Corporate Income Tax Act - ИНФОСИСТЕМ

Corporate Income Tax Act

Publication – State Gazette No. 105/22.12.2006, in force as of 01.01.2007,

Last Amendment – SG No. 94/30.11.2012, in force as of 01.01.2013

PART ONE

GENERAL DISPOSITIONS

Chapter One

GENERAL PROVISIONS

Scope of Taxation

Article 1. (Last Amendment, SG No. 95/2009, in force as of 01.01.2010) This Act regulates taxation of:

the profit accruing to resident legal persons;
the profit accruing to resident legal persons which are not merchants, including the organizations of the religious denominations, from any transactions covered under Article 1 of the Commerce Act, as well as from letting movable and immovable property;
(Last Amendment, SG No. 95/2009, in force as of 01.01.2010) the profit accruing to non-resident legal persons from a permanent establishment in the Republic of Bulgaria, or from disposal of property a such place of business;
the income, as specified in this Act, accruing to resident and non-resident legal persons from a source inside the Republic of Bulgaria;
the expenses as specified in Part Four herein;
the activities of organizers of games of chance;
the income accruing to public-financed enterprises from any transactions covered under Article 1 of the Commerce Act, as well as from letting movable and immovable property;
the vessels operation activity of persons which carry out maritime merchant shipping.

Taxable Persons

Article 2. (Last Amendment – SG No. 31/12011, in force as of 01.01.2011) (1) Taxable persons shall be:

the resident legal persons;
(Last Amendment, SG No. 95/2009, in force as of 01.01.2010) the non-resident legal persons which carry out economic activity, out from disposal of property a such place of businessin the Republic of Bulgaria through a permanent establishment or which receive income from a source inside the Republic of Bulgaria;
(Last Amendment – SG No. 31/2011, in force as of 01.01.2011) the sole traders as well as natural persons registered as tobacco producers and agricultural producers, which determine their taxable income under Art. 26 of the Income Taxes on Natural Persons Act: in respect of the taxes withheld at source and in the cases specified in the Income Taxes on Natural Persons Act;
the natural persons who are merchants within the meaning given by Article 1 (3) of the Commerce Act: in the cases specified in the Income Taxes on Natural Persons Act;
the employers and the commissioning entities under contracts for management and control: in respect of the tax on the expenses on fringe benefits, provided for in Part Four herein.

(2) For the purposes of this Act, the unincorporated associations and the contribution payment centres established in pursuance of Article 8 of the Social Insurance Code shall be treated as equivalent to legal persons.

(3) For the purposes of taxation of income from a source inside the Republic of Bulgaria, any non-resident organizationally and economically distinct formation (trust, fund and other such), which independently carries out economic activity or performs and manages investments, shall likewise be a taxable person where the owner of the income cannot be identified.

Resident Legal Persons

Article 3. (1) “Resident legal persons” shall be:

any legal persons incorporated under Bulgarian law;
any companies incorporated under Council Regulation (EC) No 2157/2001, and any cooperative society incorporated under Council Regulation No 1435/2003, where the registered office thereof is situated in the country and they are entered into a Bulgarian register.

(2) Any resident legal persons shall be liable to taxes under this Act in respect of the profits and income accruing thereto from all sources inside and outside the Republic of Bulgaria.

Non-resident Legal Persons”

Article 4. (Last Amendment, SG No. 95/2009, in force as of 01.01.2010) (1) “Non-resident legal persons” shall be any persons which are not resident persons.

(2) (Last Amendment, SG No. 95/2009, in force as of 01.01.2010) Any non-resident legal persons shall be liable to taxes under this Act in respect of the profits realized through a permanent establishment in the Republic of Bulgaria and of or dispose of property in a such place of business and incomeas specified in this Act accruing from a source inside the Republic of Bulgaria or dispose of property in a place of business and income

Types of Taxes

Article 5. (1) Profits shall attract a corporation tax.

(2) The income accruing to any resident and non-resident legal persons, as specified in this Act, shall attract a tax withheld at source.

(3) The expenses, as specified in this Act, shall attract a tax on expenses.

(4) A tax alternative to corporation tax shall be levied on:

the activity of organizing games of chance;
the income accruing to public-financed enterprises from any transactions covered under Article 1 of the Commerce Act, as well as from letting movable and immovable property;
the vessels operation activity.

Determination of Amount of Tax

Article 6. The amount of tax shall be determined by multiplying the taxable amount by the rate of tax.

Tax Returns

Article 7. The standard forms of returns and of other documents under this Act shall be endorsed by an order of the Minister of Finance and shall be promulgated in the State Gazette.

Remittance of Taxes

Article 8. (1) The taxes due under this Act shall be remitted by the taxable persons in revenue to the executive budget.

(2) The taxes due shall be credited to an account of the National Revenue Agency territorial directorate exercising competence over the place of registration of the taxable persons or over the place where the taxable persons are registrable.

(3) The taxes due shall be deemed to be remitted on the date on which the amounts are received in the executive budget on the account of the competent National Revenue Agency territorial directorate.

Default Interest

Article 9. Interest according to the Interest on Taxes, Fees and Other State Receivables Act shall be due on any taxes which are not remitted when due, including any tax prepayments.

Documentary Support

Article 10. (1) An accounting expense shall be recognized for tax purposes where it is supported by an accounting source document within the meaning given by the Accountancy Act.

(2) An accounting expense shall be recognized for tax purposes even where part of the information required under the Accountancy Act is missing in the accounting source document, provided that documents certifying any such missing information are available.

(3) Outside the cases referred to in Paragraph (2), an accounting expense shall be recognized even where the accounting source document has been issued by a person which is not an enterprise within the meaning given by Article 1 (2) of the Accountancy Act and part of the information required under the Accountancy Act is missing in the document, provided that the said document gives a true view of the business transaction documented.

(4) The taxable persons shall be obligated to register and account for any sale of goods and services as effected by means of issuing a fiscal cash receipt printed by a fiscal device according to a procedure established by an ordinance of the Minister of Finance, except where payment is effected by bank transfer or through an offset. The lack of a fiscal cash receipt printed by a fiscal device, where the issuance of such a receipt is obligatory, shall be grounds to deny recognition of an accounting expense for tax purposes.

(5) In respect of international air transport, an accounting expense shall be supported by documents where documented by means of an accounting source document and the boarding pass for the flight executed. Where the accounting source document (protocol) is issued by the person who effects the sale on behalf and for the account of the carrier, the said person shall be deemed to be an issuer of the said document.

(6) (New, SG No. 110/2007) Documentary support of the expenses referred to in Items 1 and 3 of Article 204 herein, which attract a tax on expenses, shall be available even when the said expenses are documented only by a fiscal cash receipt printed by a fiscal device. The expenses referred to in Item 3 of Article 204 herein, which attract a tax on expenses, shall be recognized for tax purposes even where a transportation control and movement document has not been issued.

Expenses Defined as Compulsory by Statutory Instrument

Article 11. Any expenses defined as compulsory by a statutory instrument shall be recognized for tax purposes and shall not attract a tax on expenses, unless otherwise provided for in this Act.

Chapter Two

SOURCES OF PROFIT AND INCOME

Profit and Income from Sources Inside Republic of Bulgaria

Article 12. (Last Amendment, SG No. 94/2010, in force as of 01.01.2011) (1) (Last Amendment, SG No. 95/2009, in force as of 01.01.2010) Any profits accruing to non-resident legal persons, derived from economic activity carried out through a permanent establishment in the country or from disposition of property of any such permanent establishment, shall have their source inside the country.

(2) Any income from financial assets issued by resident legal persons, the [Bulgarian] State and the municipalities, shall have its source inside the country.

(3) Any income from transactions in financial assets referred to in Paragraph (2) shall have its source inside the country.

(4) Any income from dividends and shares in a liquidation surplus, accruing from participating interests in resident legal persons, shall have its source inside the country.

(5) The following income, charged by resident legal persons, resident sole traders or non-resident legal persons and sole traders through a permanent established or a fixed base in the country or paid by resident natural persons or by non-resident natural persons who have a fixed base in the country in favour of non-resident legal persons, shall have its source inside the country:

any interest payments, including interest within payments under a financial lease contract;
any income from rent or other provision for use of movable or immovable property;
any copyright and licence royalties;
any technical assistance fees;
any payments received under franchising agreements and factoring contracts;
any compensations for management or control of a Bulgarian legal person.

(6) (Amended, SG No. 110/2007) Any income covered under Paragraph (5), which is charged in favour of non-resident legal persons from a permanent establishment of a resident person or from a fixed base of resident natural persons situated outside the territory of the country, shall not have its source inside the country.

(7) Any income from agriculture, forestry, hunting ground management and fisheries within the territory of the country shall have its source inside the country.

(8) (Last Amendment – SG No. 94/2010, in force as of 01.01.2011) The following incomes are from a source inside the country:

incomes from rent or other grant for use of immovable property, including undividable part of immovable property, located in the country;
incomes from transactions in immovable property, including an undividable part or a limited right in rem to any immovable property located in the country.

(9) (New – SG No. 94/2010, in force as of 01.01.2011) The following income, charged by resident legal persons, resident sole traders or non-resident legal persons and sole traders through a permanent established or a fixed base in the country in favour of non-resident legal persons, established in jurisdictions with preferential fiscal arrangements are with a source inside the country:

remuneration for services or rights, save in cases where the services or rights are actually granted;
any penalty charges for late payments and damages excluding those under insurance contracts.

(10) (Former (9) – SG No. 94/2010, in force as of 01.01.2011) Upon determination of the source of income under this Article, the place of payment of the income shall be ignored.

Chapter Three

INTERNATIONAL TAXATION

International Treaties

Article 13. Where an international treaty, which has been ratified by the Republic of Bulgaria, has been promulgated and has entered into force, contains any provisions different from the provisions of this Act, the provisions of the relevant international credit shall prevail.

Foreign Tax Credit

Article 14. (1) Where the provisions of an international treaty referred to in Article 13 herein are not applied, the taxable persons shall be allowed foreign tax credit under the terms and according to the procedure established by this Act.

(2) Upon assessment of the corporation tax or of the alternative taxes under this Act, the taxable persons shall be allowed foreign tax credit in respect of each tax similar to corporation tax or imposed in lieu of such tax and paid abroad.

(3) The taxable persons shall be allowed foreign tax credit in respect of the tax imposed abroad on the gross amount of the income from dividends, interest payments, copyright and licence royalties, technical assistance fees and rents.

(4) The tax credit referred to in Paragraphs (2) and (3) shall be determined for each State and for each type of income separately and shall be limited to the amount of the Bulgarian tax on the said profits or income.

Chapter Four

PREVENTION OF TAX EVASION

Transactions between Related Parties

Article 15. (Last Amendment, SG No. 95/2009, in force as of 01.01.2010) Where related parties enter into commercial and financial relationships under terms which affect the amount of the tax base and which differ from the terms between unrelated parties, the tax base shall be determined and taxed under the terms which would have arisen in respect of unrelated parties.

Tax Evasion

Article 16. (Last Amendment – SG No. 94/2010, in force as of 01.01.2011) (1) (Last Amendment, SG No. 95/2009, in force as of 01.01.2010) Where one or more transactions, inter alia between unrelated parties, has been concluded under terms whereof the fulfilment leads to tax evasion, the tax base shall be determined ignoring the said transactions, certain terms thereof or the legal form thereof and taking into consideration the tax base which would be obtained upon the effecting of a customary transaction of the relevant type at market prices and intended to achieve the same economic result but which does not lead to tax evasion.

