A new exit taxation regime is introduced in Bulgaria as of 1 January 2020. The amendments to the corporate income tax (CIT) legislation introduce Directive 2016/1164/EU (Anti-Tax Avoidance Directive or ATAD).
The transfer of assets or activities outside of Bulgaria (but within the same enterprise) may be subject to Bulgarian CIT in the following scenarios:
- from a Bulgarian head office to a permanent establishment (PE) abroad
- from a Bulgarian PE to a head office / another PE abroad, or
- transfer of assets / business in case of redomiciliation (change of the tax jurisdiction) of a Bulgarian company in certain cases,
where Bulgaria ends up losing taxing rights on any subsequent disposals of the assets / business.
Hybrid mismatch rules
As of 1 January 2020, hybrid mismatch rules are introduced based on Directive 2017/952/EU (ATAD II).
The new rules aim to counter tax avoidance based on different characterisation of tax items between two or more jurisdictions.
The regime is applicable:
- between related parties,
- between a head office and a PE / between two PEs, and
- in very limited cases between non-related parties.
Call-off stock value-added tax (VAT) mechanism in case of supplies to other member states
As of 1 January 2020, special VAT rules are introduced for the so-called call-off stock mechanism in case of supplies to other member states.
Mandatory VAT registration of foreign entities in Bulgaria, irrespective of their taxable turnover
As of 1 January 2020, VAT registration is mandatory for foreign entities performing taxable supplies in Bulgaria for which VAT is due by the supplier, irrespective of their taxable turnover.
Temporary reduced VAT rate for restaurant and catering services, books, and baby products
As of 1 July 2020, a reduced 9% VAT rate applies to restaurant and catering services (except for supplies of alcoholic beverages), certain baby and children food, and certain products for baby hygiene, as well as books (the scope of books covered by the reduced rate is defined in the legislation).
The reduced VAT rate will apply from 1 July 2020 until 31 December 2021.