member States.
- If the tax liable person transfers assets or activity from its head office or from its place of business to another part of the enterprise located outside the country or stops being treated as a local person for tax purposes in Bulgaria, the Republic of Bulgaria loses all or part of its right to tax the result of the subsequent disposition of the transferred assets/ business activity (Art. 155). The capital profit is subject to taxation, regardless of the fact that it has not been obtained on the territory of the country;
- The tax financial result of the tax liable person who transfers assets / business activity is converted at the difference between the market price of the asset and the taxable value of the transferred asset at the time of the transfer (Art. 155a (1));
- The provisions do not apply in case of changes in the ownership of the asset or in case of return of temporarily transferred assets / business activities in the country within a period of 12 months (temporary transfer of assets) (Art. 155c);
- According to Art. 47f of the Corporate Income Taxation Act, hybrid discrepancies exist if they lead to deduction without inclusion (deduction of the taxable result in the payer's jurisdiction without this leading to the taxable result being included in the tax area of the receiver) or double deduction (simultaneous deduction of the taxable result in the tax jurisdiction of the payer and the receiver);
Hybrid discrepancies may arise in some cases, as follows: for payments by financial instruments, for payments to or from a hybrid entities, payments to companies with one or more places of business, payments to a non-taxable place of business, contingent payments between the head offices of a hybrid entity and its place of business or between two or more places of business.
- As of January 1, 2020, repair expenses for elements of a technical infrastructure that are public state or public municipal property and used by the tax liable person in the course of his or her independent economic activity, where the elements of the technical infrastructure are accessible to use by other entities, will be recognized for tax purposes. The expenses will not be treated as supplies unless a remuneration has been agreed (Art. 10b of the VAT-Act).
- As of January 1, 2020, if the requirements for the use (spending) of the assigned corporate tax are not fulfilled – the latter is due in full amount in accordance with the general legal procedure for the respective year in which the tax has emerged.
II. Changes in the Bulgarian Value Added Tax Act
- A mandatory registration according to the VAT-Act within a period of 7 days is introduced if an activity between related persons or persons acting in concert is generally carried out consistently and the turnover exceeds BGN 50,000. An activity is considered to be homogeneous when there is a significant identity with respect to two or more of the following characteristics: the goods or services offered, the assets used, the staff, the trade mark/name of the establishment, suppliers/customers. (Art. 96 Para. 10 of the VAT-Act). These legal provisions are aimed at restricting the circumvention of the registration according to the VAT-Act when a turnover of BGN 50,000 is reached by founding a new company.
- As of January 1, 2020, a new “On-Demand Warehousing Regime” was introduced. A tax liable person may transfer goods, forming part of his/her business assets from the territory of one Member State to the territory of another Member State under the on-demand warehousing regime when the following conditions are met. The tax liable person who transfers the goods is not settled and has no permanent establishment in the territory of the Member State in which the goods arrive or their transportation ends. The tax liable person for whom the goods are intended to be delivered has been identified for VAT purposes in the Member State in which the goods arrive or their transportation ends. This eliminates the obligation of the sender of the goods to submit an application for registration under the VAT Act in the Member State in which the goods are transported (Art. 15a of the VAT-Act). In order for this regime to apply, the right of ownership of the goods must be transferred no later than 12 months after their transportation.
- A requirement for the recipient to provide his/her VAT-number in connection with intra-community supply of goods is introduced (Art. 7 Para. 1 and Art. 7 Para. 5 item 11 of the VAT-Act);
- A requirement for providing the transport documents for intra-community supplies of goods has been introduced - Art. 53 Para.2 of the VAT-Act.
III. Changes in the Bulgarian Accountancy Act
- As of January 12020, enterprises which prepare their annual financial statements on the basis of International Accounting Standards may proceed to their preparationon the basis of the National Accounting Standards with the exception of the enterprises under Art. 34 Para. 2;
- As of January 1 2020, sole traders who have not carried out any business activity in the reporting period do not submit a declaration (Art. 38 Para. 10);
- If, in accordance with the applicable accounting standards, development expenses are recognized as an intangible asset the distribution of dividends by the enterprise is not allowed until the full amortization or derecognition of this intangible asset, unless the value of the enterprise's reserves (funds) for which distribution according to the requirements of a legal act is allowed and retained earnings from previous years are at least equal to the carrying amount of the recognized intangible asset.(§ 5b of the Accountancy Act).
IV. Changes in the Bulgarian Income Taxes on Natural Persons Act
- A simplified procedure for use of tax benefit for people with reduced work capacity, as well as for children with disabilities and for personal contributions for insurance length of service upon is introduced, which means that the obligation to attach to the annual tax return a valid decision by the Territorial / National Expert Medical Commission and copies of proof of paid contributions pursuant to Art. 9a of the Code of Social Insurance is eliminated. These documents are obtained ex officio from the Bulgarian National Revenue Agency;
- The obligation of enterprises and self-insured persons to declare prizes which are given in the form of additional game or