(2) The following shall furthermore be treated as tax evasion:

any substantial excess of the quantities of raw and prime materials used as production inputs and other production costs over the customary quantities and costs for the activity carried out by the person, where any such excess is not due to reasons beyond the control of the person;
any contracts of loan for use or other gratuitous provision for use of tangible and intangible benefits;
any borrowing or lending at interest diverging from the market rate of interest as applicable at the time of conclusion of the transaction, including in the cases of interest-free loans or other temporary gratuitous financial assistance, as well as the write-off of debts or repayment of non-business debts for own account;
(Last Amendment – SG No. 94/2010, in force as of 01.01.2011) calculation of any remunerations or compensations for any services which have not been actually performed.

(3) Where a transaction is concealed by another, colourable transaction, the tax liability shall be assessed under the terms of the concealed transaction.

Transfers Related to Permanent Establishment

Article 17. This Chapter shall furthermore apply, mutatis mutandis, to any transfers between a permanent establishment and other divisions of the enterprise of a non-resident person situated outside the country, conforming to the specifics of the permanent establishment.

PART TWO

CORPORATION TAX

Chapter Five

GENERAL DISPOSITIONS

Tax Financial Result

Article 18. (1) (Amended, SG No. 110/2007) “Tax financial result” shall be the accounting financial result adjusted according to the procedure established by this Act.

(2) The positive tax financial result shall be a tax profit.

(3) The negative tax financial result shall be a tax loss.

Taxable Amount

Article 19. The taxable amount for assessment of the corporation tax shall be the tax profit.

Rate of Tax

Article 20. The rate of corporation tax shall be 10 per cent.

Tax Period

Article 21. (1) The tax period for assessment of the corporation tax shall be the calendar year, save as otherwise provided for in this Act.

(2) In respect of any newly incorporated taxable persons, the tax period shall cover the period from the date of incorporation thereof until the end of the year, save as otherwise provided for in this Act.

Chapter Six

GENERAL DISPOSITIONS REGARDING DETERMINATION OF TAX FINANCIAL RESULT

Determination of Tax Financial Result

Article 22. (Last Amendment, SG No. 95/2009, in force as of 01.01.2010) The tax financial result shall be determined by means of adjusting the accounting financial result, according to a procedure and in a manner specified in this Act, for:

the permanent tax differences;
the temporary tax differences;
(Last Amendment, SG No. 95/2009, in force as of 01.01.2010) the other amounts as provided in this Act.

Permanent Tax Differences and Adjustment of Accounting Financial Result for Such Differences

Article 23. (1) “Permanent tax differences” shall be accounting income or expenses which are not recognized for tax purposes.

(2) For the purposes of determination of the tax financial result, where this Act indicates that:

a cost (loss) is not recognized for tax purposes, the accounting financial result shall be credited with any such cost (loss) in the year of accounting for the said cost (loss), and the accounting financial results shall not be adjusted during the succeeding years;
an income (profit) is not recognized for tax purposes, the accounting financial result shall be debited with any such income (profit) in the year of accounting for the said income (profit), and the accounting financial results shall not be adjusted during the succeeding years.

Temporary Tax Differences and Adjustment of Accounting Financial Result for Such Differences

Article 24. (1) Temporary tax differences shall arise where any income or expenses are recognized for tax purposes in a year other than the year of accounting for the said income or expense.

(2) A “temporary tax difference” shall be:

any expense unrecognized for tax purposes in the year of accounting for any such expense, which will be recognized during succeeding years, when the conditions for recognition according to this Part occur;
any income unrecognized for tax purposes in the year of accounting for any such income, which will be recognized during succeeding years, when the conditions for recognition according to this Part occur.

(3) Temporary tax differences shall furthermore originate in the cases of transformation of corporations and cooperatives according to the procedure established by Chapter Nineteen herein.

(4) For the purposes of determination of the tax financial result, where this Act indicates that:

any cost (loss), which is not recognized for tax purposes in the year of accounting and will be recognized during succeeding years when the condition for recognition according to this Part occurs:

(a) the accounting financial result in the year of accounting for the cost (loss) shall be credited with any such cost (loss): origination of a temporary tax difference;

(b) the accounting financial result in the year when the condition for recognition according to this Part occurs shall be debited with any such cost (loss): reversal of a temporary tax difference;

any income (profit), which is not recognized for tax purposes in the year of accounting and will be recognized during succeeding years when the condition for recognition according to this Part occurs:

(a) the accounting financial result in the year of accounting for the income (profit) shall be debited with any such income (profit): origination of a temporary tax difference;

(b) the accounting financial result in the year of when the condition for recognition according to this Part arises shall be credited with any such income (profit): reversal of a temporary tax difference.

Tax-Recognized Income and Cost

Article 25. For the purposes of determination of the tax financial result, where this Act indicates that any income (cost) or profit (loss) is recognized for tax purposes in the year of accounting for such income, the accounting financial result for the current year or any succeeding years shall not be adjusted for the said income (cost) or profit (loss).

Chapter Seven

PERMANENT TAX DIFFERENCES

Expenses Unrecognized for Tax Purposes

Article 26. (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) The following accounting expenses shall not be recognized for tax purposes:

any non-business expenses;
any expenses which are not supported by documents within the meaning given by this Act;
any expenses on tax charged or credit for input tax used according to the Value Added Tax Act, where the expense incurred on the business transaction wherewith the value added tax is associated is not recognized for tax purposes;
(Amended, SG No. 110/2007) any expense accounted for by a supplier under the Value Added Tax Act on value added tax charged by the said supplier or by the revenue authority in connection with a supply effected, with the exception of the tax charged in connection with supplies effected free of charge and supplies in connection with deregistration under the Value Added Tax Act; this item shall not apply to expenses accounted for as a result of an adjustment in the credit for input tax under the Value Added Tax;
(Amended, SG No. 110/2007) any subsequent expenses accounted for in connection with a claim which has originated from a tax charged or credit for input tax used under Items 3, 4, 8 and 10;
(Last Amendment – SG No. 94/2012, in force as of 01.01.2013) any expenses on fines charged, forfeitures including those under Art. 307a of Penal Code and other sanctions imposed for violation of statutory instruments, any default interest charged for late payment of public state or municipal debts;
any donation expenses other than such covered under Article 31 herein;
any expenses on a tax which is subject to withholding at source and is for the account of the payer of the income;
any wage expenses at commercial corporations wherein the State or a municipality holds an interest exceeding 50 per cent in excess of the resources fixed by statutory instruments ;
(New, SG No. 110/2007) any expense accounted for upon enforcement of a liability for the value added tax due and unremitted in the cases referred to in Article 177 of the Value Added Tax Act;
(New, SG No. 110/2007) any expenses which constitute hidden profit distribution.
(New – SG No. 94/2012, in force as of 01.01.2013) expenses for bribes and/or covering up bribes of officials or foreign officials.

Income Unrecognized for Tax Purposes

Article 27. (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) (1) The following accounting income shall not be recognized for tax purposes:

(Supplemented, SG No. 69/2008) any income resulting from distribution of dividends by resident legal persons or foreign persons who are resident for tax purposes in a Member State of the European Union or in another State which is a Contracting Party to the the Agreement on the European Economic Area;
2. (Last Amendment – SG No. 94/2012, in force as of 01.01.2013 ) any income originating in connection with any expenses unrecognized for tax purposes, as referred to in Article 26, item 3, 4, 5, 6, 8 и 10 herein, up to the amount of the unrecognized expenses;
any income from interest payments on unduly remitted or collected public obligations, as well as on value added tax not refunded within the statutory time limits, charged by the central-government or municipal authorities.

(2) Item 1 of Paragraph (1) shall not apply:

to any income charged as a result of distribution of dividends by licensed special purpose investment companies under the Special Purpose Investment Companies Act;
upon hidden profit distribution.

Unrecognized Expenses on Shrinkage and Wastage

Article 28. (1) Any accounting expenses on shrinkage of fixed and current assets shall not be recognized for tax purposes, with the exception of such due to a force majeure.

(2) Any accounting expenses on shrinkage and waste of stocks of materials shall not be recognized for tax purposes.

(3) Paragraph (2) shall not apply where the expenses are due to:

a force majeure;
spoilage or alteration of physical and chemical properties, as established by a statutory instrument or by company standards, where a statutory instrument does not exist, and in the customary amounts for the relevant activity;
expiry of the service life according to a statutory instrument or company standards, where a statutory instrument does not exist, and in the customary amounts for the relevant activity;
(New, SG No. 110/2007) shrinkage of merchandise arising from business operation at establishments where customers have direct physical access to the merchandise on offer, to an amount of up to 0.25 per cent of the amount of the net turnover of the distributive trade establishment concerned.

(4) Any tax expense referred to in Article 79 (3) of the Value Added Tax Act on any assets, which is not recognized according to the procedure established by Paragraphs (1) to (3), shall not be recognized for tax purposes.

(5) Any subsequent accounting expenses, which have been accounted for in connection with a claim originating from shrinkage and wastage of any assets unrecognized according to the procedure established by Paragraphs (1) to (4), shall not be recognized for tax purposes.

Unrecognized Expenses Originating in Connection with Shrinkage and Wastage

Article 29. Any accounting expenses which have originated in connection with any shrinkage and wastage of assets or any claim related therewith shall not be recognized for tax purposes up to the amount of the unrecognized expenses referred to in Article 28 herein.

Recognition of Part of Undistributable Expenses of Not-for-Profit Legal Entities

Article 30. (1) Any accounted for undistributable expenses, corresponding to the activity subject to levy of corporation tax, incurred by any not-for-profit legal entities, shall not be recognized for tax purposes.

(2) The part of the undistributable expenses, determined by multiplying the total amount of undistributable expenses by the ratio between the income from the activity subject to levy of corporation tax and all income accruing to the not-for-profit legal entity, shall be recognized for tax purposes.

Donation Expenses

Article 31. (Last Amendment – SG No. 99/2011, in force as of 01.01.2012) (1) The accounting expenses on donations to a total amount of up to 10 per cent of the positive accounting financial result (accounting profit) shall be recognized for tax purposes where the expenses on donations are incurred in favour of:

any health-care and medical-treatment facilities;
(Last Amendment – SG No. 51/2011) any specialized institutions for provision of social services according to the Social Assistance Act, as well as of the Social Assistance Agency and of the Social Protection Fund under the Minister of Labour and Social Policy;
(Last Amendment – SG No. 106/2008, in force as of 01.01.2009) specialized institutions for children in accordance with the Child Protection Act, as well as of nursing homes for raising and upbringing children deprived of parental cares in accordance with the Public Education Act and medical and social care houses for children in accordance with the Medical Institutions Act”;
any creches, kindergartens, schools, higher schools or academies;
any public-financed enterprises within the meaning given by the Accountancy Act;
any religious denominations registered in the country;
any specialized enterprises or cooperatives of persons with disabilities, entered in the register referred to in Article 29 of the Integration of Persons with Disabilities Act, as well as in favour of the Agency for Persons with Disabilities;
any persons with disabilities, as well as for technical aids therefor;
(Last Amendment , SG No.35/2009 ,in force as of12.05.2009) persons, victims of disasters referred to in the Act onProtection in case of disaster, or their families;
the Bulgarian Red Cross;
any socially disadvantaged persons;
any children with disabilities or parentless children;
any cultural institutes, or for the purposes of cultural, educational or research exchange under an international treaty whereto the Republic of Bulgaria is a party;
any not-for-profit legal entities, registered in the Central Register of Not-for-Profit Legal Entities for pursuit of public benefit activities, with the exception of organizations supporting culture within the meaning given by the Financial Support for Culture Act;
(Last Amendment -SG No.32/2009, in force as of 01.01.2010) students in schools and universities in a Member States of the European Union or another State Party to the Agreement on the European Economic Area for the established and provided scholarships for their education;
(Last Amendment – SG No. 35/2011, in force as of 03.05.2011) the Bulgaria Energy Efficiency and Renewable Sources Fund;
any therapeutical communities for narcotics-dependent persons, as well as of narcotics-dependent persons for the therapy thereof;
(New – SG No. 106/2008, in force as of 01.01.2009) United Nations International Children’s Emergency Fund (UNICEF).

