On 6 December 2016, the amendments of the Bulgarian tax laws were published in the State Gazette and shall take effect as of 1 January 2017.
Mandatory electronic filing of tax returns
Entities subject to corporate income tax will be obliged to file their tax returns online using a qualified electronic signature. Online filing will also apply to other returns under the corporate income tax act, such as those returns related to withholding tax, advance instalments, etc.
The amendments will allow corrections to the tax returns after the statutory filing deadline. A simplified procedure will allow 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 initially filed, thus giving an effective timeframe of 6 months to make adjustments.
Individuals will also be able to make one-off corrections to perianal income tax returns.
VAT for non-incorporated entities
The contribution of goods and services by a taxable entity to a non-incorporated organisation subject to VAT (e.g., a consortium) will not be considered as a taxable transaction. All rights and liabilities of the partner contributing to the consortium will remain it its own responsibility, depending on the actual activities of the consortium. The consortium will have no VAT related rights or liabilities with respect the goods and services provided by the partner. For example, if the consortium further makes a contribution subject to VAT by supplying goods provided by the partner, the later shall charge VAT (if applicable), respectively if the consortium makes a contribution that is not subject to VAT (e.g., a donation) then the partner shall make a VAT credit adjustment.
VAT adjustments for immovable property, goods and services
In the case of properties, goods or services intended to be used for both the business and non-business purposes, the entities that have acquired or are constructing them will only be able to use input VAT credit to the extent the properties, goods and services are used for business purposes. The new system provides for detailed mechanism to determine the appropriate adjustment using an allocation key.
Individuals making in-kind contributions to companies will be subject to income tax in certain cases
As an anti-avoidance measure, the amendments to the personal income tax act introduce a taxable event in the following cases:
- where a company that has received an in-kind contribution from an individual subsequently disposes of the assets received from that individual, reduces its registered capital and as a result issues a distribution to the contributing individual, such a distribution (in cash or by other means) will be treated as a taxable income for this individual;
- where an individual makes an in-kind contribution to a company (company B) with shares received from another company (company A) in exchange for in-kind contribution of other assets in company A, the capital gains realised upon the disposal of the shares in company B will be the positive difference between the shares received and the documentary evidenced acquisition value of the assets subject to in-kind contribution in company A.
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.
Amendments in the structure and rate of excise duty on cigarettes
Both the specific and proportional excise duties rates on cigarettes are 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 (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 (while as of 1 January 2018, the minimum duty will be increased to BGN 177, i.e. approx. EUR 90.50).
Earlier this year the following amendments were adopted:
VAT exemption on food donations as of 1 January 2017
VAT exemption on donations of food to food banks under the following conditions:
- the individual food items are of insignificant value and their expiry date is within 30 days as of the donation date;
- the donations are made to registered charitable non-profit food banks;
- the value of the food donations do not exceed 0.5% of the annual turnover of the donating entity;
- the donated food items are marked as “donation/not for sale” and are used for charitable purposes only.
One-off tax on company assets A new system imposing 10% one-off tax on the costs incurred by private use of company assets was also introduced. The system provides for a detailed mechanism to establish the appropriate allocation key for business/ private use of assets depending on the type of asset, e.g., real estate, vehicles, etc.
The one-off tax will apply retroactively from 1 January 2016 with the one-off tax return and the underlying payment of the tax for 2016 will be due by 31 March 2017.