Bulgaria

Corporate - Other issues

Last reviewed - 04 February 2020

Intergovernmental agreements (IGAs)

In December 2014, Bulgaria and the United States signed and disclosed a non-reciprocal Model 1B IGA to implement the tax reporting and withholding procedures associated with the Foreign Account Tax Compliance Act (FATCA).

As of 1 January 2016, Bulgaria has implemented the rules on automatic exchange of financial information in compliance with the EU law, OECD recommendations, and FATCA. The tax authorities will exchange financial information with foreign tax offices on an annual basis.

The information concerns individual and company accounts (including trusts, foundations, and pass-through foreign control entities), account balances, and fund movements related to dividends, interest, sales proceeds, assets, etc.

Base erosion and profit shifting (BEPS)

Bulgaria has incorporated measures tackling hybrid mismatches in its Corporate Income Tax Act (e.g. non-taxable dividends from EU/EEA subsidiaries become taxable if the dividend payment is deductible at the level of the paying entity).

The Bulgarian tax authorities generally follow the other BEPS developments and consider them in their approach.

Multilateral Instrument (MLI)

Bulgaria is a signatory to the MLI, as of 7 June 2017. As at 1 January 2019, the MLI has not been ratified by Bulgaria. Detailed information regarding the position/reservations of Bulgaria on the provisions of the MLI can be found in the country’s List of Reservations and Notifications at the Time of Signature, available on the official OECD website.

Common reporting standard (CRS)

Bulgaria has incorporated the CRS in its domestic Tax and Social Security Procedure Code, effective as of 1 January 2016. Detailed information can be found in the OECD’s Automatic Exchange Portal at the OECD BEPS portal.

EU state aid investigations

Currently, there are no investigations on the part of the European Commission (EC) with regard to Bulgarian tax law.

However, in case SA.39869 (2014/N), the EC examined a tax incentive scheme that aims at attracting investments into manufacturing activities in certain of the assisted regions of Bulgaria. The measure allows enterprises to retain up to 100% of the CIT in respect of the tax profit derived from the manufacturing activities carried out in municipalities where the rate of unemployment for the year preceding the current year exceeded by 25% (or more) the national average unemployment rate for the same period.

The EC concluded that the measure meets all the compatibility criteria of the Regional Aid Guidelines, and is therefore compatible with the internal market pursuant to Art. 107(3)(a) TFEU.