(2) (Last Amendment – SG No. 99/2011, in force as of 01.01.2012) Accounting expenses for donations amounting to 50 per cent of the accounting profit shall be recognized for tax purposes where the expenses on donations are incurred in favour of the Medical Treatment of Children Fund Center and Assisted Reproduction Fund Center.

(3) The assistance provided gratuitously under the terms and according to the procedure established by the Financial Support for Culture Act shall be recognized for tax purposes to an amount of up to 15 per cent of the accounting profit.

(4) Any expenses on donations of computers and computer peripheral equipment, which are manufactured within one year prior to the date of the donation, and made in favour of Bulgarian schools, including higher schools, shall be recognized for tax purposes.

(5) The aggregate amount of the expenses on donations recognized for tax purposes under Paragraphs (1) to (4) may not exceed 65 per cent of the accounting profit.

(6) The entire expense on a donation shall not be recognized for tax purposes where the donation benefits, whether directly or indirectly, the managers who make it or those who dispose of the said donation, or where there is evidence that the gift has not been received.

(7) (New, SG No. 32/2009, in force as of 01.01.2010) Paragraphs 1-6 apply also to donations made in the benefit to identical or similar to the persons referred to in Paragraphs 1-4, resident in or citizens of other Member States of the European Union or a State Party to the Agreement on the European Economic Area, where the person who has made the donation, has in possession an official document certifying the status of the recipient of the donation, issued or certified by a competent authority of the foreign country, and its translation into Bulgarian is made by a chartered translator.

Taxable Person’s Formation Expenses

Article 32. (1) The accounting expenses on the incorporation of a legal person shall be recognized for tax purposes at the taxable persons which are incorporators. The unrecognized expenses shall be recognized for tax purposes upon determination of the tax financial result of the newly formed legal person in the year of commencement of the legal existence thereof.

(2) The expenses referred to in Paragraph (1) shall be recognized for tax purposes in respect of the incorporators upon occurrence of circumstances determining that the legal existence of a new legal person will not commence. The said expenses shall be recognized in the year of occurrence of the said circumstances, if the requirements of this Act are complied with.

Income and expenses, profit and loss reported by general partner in a joint venture tax treatment

Article 32a. (New, SG No. 95/2009 ,in force as of01.01.2009) (1) The accounting receipts and expenditures, profit and loss statements, reported by a joint venture partner as result of the implementation of the proportionate consolidation method are not acknowledged when the joint venture is an entity subject to taxation.

Tax treatment upon distribution of investment dividends accounted through the equity method.

Natural Persons’ Travel and Per Diem Expenses

Article 33. (Amended, SG No. 110/2007, effective 1.01.2007) (1) The following accounting travel and per diem expenses of natural persons shall be recognized for tax purposes, where the travel and stay were performed in connection with the activity of the taxable person:

the travel and per diem expenses of any natural persons who are in employment relationships with the taxable person or are hired thereby under non-employment relationships, including such expenses of managing directors, members of management or supervisory bodies or the taxable person;
the travel and per diem expenses incurred by a sole trader of:

(a) the natural person who owns the enterprise of the natural person, and

(b) the persons who are in employment relationships with the sole trader or are hired thereby under non-employment relationships.

(2) The accounting travel and per diem expenses of any shareholders or partners shall not be recognized for tax purposes where the said shareholders or partners perform the travel and stay in their capacity of shareholders or partners.

Chapter Eight

TEMPORARY TAX DIFFERENCES

Non-recognition of Income and Expenses from Subsequent Valuations (Revaluations and Impairments)

Article 34. (Last Amendment – SG No. 106/2008, in force as of 01.01.2009) (1) (Last Amendment – SG No. 106/2008, in force as of 01.01.2009) The proceeds and expenditures from subsequent assessment of assets and liabilities shall not be recognized for tax purposes in the year of their accounting. The proceeds and expenditures from subsequent assessments of receivables and the expenses on writing off receivables as uncollectible shall not be recognized for tax purposes in the year of their accounting, provided that in the same year or in the previous year none of the events under Art. 37 has occurred.

(2) Paragraph (1) shall not apply in respect of any accounting income and expenses from subsequent valuations of monetary positions in foreign currency at the central exchange rate of the Bulgarian National Bank.

Recognition of Expenses and Income from Subsequent Valuations (Revaluations and Impairments)

Article 35. (1) Any income and expenses from subsequent valuations unrecognized for tax purposes according to the procedure established by Article 34 herein shall be recognized for tax purposes in the year of write-off of the relevant asset or liability.

(2) Where the value of the stocks of materials of a specific type, written off during the current year, exceeds the value of the stocks of materials of the said type as at the 31st day of December of the preceding year, the unrecognized income referred to in Article 34 herein in respect of the said type of stocks of materials during preceding years shall be recognized for tax purposes during the current year.

(3) Paragraphs (1) and (2) shall not apply in the cases of shrinkage and wastage of assets, which are not recognized for tax purposes according to the procedure established by Article 28 herein.

Income and Expenses from Initial Recognition and Subsequent Valuation of Biological Assets and Agricultural (Farming) Produce

Article 36. (1) Any excess of the income (profits) from an initial recognition and subsequent valuation of biological assets and agricultural (farming) process over the expenses accounted for in connection with the said assets shall not be recognized for tax purposes in the year of accounting for the said income and expenses. Any excess of the income referred to in sentence one shall be recognized for tax purposes in the year of write-off of the relevant asset.

(2) Any excess of the expenses reported in connection with biological assets and agricultural (farming) process, over the incomes (profits) from an initial recognition and subsequent valuation of said assets shall not be recognized for tax purposes in the year of accounting for the said income and expenses. Any excess of the expenses referred to in sentence one shall be recognized for tax purposes in the year of write-off of the relevant asset.

(3) The provisions of Articles 34 and 35 herein shall not apply to any biological assets and agricultural produce.

Recognition of Income and Expenses from Subsequent Valuations of Claims

Article 37. (Last Amendment – SG No. 106/2008, in force as of 01.01.2009) The proceeds and expenditure from subsequent assessment and from writing off receivables in accordance with the provisions of Art. 34, not recognized for tax purposes, shall be recognized for tax purposes in the year when any of the following events occurs:

lapse of the prescription of the claim, but not more than five years after the time the said claim became exigible;
onerous transfer of the claim;
the bankruptcy proceedings against the debtor have been closed by a confirmed plan for rehabilitation which provides for incomplete satisfaction of the taxable person; the unrecognized income and expenses shall be recognized for tax purposes solely in respect of the diminution in the claim;
an effective judgment of court has decreed that the claim or a part thereof is undue; the unrecognized income and expenses shall be recognized for tax purposes solely in respect of the undue part of the claim;
prior to the lapse of the prescription, the claims have been extinguished by virtue of a law;
upon expungement of the debtor, where the claim or part thereof has been left unsatisfied: recognition shall be limited to the unsatisfied part.

Provisions for Debts

Article 38. (1) Any expenses on provisions for debts shall be recognized for tax purposes in the year of accounting for any such expenses.

(2) Any expenses on provisions unrecognized under Paragraph (1) shall be recognized for tax purposes in the year of repayment of the debt for which the provision has been recognized up to the amount of the debt repaid.

(3) (Amended, SG No. 110/2007) Upon determination of the tax financial result, the accounting financial result shall be debited with the accounting incomes or, respectively, with the amount wherewith the accounting expenses have been debited, accounted for in connection with a recognized provision.

Provisions Not Included in Tax Depreciable Value of Tax Depreciable Asset

Article 39. (1) Upon determination of the tax financial result, the accounting financial result shall be debited with the repaid debts related to any provisions which are not included in the tax depreciable value of a tax depreciable asset according to Article 53 (1) herein. The debiting referred to in sentence one shall be performed in the year of repayment of the debt.

(2) (Amended, SG No. 110/2007) Upon determination of the tax financial result, the accounting financial result shall be debited with the accounting income or, respectively, with the amount wherewith the accounting expenses have been debited, accounted for in connection with a recognized provision.

Specific Procedure for Recognition of Expenses on Provisions for Debts upon Cessation of Activity

Article 40. (1) Any taxable person, which has applied Article 38 (1) or Article 53 (1) herein and has entirely ceased the core activity thereof in the year of repayment of the debts in respect of which a provision unrecognized for tax purposes has been charged, shall not apply the provisions of Article 38 (2) or Article 39 (1) herein and shall be entitled to an offset or refund of the overremitted corporation tax as arrived at according to the procedure established by Paragraph (2).

(2) The overremitted corporation tax shall be arrived at as a product of the repaid part of the debts, in respect of which a provision unrecognized for tax purposes has been charged, and the rate of corporation tax for the year of repayment of the debts. The repaid part of the debts for the purposes of sentence one may not exceed the sum total of the tax financial results for the ten years last preceding the year of cessation of activity.

Unused Leaves

Article 41. (1) Any expenses on accumulating unused (compensable) leaves at the 31st day of December of the current year, as well as any expenses connected with any such leaves, for compulsory social and health insurance, shall not be recognized for tax purposes in the year of accounting for any such expenses.

(2) Any unrecognized expenses on accumulating unused (compensable) leaves referred to in Paragraph (1) shall be recognized for tax purposes in the year during which compensations for the said leaves was actually paid to the staff, up to the amount of the compensations paid.

(3) Any unrecognized expenses on compulsory social and health insurance referred to in Paragraph (1) shall be recognized for tax purposes in the year during which the relevant social and health insurance contributions were remitted, up to the amount of the insurance contributions remitted.

(4) (Amended, SG No. 110/2007) Upon determination of the tax financial result, the accounting financial result shall be debited with the accounting income or, respectively, with the amount wherewith the accounting expenses have been debited, accounted for in connection with any debts referred to in Paragraph (1).

(5) (New, SG No. 110/2007) Paragraph (1) shall not apply to any leaves and social and health insurance contributions connected therewith, the accounting for which does not lead to a diminution in the financial result for the year of accounting for the said expenses.

(6) (New, SG No. 110/2007) Any expenses resulting from compensable leaves and social and health insurance contributions connected therewith, leading to a diminution in the financial result, shall not be recognized for tax purposes in a year other than the year of accounting for the said expenses, where the compensations were not paid and the contributions were not remitted at the 31st day of December of the year in which the accounting financial result was debited. In such cases, Paragraphs (2) and (3) shall apply, mutatis mutandis.

