On 16 September 2016 the Bulgarian Ministry of Finance published, on its website, a draft bill introducing amendments to tax legislation. The draft bill will be subject to public consultation before being sent to Parliament. The proposed amendments would take effect on 1 January 2017.
Significant amendments include:
Filing and corrections to corporate and income tax returns
Corporate and personal income tax returns will have to be filed online only, using a qualified electronic signature. Individuals who do not have qualified electronic signatures will be able to file using a personal identification code issued by the National Revenue Agency. Online filing will apply to individuals after 1 January 2018.
The proposed bill will allow a simplified procedure for companies and individuals to submit a one-off corrective annual tax return by 30 September of the year in which the annual tax return was filed.
VAT for non-incorporated entities
The contribution of goods and services by a partner to a non-incorporated VAT-able organization (e.g. a consortium) will be outside the scope of VAT. The contributing partner to the consortium reserves all VAT rights and liabilities, including reporting, over the contributed, depending on the activities of the consortium.
VAT adjustments for immovable property
Entities with immovable properties which are used for both business and non-business activities will be able to use input VAT credit only to the proportion related to the business activities. The proportion will be determined under an allocation key elaborated by the entity and officially declared before the national revenue agency.
Some in-kind contributions to companies will be subject to income tax
Under the current regime, an in-kind contribution by an individual to a company does not trigger tax liabilities (tax liabilities occur on the subsequent disposal of the shares received in exchange for the in-kind contribution). The envisaged amendments introduce the following limitations:
- Distributions by a company originating from reduction of capital following sale of assets that have been contributed in-kind by an individual, will be taxable income for the individual;
- Mechanism for calculating taxable income in cases of double in-kind contribution (in-kind contribution of shares received in asset in-kind contribution in another company).
Excise duty registration for foreign natural gas suppliers
Non-established entities willing to supply natural gas to local end-customers will need to do so either via a branch registered in Bulgaria or through an accredited local VAT representative.
Excise duty on cigarettes amended
It is suggested that the excise duties on cigarettes be amended as follows:
– the specific excise duty on cigarettes will be increased from BGN 70 to BGN 101 (approx. EUR 52) per 1,000 cigarettes;
– the proportional excise duty rate will be decreased from 38% to 27% of the sale price from 1 January 2017 (and will go up to 28% as of 1 January 2018); and
– the minimum excise duty charged per 1,000 cigarettes will be increased to BGN 168 (approx. EUR 86) as of 1 January 2017 (and increased again on 1 January 2018 to BGN 177 (approx. EUR 90)).
Cash transactions limited to BGN 5,000
The draft bill lowers the threshold for cash payments for the same transaction or series of payments related to the same transaction from BGN 10,000 (approx. EUR 5,100) to BGN 5,000 (approx. EUR 2,550).