Bulgaria

Corporate - Significant developments

Last reviewed - 04 February 2020

Exit Taxation

A new exit taxation regime is introduced in Bulgaria as of 1 January 2020. The amendments to the CIT legislation introduce Directive 2016/1164/EU (Anti-Tax Avoidance Directive or the so called “ATAD”).

The transfer of assets or activities outside of Bulgaria (but within the same enterprise), may be subject to Bulgarian corporate income tax 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,
  • 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 or the so called “ATAD II”. 

The new rules aim to counter tax avoidance based on different characterization 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,
  • in very limited cases between non-related parties.

Thin capitalisation rules – slight amendment on related party guarantees / collaterals

The existing tax thin capitalisation rules are slightly amended as of 1 January 2020 for cases where both the borrower under a bank loan or financial lease, and its related party provide a guarantee or collateral. 

Call-off stock 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.