(7) (New, SG No. 110/2007) Paragraphs (1) to (6) shall not apply to any compensable leaves and social and health insurance contributions connected therewith which, according to accounting legislation, are capitalized as part of the value of a tax depreciable asset.

Expenses Constituting Income Accruing to Resident Natural Persons

Article 42. (1) Any expenses incurred by taxable persons, constituting income accruing to resident natural persons under the Income Taxes of Natural Persons Act, which are not paid as at the 31st day of December of the current year, shall not be recognized for tax purposes in the year of accounting for any such expenses.

(2) Paragraph (1) shall not apply to any expenses constituting:

a basic or supplementary labour remuneration, fixed by a statutory instrument;
income accruing to sole traders.

(3) The expenses unrecognized under Paragraph (1) shall be recognized for tax purposes in the year during which the income is paid, up to the amount of the income paid.

(5) (New, SG No. 110/2007) The expenses on compulsory social and health insurance contributions connected with the unrecognized expenses referred to in Paragraph (1) shall not be recognized for tax purposes in the year of accounting for the said expenses where the compulsory social and health insurance contributions were not remitted at the 31st day of December of the current year.

(6) (New, SG No. 110/2007) The unrecognized expenses referred to in Paragraph (5) shall be recognized for tax purposes in the year during which the relevant compulsory social and health insurance contributions were remitted, up to the amount of the contributions remitted. Upon determination of the tax financial result, the accounting financial result shall be debited with the accounting income or, respectively, with the amount wherewith the accounting expenses have been debited, accounted for in connection with the debts referred to in Paragraph (5).

(7) (New, SG No. 110/2007) Paragraphs (1) and (5) shall not apply to any income and compulsory social and health insurance contributions connected therewith, the accounting for which does not lead to a diminution in the accounting financial result for the year of accounting for the said expenses.

(8) (New, SG No. 110/2007) Any expenses resulting from income and compulsory social and health insurance contributions referred to in Paragraphs (1) and (5), leading to a diminution in the financial result, shall not be recognized for tax purposes in a year other than the year of accounting for the said expenses, where the income was not paid and the contributions were not remitted at the 31st day of December of the year in which the accounting financial result was debited. In such cases, Paragraphs (3) and (6) shall apply, mutatis mutandis.

(9) (New, SG No. 110/2007) Paragraphs (1) to (8) shall not apply to any income and social and health insurance contributions connected therewith which, according to accounting legislation, are capitalized as part of the value of a tax depreciable asset.

Regulation of Thin Capitalization

Article 43. (1) Any expenses on interest payments shall not be recognized for tax purposes in the year of accounting for any such expenses to an amount arrived at for the current year according to the following formula:

UEIP = EIP – IIR – 0.75 x AFRBI, where:

UEIP shall be the unrecognized expenses on interest payments;

EIP shall be the expenses on interest payments arrived at according to the procedure established by Paragraph (3);

IIR shall be the total amount of income from interest receivable;

FRBI shall be the accounting financial result before all expenses on interest payments and income from interest receivable.

(2) Any expenses on interest payments, unrecognized under Paragraph (1), shall be recognized for tax purposes during the next succeeding five years until depletion of the said expenses, to an amount arrived at for the current year according to the following formula:

REIP = 0.75 x FRBI + IIR – EIP, where:

REIP shall be the recognized expenses on interest payments;

FRBI shall be the accounting financial result before all expenses on interest payments and income from interest receivable;

IIR shall be the total amount of income from interest receivable;

EIP shall be the expenses on interest payments arrived at according to the procedure established by Paragraph (3) for the current year.

(3) The expenses on interest payments shall include all financial (interest) income, accounted for under financing by means of debt capital. The expenses on interest payments shall not include:

any interest payments on financial leases and bank loans, except where the parties to the transaction are related parties or the lease or the loan, as the case may be, is guaranteed or secured by or is extended on the order of a related party;
any penalty charges for late payments and damages;
any interest unrecognized for tax purposes on other grounds in this Act;
(New, SG No. 110/2007) any interest and other expenses on loans which, according to accounting legislation, are capitalized as part of the value of an asset.

(4) Where the accounting financial result before all expenses on interest payments and income from interest receivable is a negative quantity, the said result shall be ignored upon determination of the amount of expenses on interest payments unrecognized and recognized under Paragraphs (1) and (2).

(5) The provisions of this Article shall apply in respect of any newly incurred expenses on interest payments, observing the sequence of the incurrence of the said expenses.

(6) Paragraph (1) shall not apply where:

(DC1 + DC2)/2 ≤ 3 х (OE1 + OE2)/2

, where

DC1 shall be the debt capital as at the 1st day of January of the current year;

DC2 shall be the debt capital as at the 31st day of December of the current year;

OE1 shall be the owners’ equity as at the 1st day of January of the current year;

OE2 shall be the owners’ equity as at the 31st day of December of the current year.

(7) The expenses on interest payments incurred by credit institutions shall not be regulated according to the procedure established by Paragraphs (1) to (6).

Chapter Nine

AMOUNTS INVOLVED UPON DETERMINATION OF TAX FINANCIAL RESULT

Securities Traded on Regulated Markets

Article 44. (Last Amendment – SG No. 106/2008, in force as of 01.01.2009) (1) When determining the tax financial result, the accounting financial result shall be reduced by the profit from disposal of financial instruments under the meaning of § 1, Subpar. 21 of the supplementary provisions, determined as a positive difference between the sale price and the documentary proven price of acquisition of those financial instruments. Sentence one shall not apply for profits from a foreign source with respect of which in an agreement for avoidance of double taxation, the method of avoidance of double taxation called “relief with progression” has been stipulated for.

(2) When determining the tax financial result the accounting financial result shall be increased by the loss from disposal of financial instruments under the meaning of §1, Subpar. 21 of the supplementary provisions, determined as a negative difference between the sale price and the documentary proven price of acquisition of those financial instruments.

Subsequent Valuations Reserve in Respect of Assets which Are Not Tax Depreciable Assets

Article 45. (Supplemented, SG No. 110/2007) Upon determination of the tax financial result, the accounting financial result shall be credited with the value of the revaluation reserve (subsequent valuations reserve) written off upon the write-off of any assets which are not tax depreciable assets, where an accounting income or expense has not been accounted for upon the write-off of the said reserve. The said crediting shall be effected in the year of write-off of the asset. Where any land is transformed into investment property, the said crediting shall be effected in the year of write-off of the investment property.

Tax Treatment of Debts

Article 46. (1) (Amended, SG No. 110/2007) Upon determination of the tax financial result, the accounting financial result shall be credited with the amount of the debts of the taxable person, and the said crediting shall be effected in the year in which one of the following circumstances occurs:

the debts are extinguished by prescription, but not more than five years after the time when the debt became exigible;
the bankruptcy proceedings against the taxable person have been closed by a confirmed plan for rehabilitation which provides for incomplete satisfaction of the creditors; the crediting shall be effected by the amount of the diminution in the debt;
an effective judgement of court has decreed that the debt or part thereof is undue;
the creditor has relinquished the claim thereof by a judicial procedure or has redeemed the said claim; the crediting shall be effected by the amount redeemed;
before the lapse of the prescription period, the debts have been extinguished by virtue of a law;
the taxable person has submitted a motion for expungement.

(2) (Amended, SG No. 110/2007) Paragraph (1) shall not apply, where the debt was extinguished or accounting income were accounted for as a result of a write-off of the debt in the year of occurrence of a circumstance under Paragraph (1).

(3) (New, SG No. 110/2007) Where Paragraph (1) was applied during a preceding year, upon determination of the tax financial result for the current year, the accounting financial result shall be debited with:

the amount of the debt extinguished during the year;
the accounting income accounted for during the current year as a result of a write-off of the debt.

(4) (New, SG No. 110/2007) The debiting under Paragraph (3) shall be up to the amount of the crediting under Paragraph (1) during the preceding years in respect of the respective debt.

Tax Treatment of Credit for Input Tax Deducted in Respect of Assets Available or upon Registration or Re-registration under Value Added Tax Act

Article 47. (1) (Supplemented, SG No. 110/2007) Upon determination of the tax financial result, the accounting financial result shall be credited with the amount of the credit for input tax deducted by the taxable person in respect of the assets available as at the date of registration or re-registration under the Value Added Tax Act, where accounting income is not accounted for in connection with the credit for input tax deducted.

(2) (Repealed, SG No. 110/2007).

(3) (Amended, SG No. 110/2007) Paragraph (1) shall not apply where:

the value added tax is not included in the historical cost of the asset, or
the asset is not a tax depreciable asset and the said asset was written off in the year of registration or re-registration under the Value Added Tax Act.

(4) (New, SG No. 110/2007) In case of a write-off of an asset which is not a tax depreciable asset and whereto Paragraph (1) was not applied in a preceding year, upon determination of the tax financial result for the current year, the accounting financial result shall be debited with the amount of the credit for input tax deducted for the respective asset wherewith the accounting financial result has been credited according to the procedure established by Paragraph (1).

Art.47a. (New, SG No. 95/2009, in force as of 01.01.2009) (1) Upon defining of the financial result of shareholders or partners, the financial result is decreased with the distributed dividends from local legal entities or foreign entities who are local legal entities for tax purposes of a member state of the European Union or another state which is a party to the European Economic Area agreement, when the investment is accounted through the equity method

(2)The decrease under par. 1 for the financial institutions is with the dividends distributed through the year. The decrease is made in the year of admission of the distributed dividends in the annual financial statement of the financial institution.

(3)The decrease under par. 1 for the entities subject to taxation that are not financial institutions is with the distributed dividends for the whole period from acquiring to writing off of the investment. The decrease is made in the year of writing off of the investment.

(4 ) Paragraphs 1-3 are not applicable for:

dividends, distributed from profits which are made prior the investment acquiring;
dividends, distributed from licensed partnership with special investment purpose under The Special Investment Purpose Companies Act;
dividends which are hidden profit distribution.

Transfer of a permanent establishment

Art. 47b. (New, SG No. 95/2009, in force as of 01.01.2010) (1) Upon defining of the financial result of the permanent establishment, its accounting financial result is increased with the profit and decreased with the loss due to the transfer of the permanent establishment. The interim tax differences with reference to the assets and liabilities of the permanent establishment are acknowledged as tax purposes in the year of transfer of the permanent establishment and in compliance with the provisions of the law. Art.66, par. 1 and 2 is applied upon defining of the tax financial result of the permanent establishment

(2) The profit and loss for the purposes of par. 1 is considered the divergence between the selling price of the permanent establishment and the assets accounting value, decreased with the business activities premises liabilities accounting value at the date of the transfer.

(3) Paragraphs 1 and 2 are not applicable when the permanent establishment transfer profit and loss have been used upon preparing the accounting financial result of the permanent establishment

Chapter Ten

TAX DEPRECIABLE ASSETS

Tax Depreciable Assets

Article 48. Tax depreciable assets shall comprehend:

the tax tangible fixed assets;
the tax intangible fixed assets;
the investment properties, with the exception of land;
the subsequent expenses referred to in Article 64 herein.

Goodwill

Article 49. (1) Goodwill generated as a result of a business combination shall not be a tax depreciable asset.

(2) Any loss from impairment and upon write-off of goodwill shall not be recognized for tax purposes.

Tax Tangible Fixed Assets

Article 50. “Tax tangible fixed assets” shall be the amounts which satisfy the requirements for depreciable tangible fixed assets according to the National Financial Reporting Standards for Small and Medium-Sized Enterprises whose value equals or exceeds the lesser of:

the value materiality threshold for the tangible fixed asset, as adopted in the accounting policies of the taxable person;
(Amended, SG No. 110/2007) seven hundred BGN.

Tax Intangible Fixed Assets

Article 51.(1) “Tax intangible fixed assets” shall be:

any acquired non-financial resources which:

(a) have no physical substance;

(b) are used during a period longer than twelve months;

(d) are of a value which equals or exceeds the lesser of:

(aa) the value materiality thresholds for the tangible fixed asset, as adopted in the accounting policies of the taxable person;

(bb) (Amended, SG No. 110/2007) seven hundred BGN;

(Repealed, SG No. 110/2007);
any amounts charged as a result of business transactions leading to an increase in the economic benefits flowing from a tax tangible fixed asset which is hired or provided for use; the said amounts shall not form a tax tangible fixed asset.

(2) Any accounting expenses, accounted for in connection with the acquisition of a tax tangible fixed asset before the origination of the said asset, shall not be recognized for tax purposes in the year of accounting for the said expenses and shall be involved upon determination of the tax depreciable value of the said asset. Where any circumstances determining that the taxable person will not acquire the tax intangible fixed asset occur in a succeeding year, the unrecognized expenses referred to in sentence one shall be recognized for tax purposes in the year of occurrence of any such circumstances, if the requirements of this Act are complied with.

Tax Depreciation Schedule

Article 52.(1) Any taxable persons which form a tax financial result shall prepare and keep a tax depreciation schedule, posting therein all tax depreciable assets.

(2) The tax depreciation schedule shall be a tax ledger wherein the information, specified according to the requirements of this Act, regarding the process of acquisition, subsequent keeping, depreciation and write-off of the tax depreciable assets, shall be posted.

(3) The tax depreciation schedule shall contain, as a minimum, the following information on each tax depreciable asset:

designation;
month of commissioning;
tax depreciable value;
tax depreciation charged;
tax value;
annual rate of tax depreciation;
annual tax depreciation;
month of occurrence of any changes in the values of the asset and the circumstances necessitating the said changes;
month of discontinuance and resumption of the charging of tax depreciations and the circumstances which necessitate the said discontinuance and resumption;
month of write-off of the asset covered under Article 60 (3) herein for accounting purposes and the circumstances which necessitate the said write-off.
month of write-off of the asset in the tax depreciation schedule.

Values of Tax Depreciable Assets

Article 53. (1) The “tax depreciable value” shall be the historical cost of the asset debited with the charged provisions and donations associated with the asset which are included in the said cost. In the cases referred to in Article 64 (1) and Article 67 herein, the tax depreciable value shall be the sum total of:

the subsequent expenses: in the cases referred to in Article 64 (1) herein;
the expenses unrecognized for tax purposes: in the cases referred to in Article 67 herein.

(2) The “annual tax depreciation” shall be the depreciation charged in the tax depreciation schedule for the relevant year according to the requirements of this Chapter.

(3) The “tax depreciation charged” shall be the sum total of the annual tax depreciations for the relevant asset. The tax depreciation charged may not exceed the tax depreciable value of the asset.

(4) The “tax value” shall be the tax depreciable value of the asset debited with the tax depreciation charged for the said asset.

Tax and Accounting Depreciations

Article 54. (1) The tax depreciations, determined according to the procedure established by this Chapter, shall be recognized upon determination of the tax financial result.

(2) (Supplemented, SG No. 110/2007) The accounting expenses on depreciation shall not be recognized for tax purposes. Upon determination of the tax financial result, the accounting financial result shall be credited with the accounting depreciations, regardless of whether the accounting for the said depreciations leads to a diminution in the accounting financial result for the year of accounting for the said depreciations.

Tax Depreciable Asset Categories

Article 55. (Last Amendment – SG No. 106/2008, in force as of 01.01.2009) (1) Upon determination of the annual tax depreciations, tax depreciable assets shall be allocated to the following categories:

Category I: solid buildings, including investment properties, plant, transmission facilities, electric power carriers, communication lines;
Category II: machinery, process equipment, apparatus;
Category III: means of transport excluding automobiles; surfacing of roads and of runways;
(Supplemented, SG No. 110/2007) Category IV: computers, computer peripheral equipment, software, and right to use software, mobile telephones;
Category V: automobiles;
Category VI: tax tangible and intangible fixed assets whereof the period of use is restricted according to contractual relationships or a legal obligation;
Category VII: all other depreciable assets.

(2) The annual rate of tax depreciation shall be determined on a single occasion for the year and may not exceed the following amounts:

Asset category	Annual rate of tax depreciation (%)
I	4
II	30
III	10
IV	50
V	25
VI	100/years of legal restriction The annual rate may not exceed 33 1/3
VII	15

(3) In respect of Category II assets, the annual rate of tax depreciation may not exceed 50 per cent, where the following conditions are simultaneously fulfilled:

the assets form part of an initial investment;
the assets are new as fabricated and have not been exploited prior to the acquisition thereof.

(4) (Repealed, SG No. 110/2007).

(5) (New, SG No. 110/2007) The acquisition of an asset through conclusion of a lease contract, classified as financial lease according to accounting legislation, shall be no grounds for allocation of the said asset to Category VI.

(6) (New – SG No. 106/2008, in force as of 01.01.2009) Subpar. 1 of Par. 3 shall not apply when the assets under Par. 3 are acquired in connection with an investment for increase in power efficiency if voluntary agreements under chapter five, section II of the Power Efficiency Act are available.

Standard Procedure for Posting of Assets in Tax Depreciation Schedule

Article 56. Tax depreciable assets shall be posted in the tax depreciation schedule at the tax depreciable value thereof.

Specific Procedure for Posting of Assets in Tax Depreciation Schedule

Article 57. (1) Any person, in respect of which the tax treatment changes as a result of which an obligation to form a tax financial result arises for the said person, shall prepare a tax depreciation schedule wherein the tax depreciable assets available at that time shall be posted at tax depreciable value and tax depreciation charged determined according to the procedure established by Paragraphs (2) and (3).

(2) The tax depreciable value of any asset referred to in Paragraph (1) shall be determined by means of:

crediting the historical cost of the said asset with the subsequent expenses incurred theretofore which, according to accounting legislation, lead to future economic benefits derived from the said asset;
debiting the historical cost of the said asset with the charged provisions and donations associated with the said asset which are included in the said cost.

(3) The tax depreciation charged for any asset referred to in Paragraph (1) shall be the accounting depreciation which would be charged theretofore on the historical cost of the said asset, adjusted according to the procedure established by Paragraph (2).

(4) Any assets for which the tax depreciation charged equals or exceeds the tax depreciable value thereof shall not be posted upon preparation of the tax depreciation schedule.

(5) Paragraphs (1) to (4) shall furthermore apply in the cases of re-posting of an asset in the tax depreciation schedule.

Charging of Tax Depreciations

Article 58. (1) (Supplemented, SG No. 110/2007) Tax depreciation shall commence to be charged as from the beginning of the month in which the tax depreciable asset is commissioned or as from the beginning of the next succeeding month. The date of commissioning must be supported by documents.

(2) Where a procedure for commissioning is provided for in a statutory instrument, the asset may not be commissioned for tax purposes earlier than what is established in the statutory instrument.

(3) The annual tax depreciation shall be arrived at according to the following formula:

ATD = TDV x ARTD x (M/12)

where:

ATD shall be the annual tax depreciation;

TDV shall be the tax depreciable value;

ARTD shall be the annual rate of tax depreciation, determined by the taxable person according to Article 55 (2) and (3) herein;

M shall be the number of months of the year during which tax depreciation is charged.

Discontinuance of Charging of Tax Depreciations

Article 59. (1) (Amended, SG No. 110/2007, effective 1.01.2007) (1) Charging of tax depreciations shall be discontinued when the relevant asset is temporarily withdrawn from use (no economic benefit is derived therefrom) for a period not exceeding twelve months. Charging shall be discontinued as from the beginning of the month next succeeding the month during which the period referred to in sentence one elapsed and shall be resumed as from the beginning of the month of re-commissioning of the said asset. The tax depreciable asset shall not be written off in the tax depreciation schedule.

(2) Upon determination of the tax financial result for the year during which the twelve-month period referred to in Paragraph (1) elapsed, the annual tax depreciation of the taxable person shall be debited with the amount of the tax depreciation charged for the asset during the twelve months during which the asset was withdrawn from use. The values of the tax depreciable asset at the date of discontinuance of the charging of tax depreciation shall be adjusted for the amount of the debiting under sentence one as follows:

the tax depreciation charged for the asset shall be debited;
the tax value of the asset shall be credited.

(3) Any taxable person where against liquidation or bankruptcy proceedings are pending shall discontinue the charging of tax depreciations for those assets for which the charging of accounting depreciations is discontinued according to the requirements of accounting legislation. At the date of discontinuance of the charging of tax depreciations, Article 60 (5) herein shall apply, mutatis mutandis.

(4) The charging of tax depreciations in respect of any assets covered under Article 60 (3) herein shall not be discontinued.

Write-off of Assets in Tax Depreciation Schedule

Article 60. (1) An asset shall be written off in the tax depreciation schedule where the said asset is completely depreciated for tax purposes.

(2) Where an asset is written off for accounting purposes before being fully depreciated for tax purposes, the said asset shall be written off in the tax depreciation schedule at the beginning of the month during which the said asset is written off for accounting purposes.

(3) Paragraph (2) shall not apply upon the write-off of any assets:

(Amended, SG No. 110/2007) which are completely depreciated for accounting purposes;
as a result of an increase in the value materiality threshold.

(4) Any assets referred to in Paragraph (3) shall be written off in the tax depreciation schedule according to the procedure established by Paragraph (1).

(5) (Supplemented, SG No. 110/2007) Where any depreciable asset according to the National Financial Reporting Standards for Small and Medium-Sized Enterprises is transformed into a non-depreciable asset, with the exception of transformation into an investment property, the said asset shall be written off in the tax depreciation schedule as from the beginning of the current month. Sentence one shall not apply to any assets which are completely depreciated for accounting purposes and which are temporarily withdrawn from use (no economic benefit is derived therefrom).

(6) Where a tax depreciable asset ceases to be used for an activity in respect of which a tax financial result is formed, the said asset shall be written off in the tax depreciation schedule as from the beginning of the current month.

Retention of Values of Tax Depreciable Asset

Article 61. (Last Amendment – SG No. 94/2010, in force as of 01.01.2011) The values of the tax depreciable asset shall not change upon:

any subsequent accounting valuation (revaluation and impairment);
any change in accounting policy, including any change in the applicable accounting standards;
(Repeal – SG No. 94/2010, in force as of 01.01.2011);
registration or re-registration under the Value Added Tax Act.

Change in Tax Depreciable Asset Values

Article 62. (Last Amendment – SG No. 94/2010, in force as of 01.01.2011) (1) (Last Amendment – SG No. 94/2010, in force as of 01.01.2011) A change in the values of the tax depreciable asset shall be effected upon occurrence of any circumstances necessitating such a change according to this Act or accounting legislation, with the exception of the cases covered under Article 61 herein.

(2) The change in the values of the asset shall be shown in the tax depreciation schedule as at the 1st day of January of the year in which the circumstances necessitating the change have been ascertained. The tax depreciation schedule shall not be changed and the tax depreciation charged shall not be adjusted in respect of prior years.

(3) The values of the tax depreciable asset after the change must equal the value which would be determined if the circumstances necessitating the change were known during the prior years.

(4) (Last Amendment – SG No. 94/2010, in force as of 01.01.2011) Upon determination of the tax financial result, the annual tax depreciation of the asset for the current year shall be adjusted for the difference between the tax depreciation charged for the asset during the prior years and the annual tax depreciation which would be charged for the said years if the circumstances necessitating the change were known during the prior years. The first sentence does not apply if the circumstances necessitating the change of the asset are finding of an error.

(5) Where the circumstances ascertained do not necessitate a change in the values of the asset for prior years, the change in the values shall be shown in the tax depreciation schedule as at the time of ascertainment of the circumstance during the current year.

Subsequent Expenses Associated with Asset Available in Tax Depreciation Schedule

Article 63. The tax depreciable value of any asset which is available in the tax depreciation schedule shall be credited with any subsequent expenses which, according to accounting legislation, lead to future economic benefits associated with the tax depreciable asset. The tax depreciable asset shall be credited as from the beginning of the month during which the said subsequent expenses were incurred.

Subsequent Expenses Associated with Asset Written Off in Tax Depreciation Schedule

Article 64. (1) Where an asset has been written off in the tax depreciation schedule but has not been written off for accounting purposes, a separate tax depreciable asset shall be posted with the subsequent expenses which, according to accounting legislation, lead to future economic benefits associated with the said asset.

(2) The tax depreciable asset referred to in Paragraph (1) shall be posted in the tax depreciation schedule as from the beginning of the month during which the subsequent expenses were completed.

(3) For the purposes of Article 55 herein, the tax depreciable asset shall be allocated to the category to which the asset in connection with which the subsequent expenses have been incurred was allocated.

(4) Where the asset in connection with which the subsequent expenses have been incurred is written off in the tax depreciation schedule before the tax depreciable asset referred to in Paragraph (1) is fully depreciated, the said asset shall be written off in the tax depreciation schedule under the terms and according to the procedure established by Article 60 herein.

Income and Expenses from Subsequent Valuations of Tax Depreciable Assets

Article 65. The accounting income and expenses from subsequent valuations of tax depreciable assets shall not be recognized for tax purposes.

Adjustment of Accounting Financial Result upon Write-Off of Tax Depreciable Asset

Article 66. (1) Where an asset is written off in the tax depreciation schedule, upon determination of the tax financial result the accounting financial result shall be credited with the accounting carrying value of the asset.

(2) Where an asset is written off in the tax depreciation schedule, upon determination of the tax financial result the accounting financial result shall be debited with the tax value of the asset.

(3) Paragraphs (1) and (2) shall not apply:

in the cases of unrecognized expenses on shrinkage of assets and associated claims, where the tax value exceeds the accounting carrying value of the said asset;
upon write-off of an asset for the account of owners’ equity, where the tax value exceeds the accounting carrying value of the said asset;
upon write-off of an asset according to the procedure established by Article 60 (6) herein, where the tax value exceeds the accounting carrying value of the said asset;
upon transformation of corporations and restructuring of cooperatives under Sections II and III of Chapter Nineteen herein.

Accounting Expenses Forming Tax Depreciable Asset

Article 67. Any accounting expenses forming a tax depreciable asset, including any subsequent expenses, shall not be recognized for tax purposes.

Income and Expenses Accounted for in Connection with Donation Associated with Tax Depreciable Asset

Article 68. Any accounting income and expenses, accounted for in connection with a donation wherewith the historical cost has been debited upon determination of the tax depreciable value of the asset, shall not be recognized for tax purposes.

Specific Tax Treatment of Asset Formed as Result of Development Activity

Article 69. (1) Upon determination of the tax financial result, the taxable person shall have the right to debit the accounting financial result thereof with the historical cost of an intangible fixed asset on a single occasion in the year of formation of the said result, where the following conditions are simultaneously fulfilled:

the asset has been formed as a result of development activity;
the development activity has been carried out in connection with the activity carried out by the taxable person as a regular business;
the development activity has been commissioned under market conditions to a scientific research institute or a higher school.

(2) Where the taxable person has exercised the right thereof under Paragraph (1), the intangible fixed asset accounted for under Paragraph (1) shall not be a tax depreciable asset.

Chapter Eleven

CARRY-FORWARD OF TAX LOSS

General Dispositions

Article 70. (1) Taxable persons shall have the right to carry forward the tax loss formed according to the procedure established by this Part. Where a taxable person has elected to carry forward the tax loss, the said loss shall mandatorily be carried forward successively until the depletion thereof during the next succeeding five years.

(2) The taxable person shall exercise the right thereof to election by means of deduction of the tax loss during the first year after incurrence of a tax loss, during which the said person has formed a positive tax financial result before deduction of the tax loss. Where the taxable person has not formed a positive tax financial result before deduction of the tax loss until the date of tax control, the person shall be presumed to have exercised the right thereof to election in respect of carry-forward of a tax loss.

Procedure for Deduction

Article 71. (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) (1) A tax loss shall be deducted upon determination of the tax financial result within the amount of the positive tax financial result before deduction of the tax loss. Where the tax loss is less than the positive tax financial result before deduction of the tax loss, the full amount of the said loss shall be deducted upon determination of the tax financial result.

(2) (Repeal – SG No. 94/2012, in force as of 01.01.2013)

Newly Incurred Tax Losses

Article 72. The provisions of this Chapter shall apply in respect of any newly incurred tax losses, observing the sequence of incurrence of the said losses. In respect of each of the newly incurred tax losses, the five-year-period shall begin to run from the year next succeeding the year of incurrence of the said losses.

Loss from Source Outside Bulgaria upon Application of Exemption with Progression Method

Article 73. (1) Any tax loss, formed during the current year in a State wherewith the Republic of Bulgaria has concluded a convention for the avoidance of double taxation and the method of avoidance of double taxation with respect to profits is exemption with progression, shall not be deducted from the tax profits from a source inside the country or other States during the current of succeeding years.

(2) The tax loss referred to in Paragraph (1) shall be deducted in compliance with the requirements of this Chapter successively solely from the tax profits from the source outside Bulgaria from which the said loss has been incurred during the next succeeding five years.

(3) Upon cessation of the activity of a permanent establishment in a Member State of the EuropeanUnionor of the European Economic Area, any tax losses from a permanent establishment which have not been carried forward and have not been recovered shall be carried forward according to the standard procedure established by this Act until lapse of the five-year period since the incurrence of the said losses.

Loss from Source Outside Bulgaria upon Application of Credit Method

Article 74. (1) Where a taxable person has formed a tax loss and the said loss or a part thereof has its source outside Bulgaria in respect of which source the credit method for avoidance of double taxation is applied, the loss which is not deducted during the current year shall be deducted during the next succeeding five years in compliance with the requirements of this Chapter successively solely from the tax profits from the source outside Bulgaria from which the said loss has been incurred.

(2) Where the tax loss for the year has not been formed from a single source (foreign State or the country), the said loss shall be allocated for the purposes of Paragraph (1) among the States from which the said loss has originated according to the following formula:

A = B x (C/D)

where:

A shall be the part of the tax loss incurred by the taxable person for the year, allocated to the relevant source (foreign State or the country);

B shall be the tax loss formed by the taxable person for the year;

C shall be the tax loss formed from the relevant source (foreign State or the country);

D shall be the sum total of the tax losses formed from all sources (foreign States and the country).

(3) Paragraph (1) shall not apply to any losses from a source within a Member State of the EuropeanUnionor of the European Economic Area.

Chapter Twelve

ACCOUNTING ERRORS

Correction of Accounting Errors

Article 75. (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) (1) Upon detection, during the current year, of any accounting error related to prior years, the tax financial results for the relevant prior years shall be corrected according to the requirements of the laws effective during the relevant prior years in a way as if the said error was nor made.

(2) Upon determination of the tax liability on the tax financial result for a prior year as corrected under Paragraph (1), the rate of tax for the relevant prior year shall be applied.

(3) (Last amendment – SG No. 94/2012 in force as of 01.01.2013) In the cases referred to in Par. 1 the tax liable person shall notify in writing the revenue body which shall take actions for correction of the tax financial result and tax liability for the relevant taxation period.

(4) (Last Amendment – SG No. 94/2010, in force as of 01.01.2011) Where an error, related to a tax depreciable asset, is detected, the values of the asset are recalculated under the terms and conditions of Art. 62. Where, as a result of an error detected, it is established that the taxable person has had to form a tax depreciable asset, then in determining the tax financial results for the relevant prior years, an annual tax depreciation equal to the accounting depreciation which would have been calculated for the asset for the respective years shall be recognized, which may not exceed the annual tax depreciation which would be charged if the maximum permissible annual rates of tax depreciation under the relevant rules for the respective years were used. The tax depreciable asset under sentence two must be entered in the tax depreciation schedule as of the 1st day of January of the year of detection of the error at the tax depreciable value of the asset and the tax depreciation charged under sentence two.

(5) The temporary tax difference which would originate during a prior year if the error was not made shall be considered as having originated during the relevant prior year and shall be recognized for tax purposes according to the standard procedure established by this Act.

(6) (Last Amendment – SG No. 94/2010, in force as of 01.01.2011) Paragraphs (1) to (4) do not apply to tax financial result and the tax obligation related to it, for the year in past, for which as of 1 January of the year when the error is found, more than six years have passed.

(7) All accounting income and expenses, accounted for during the current year in connection with a detected accounting error from prior years, shall not be recognized for tax purposes.

Specific Cases of Correction of Accounting Errors

Article 76. Where, after correction of the tax financial result under Article 75 (1) herein, a tax loss for the relevant prior period is incurred or changes, the provisions of Chapter Eleven herein shall apply. The tax financial results for the years from the making of the error until the detection thereof shall be corrected according to the procedure established by Article 75 herein in such a way as if the error was not made. The year during which the error was made shall be considered a year of incurrence of the tax loss.

Expenses Accounted for in Breach of Accounting Legislation

Article 77. (1) Any expenses accounted for in breach of accounting legislation shall not be recognized for tax purposes in the year of accounting for such expenses.

(2) The expenses unrecognized for tax purposes, referred to in Paragraph (1), shall be recognized for tax purposes where this is permissible under this Act and in compliance with the requirements of this Chapter.

Income and Expenses Unaccounted for According to Procedure Established by Statutory Instrument

Article 78. Upon determination of the tax financial result, the accounting financial result shall be corrected by the amount of income and expenses which should have been accounted for during the current year according to the requirements of a statutory instrument but which were not accounted for by the taxable person. Where any accounting income and expenses are subsequently accounted for in connection with a business transaction under sentence one, the said income and expenses shall not be recognized for tax purposes.

Correction of Errors Other than Accounting Errors

Art. 79. (Last Amendment – SG No. 94/2010, in force as of 01.01.2011) The provisions of this Chapter apply also for errors different than accounting errors, including errors in transformation of the accounting financial result for the purposes of determination of the tax financial result.

Default Interest

Article 80. Default interest according to the standard procedure shall furthermore be due upon application of Article 75 herein. The interest shall be due as from the date on which the corporation tax for the relevant prior year should have been remitted.

Corrections of Errors Detected upon Tax Control

Article 81. The provisions of this Chapter, with the exception of Article 75 (3) herein, shall furthermore apply in the cases of errors detected upon tax control.

Chapter Thirteen

CHANGE IN ACCOUNTING POLICIES

Adjustment upon Change in Accounting Policies

Article 82.(1) Where the accounting policies change, upon determination of the tax financial result, the accounting financial result for the current year shall be adjusted in the manner and by the amount whereby the tax financial results for the prior years would have been adjusted if the changed accounting policies were applied during the said years.

(2) The temporary tax differences, which have originated according to the accounting policies applied before the change, shall be considered as not having originated.

(3) In case the changed accounting policies have been applied during the prior years and temporary tax differences would have originated as a result of this, the said differences shall be considered as having originated and shall be recognized according to the standard procedure established by this Act.

(4) Any accounting income and expenses, accrued and incurred as a result of changed accounting policies, shall not be recognized for tax purposes.

(5) (Amended, SG No. 110/2007, effective 1.01.2007) Paragraphs (1) to (3) shall not apply upon any change in accounting policies related to tax depreciable assets.

(6) No default interest shall be due upon any change in accounting policies where the effect of the said change leads to an increase in the tax financial result.

Chapter Fourteen

TAX PREPAYMENTS

General Dispositions

Article 83. (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) (1) (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) Any taxable person shall make monthly or quarterly prepayments of corporation tax based on the estimated taxable profit for the year.

(2) (New, SG No. 110/2007) Prepayments shall not be made by:

(Last Amendment – SG No. 94/2012, in force as of 01.01.2013) any taxable persons whose net turnover for the last preceding year does not exceed BGN 300,000;
any newly incorporated taxable persons, for the year of the incorporation thereof, with the exception of any such persons newly incorporated as a result of a transformation under the Commerce Act.

(3) (New – SG No. 94/2012, in force as of 01.01.2013) The persons under Par. 2 may make quarterly advance contributions pursuant to this chapter and, in that case, Art. 89 shall not apply.

Monthly Tax Prepayments

Article 84. (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) Monthly tax prepayments shall be made by any taxable person whose net sales revenue for the last year exceed BGN 3 000 000.

Quarterly Tax Prepayments

Article 85. Quarterly tax prepayments shall be made by any taxable person which is under no obligation to make monthly tax prepayments.

Determination of Monthly Advance Contributions

Article 86. (Last amendment – SG No. 94/2012, in force as of 01.01.2013) The monthly advance payment shall be determined in accordance with the following formula:

AP_MONTHLY = (FTP / 12) x TR

APmonthly shall be the monthly advance contribution;

FTP shall be the forecasted tax profit for the current year;

TR shall be the tax rate of the corporate tax.

(2) (New, SG No. 110/2007) Where the tax profit for the last preceding year exceeds the tax profit for the year before the last preceding year, the monthly tax prepayment for April shall be determined by crediting the monthly tax prepayment, calculated according to the procedure established by Paragraph (1) for the period commencing on the 1st day of April and ending on the 31st day of December, with the amount determined according to the following formula:

A = 3 x (PR2 – PR1),

where:

A shall be the amount credited;

PR1 shall be the monthly tax prepayment for the period commencing on the 1st day of January and ending on the 31st day of March, calculated according to the procedure established by Paragraph (1);

PR2 shall be the monthly tax prepayment for the period commencing on the 1st day of April and ending on the 31st day of December, calculated according to the procedure established by Paragraph (1).

The same procedure shall furthermore apply to the determination of the monthly tax prepayment for April in the cases where the taxable person:

was incorporated during the last preceding year, or
formed a tax loss for the year before the last preceding year, or
did not form a tax financial result for the year before the last preceding year.

(3) (New, SG No. 110/2007) Where the tax profit for the year before the last preceding year exceeds the tax profit for the last preceding year, the monthly tax prepayment for April shall be determined by debiting the monthly tax prepayment, calculated according to the procedure established by Paragraph (1) for the period commencing on the 1st day of April and ending on the 31st day of December, with the amount determined according to the following formula:

B = 3 x (PR2 – PR1)

where:

B shall be the amount debited;

Where the amount debited exceeds the monthly tax prepayment calculated according to the procedure established by Paragraph (1) for the period commencing on the 1st day of April and ending on the 31st day of December, the monthly tax prepayment for April shall be zero, and the excess shall be deducted from the following monthly tax prepayments for the current year upon determination of the amount of the said tax prepayments.

Determination of Quarterly Advance Contributions

Article 87. (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) The quarterly advance payments shall be determined in accordance with the following formula:

PR_QUARTERLY = (FTP / 4) x TR

where:

AC_QUARTERLY shall be the quarterly advance contribution;

FTP shall be the forecasted tax profit for the current year;

TR shall be the tax rate of the corporate tax.

Declaration of Advance Contributions

Article 87а. (New – SG No. 94/2012 in force as of 01.01.2013)(1) The advance contributions for the current calendar year determined pursuant to Art. 86 и 87 shall be declared in the annual tax return for the precedent calendar year.

(2) The quarterly advance contributions for the current calendar year determined pursuant to Art. 87 by a company newly established as a result of transformation shall be declared in a standard form declaration within the time limit for payment of the first advance contribution after transformation.

(3) The quarterly advance contributions for the current calendar year determined pursuant to Art. 87 by a newly established company in the cases under Art. 83, Par. shall be declared in a standard form declaration within the time limit for payment of the first chosen quarterly advance contribution.

Declaration on Variations of Tax Prepayments

Article 88. (Last Amendment – SG No. 94/2012 in force as of 01.01.2013) (1) (Last Amendment – SG No. 94/2012 in force as of 01.01.2013) The taxable persons may submit a declaration in a standard form on reduction or increase of tax prepayments when the said persons assume that the said prepayments will differ from the annual corporation tax due.

(2) (Last Amendment – SG No. 94/2012 in force as of 01.01.2013) The reduction or increase of tax prepayments shall be enjoyable after submission of the declaration.

(3) (New – SG No. 94/2012, in force as of 01.01.2013) The declaration under Par. 1 shall be submitted in the event of transformation pursuant to Chapter Nineteen, when there is a correction in the amount of the advance contributions determined by the receiving company after transformation. The declaration shall be submitted within the time limit for payment of the first advance contribution after transformation.

Interest Due Where the Annual Corporate Tax Exceeds the Determined Advance Contributions

Article 89. (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) (1) (Last amendment – SG No. 94/2012, in force as of 01.01.2013) Where the annual corporate tax exceeds the sum of the monthly advance contributions determined for the relevant year by more than 20 percent or where 75 percent of the annual corporate tax due exceeds by more than 20 percent the sum of the quarterly advance contributions determined for the relevant year, an interest shall be due on the difference above 20 percent.

(2) (Last Amendment – SG No. 94/2012 in force as of 01.01.2013) The amount on which interest is due under Par. 1 shall be determined using the following formulae:

for the monthly advance contributions:

А = B – (C + 0,2 x C), where:

А is the amount on which interest is due;

B is the annual corporate tax due;

C is the total amount of the monthly advance contributions determined for the relevant year;

for the quarterly advance contributions:

А = 0,75 x B – (C + 0,2 x C), where:

А is the amount on which interest is due;

B is the annual corporate tax due;

C is the total amount of the quarterly advance contributions determined for the relevant year;

(3) (Repeal – SG No. 94/2012 in force as of 01.01.2013)

(4) (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) Within the meaning of this Article, “advance contributions determined” shall be:

the monthly advance contributions determined pursuant to Art. 86, or the quarterly advance contributions determined pursuant to Art. 87, for the first, second and third quarter – for the advance contributions prior to filing a declaration for correction of the advance contributions under Art. 88;

the decreased or increased advance monthly contributions or the decreased or increased advance quarterly contributions for the first, second and third quarter specified in the declaration under Art. 88 – for the advance contributions following the filing of the declaration for correction under Art. 88.

(5) (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) The interest referred to in Par. 1 shall be determined in accordance with the Interest on Taxes, Fees and Other Similar State Receivables Act and shall be calculated for the period from 16 April until 31 December of the relevant year, and for a newly established company as a result of transformation – from the date subsequent to the date on which the term for making of the first quarterly advance payment expires until 31 December of the year of transformation.

Payment of Advance Contributions

Article 90. (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) (1) The monthly advance payments shall be paid as follows:

for January, February and March – until 15 April of the current calendar year;
for April – December – until the 15th day of the month for which they are paid for.

(2) The quarterly advance payments for the first and second quarter shall be payable until the 15th day of the month following the quarter they are paid for, and for the third quarter – until 15 December. No quarterly advance contribution is payable for the fourth quarter.

Cession of Advance Payments

Article 91. (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) The tax liable persons the corporate tax of whom is ceded for the current year shall also be ceded the respective part of the advance payments due, the said part being in proportion to the amount of cession.

Chapter Fifteen

CORPORATION TAX DECLARING AND REMITTANCE

Declaring of Corporation Tax

Article 92. (Last Amendment – SG No. 94/2010, in force as of 01.01.2011) (1) Any taxable persons which are liable to corporation tax shall submit an annual tax return in a standard form regarding the tax financial result and the annual corporation tax due.

(2) The annual tax return shall be submitted on or before the 31st day of March of the next succeeding year at the National Revenue Agency territorial directorate exercising competence over the place of registration of the taxable person.

(3) (Last Amendment – SG No. 95/2009, in force as of 01.01.2010) The annual activity report is submitted together with the annual tax declaration.

(4) (Last Amendment – SG No. 95/2009, in force as of 01.01.2010) An annual activity report is not submitted by entities subject to taxation that have not:

performed business activities through the year;
accounted assets or liabilities for the respective year in accordance with the accounting law.

(5) (Last Amendment – SG No. 95/2009, in force as of 01.01.2010) A rate rebate of 1 per cent of the annual corporation tax due but not more than BGN 1,000 shall be enjoyable by any taxable person which submits an annual tax return and the annual statement thereof on or before the 31st day of March of the next succeeding year by electronic means and which remits the corporation tax on or before the same date.

(6) (New – SG No. 94/2010, in force as of 01.01.2011) The taxable persons attach to their annual tax declaration evidence for the amount of tax played abroad. The first sentence does not apply for profit/income from a source abroad, with regard to which an agreement on avoidance of double taxation envisages the method for avoidance of double taxation – exemption with progression.

Tax Remittance

Article 93. Any taxable person shall remit the corporation tax for the relevant year on or before the 31st day of March of the next succeeding year after deduction of the tax prepayments remitted for the relevant year.

Overremitted Tax

Article 94. (Repeal – SG No. 94/2012, in force as of 01.01.2013)

Chapter Sixteen

FINANCIAL INSTITUTIONS

Income and Expenses Determined by Regulatory Authority

Article 95. Where there exists any divergence between the amount of income or expenses as accounted for according to the accounting policies of a financial institution and the amount as determined by a regulatory authority according to a statutory instrument, the amount as determined according to the special statutory instrument shall be recognized upon determination of the tax financial result.

Income and Expenses from Subsequent Valuations (Revaluations and Impairments) of Financial Assets and liabilities

(Last Amendment – SG No. 95/2009, in force as of 01.01.2009)

Article 96. (Last Amendment – SG No. 95/2009, in force as of 01.01.2009) (1) (Previous text Article 96 – SG No. 95/2009, in force as of 01.01.2009) Any income and expenses from subsequent valuations of financial assets and liabilities, accounted for by financial institutions, shall be recognized for tax purposes in the year of accounting for the said income and expenses. Financial institutions shall not apply Articles 34, 35 and 37 herein in respect of the financial assets and liabilities.

(2) (New – SG No. 95 of 2009, in force as of 01.01.2009) When gains and losses arising from subsequent assessments are not acknowledged as tax purposes during previous period, they are acknowledged as tax purposes in compliance with the general provisions of the law. Paragraph 1, sentence two is not applied with reference to these assets and liabilities.

Subsequent Valuations of Financial Assets and Liabilities Recognized Directly in Owners’ Equity

Article 97. (1) Upon determination of the tax financial result of financial institutions, the accounting financial result thereof shall be credited with any profits from subsequent valuations of financial assets and liabilities, recognized during the current year directly in the owners’ equity thereof.

(2) Upon determination of the tax financial result of financial institutions, the accounting financial result thereof shall be debited with any losses from subsequent valuations of financial assets and liabilities, recognized during the current year directly in the owners’ equity thereof.

(3) (Amended, SG No. 110/2007) Any profits and losses recognized during the current year in the profit-and-loss account (income statement), which were involved upon determination of the tax financial result according to the procedure established by Paragraphs (1) and (2), shall not be recognized for tax purposes.

Chapter Seventeen

SPECIFIC RULES FOR DETERMINATION OF TAX FINANCIAL RESULT OF COOPERATIVES

Producer and Consumer Dividends

Article 98. (1) “Producer dividends” shall be the amounts which are distributed for output produced by cooperative members and sold to the cooperative. Any such dividends shall be determined on the basis of the profit corresponding to the output sold, whether before of after the processing of the said output.

(2) “Consumer dividends” shall be the amounts which are distributed for consumer goods purchased by cooperative members from the cooperative. Any such dividends shall be determined on the basis of the profit arising from the difference between the selling price, whereat the cooperative has sold the goods, less the distribution costs thereof, and the price paid by the cooperative for acquisition of the said goods.

Tax Treatment of Producer and Consumer Dividends

Article 99. (1) Upon determination of the tax financial result, the accounting financial result shall be debited with the producer and consumer dividends paid to cooperative members until the 25th day of March of the next succeeding year, which are covered by the balance-sheet profit. The debiting referred to in sentence one shall be effected up to the amount of the positive accounting financial result.

(2) Any producer and consumer dividends paid to cooperative members shall be accounted for as accounts receivable and shall be excluded upon determination of the accounting financial result.

(3) Where the cooperative has reported, for the relevant year, a balance-sheet loss or a balance-sheet profit insufficient to cover the producer and consumer dividends paid during the year, the amount of the producer and consumer dividends paid during the year and uncovered shall be accounted for as an accounting expense which is not recognized for tax purposes.

Chapter Eighteen

INTRA-COMMUNITY DIVIDENDS

(Repealed, SG No. 69/2008)

Articles 100 – 106. (Repealed, SG No. 69/2008)

Article 107. (Repealed, SG No. 110/2007).

Articles 108 – 111. (Repealed, SG No. 69/2008)

Chapter Nineteen

TRANSFORMATION OF COMPANIES AND COOPERATIVES AND TRANSFER OF ENTERPRISE

Section I

General Dispositions

Applicability

Article 112. The provisions of this Chapter shall apply upon transformation of any companies and cooperatives and upon transfer of an enterprise.

Date of Transformation

Article 113. The date of transformation for tax purposes shall be the date of entry of the transformation in the Commercial Register.

Last Tax Period upon cessation of transferring company

Article 114. Last Tax Period upon cessation of transferring company shall be the period from the beginning of the year to the date of transformation. For transferring companies which are newly established during the year of transrormation, Last Tax Period shall be the period from the date of establishment to the date of transformation.

Taxation for Last Tax Period

Article 115. (1) The transferring companies and the permanent establishments of non-resident persons shall be subject to corporation tax for the last tax period according to the standard procedure established by this Act. The taxation shall be final.

(2) For tax purposes, the assets and liabilities available at the date of transformation shall be considered as having been sold at market prices and shall be written off.

(3) Upon determination of the tax financial result, the accounting financial result shall be credited with the profit and shall be debited with the loss arrived at as a difference between the market price of the asset or liability and the accounting value thereof at the date of transformation. Any temporary tax differences related to the asset or liability shall be recognized during the last tax period according to the standard procedure established by this Act. Article 66 (1) and (2) herein shall apply upon determination of the tax financial result.

(4) Paragraphs (2) and (3) shall not apply upon transformation under the terms and according to the procedure established by Sections II and III herein.

Tax Treatment of Transformation through Change of Legal Form

Article 116. (1) Articles 115 and 117 herein shall not apply in the cases of transformation through change of the legal form under Article 264 of the Commerce Act. The newly formed company shall assume all obligations for determination of the tax financial result and remittance of the corporation tax due for the full year of transformation.

(2) For tax purposes, all rights and obligations arising from any acts performed by the transferring company for the current and prior periods, including the adjustments of the tax financial results, shall be considered as having been performed by the newly formed company.

Tax Treatment of Transformation by Transfer of Property to Sole Owner

Article 116a. (New, SG No. 110/2007) (1) Upon transformation by transfer of property to the sole owner under Article 265 of the Commerce Act, all rights and obligations arising from steps performed by the transforming corporation for the current and prior periods, including the adjustments of the tax financial result, shall be considered as having been performed by the sole trader.

(2) The sole trader shall submit a tax return on corporation tax for the last tax period of the transferring company according to the procedure established by Article 117 (1) herein and shall remit the said tax within the time limit under Article 117 (2) herein.

(3) After the transformation, the sole trader shall make quarterly tax prepayments in the year of transformation.

(4) The sole trader may not carry forward any tax losses formed by the transferring company.

(5) The sole trader may not recognize for tax purposes any unrecognized expenses on interest payments in the transferring company resulting from application of the thin capitalization regime.

(6) The transferring company shall not apply Article 115 (2) and (3) herein.

Declaring and Remittance of Tax for Last Tax Period

Article 117. (1) (Amended and supplemented, SG No. 110/2007) In the cases of dissolution of transferring companies, the newly formed companies or the acquiring companies shall submit a tax return on the corporation tax for the last tax period of the transferring company within thirty days after the date of transformation. The tax return shall be submitted to the National Revenue Agency territorial directorate exercising competence over the place of registration of the newly formed company or the acquiring company. Upon transformation through division, the tax return shall be submitted by one of the newly formed or acquiring companies.

(2) The corporation tax for the last tax period shall be remitted by the newly formed companies or the acquiring companies within thirty days after the date of transformation after deduction of the tax prepayments made.

(3) (New, SG No. 110/2007) Paragraphs (1) and (2) shall furthermore apply in the cases of dissolution of a transferring company under Section II of this Chapter.

Tax Prepayments by Acquiring Companies or Newly Formed Companies

Article 118. (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) (1) (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) After transformation the acquiring companies shall make the same advance payments as before transformation during the year of transformation, whereas the newly established companies shall make quarterly advance payments.

(2) (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) Upon transformation through change of the legal form under Article 264 of the Commerce Act, the newly formed company shall make monthly or quarterly tax prepayments according to the standard procedure established by this Act on the basis of the estimated tax revenue calculated by the transferring company.

Carry-Forward of Tax Loss upon Transformation and Transfer of Enterprise

Article 119. (1) Upon transformation under the Commerce Act, the acquiring companies or newly formed companies may not carry forward any tax losses formed by the transferring companies.

(2) Upon sale of an enterprise under Article 15 of the Commerce Act, the transferee may not carry forward any tax losses formed by the transferor.

(3) Paragraph (1) shall not apply upon transformation through change of the legal form under Article 264 of the Commerce Act.

Regulation of Thin Capitalization

Article 120. (1) Upon transformation under the Commerce Act, the acquiring companies or newly formed companies may not recognize for tax purposes any unrecognized expenses on interest payments in the transferring companies resulting from application of the thin capitalization regime.

(2) Upon sale of an enterprise under Article 15 of the Commerce Act, the transferee may not recognize for tax purposes any unrecognized expenses on interest payments at the transferor resulting from application of the thin capitalization regime.

(3) Paragraph (1) shall not apply upon transformation through change of the legal form under Article 264 of the Commerce Act.

Expenses on Conduct of Transformation

Article 121. (1) The accounting expenses incurred in connection with the transformation shall not be recognized for tax purposes at the transferring company. The unrecognized expenses shall be recognized for tax purposes upon determination of the tax financial result of the acquiring company or the newly formed company in the year during which the transformation was implemented.

(2) Where any circumstances occur determining that the transformation will not be implemented, the expenses referred to in Paragraph (1) shall be recognized for tax purposes at the transferring companies in the year of occurrence of the said circumstances, if the requirements of this Act are complied with.

Tax Treatment upon Opting for Earlier Date of Transformation for Accounting Purposes

Article 122. (1) (Amended and supplemented, SG No. 110/2007) Upon opting for an earlier date of transformation for accounting purposes according to the procedure established by Article 263g (2) of the Commerce Act, all steps performed by the transferring companies for the account of the newly formed companies or acquiring companies as from the said date and until the date of transformation for tax purposes shall be considered as having been performed for tax purposes by the transferring companies.

(2) (Supplemented, SG No. 110/2007) In the cases referred to in Paragraph (1), all accounting income and expenses, profits and losses, accounted for by the newly formed companies or acquiring companies shall be recognized for tax purposes at the transferring company. The said income and expenses, profits and losses shall not be recognized for tax purposes at the newly formed companies or acquiring companies. The accounting income and expenses, profits and losses for the purposes of sentences one and two shall be those as would have been accounted for by the transferring company without providing for the earlier date for accounting purposes according to the procedure established by Article 263g (2) of the Commerce Act.

(3) The adjustments upon determination of the tax financial result, resulting from any acts referred to in Paragraph (1), shall be performed by the transferring companies.

Cooperative Organizations and State-Owned Enterprises

Article 123. The provisions of this Chapter in respect of the transformation of commercial corporations shall furthermore apply in the cases of:

restructuring of cooperative organizations;
dissolution, closure or formation of state-owned enterprises within the meaning given by Article 62 (3) of the Commerce Act under conditions of universal succession.

Liability upon Transformation and Restructuring

Article 124. (1) Upon transformation of commercial corporations or upon restructuring of cooperative organizations, the newly formed or acquiring companies/cooperative organizations shall incur solidary liability for the tax liabilities of the transferring companies or cooperative organizations up to the extent of the rights received.

(2) Upon transfer of an enterprise under Article 15 of the Commerce Act, the transferee shall incur solidary liability for the tax liabilities of the transferor up to the extent of the rights received.

(3) The rights received shall be valued at market prices.

Section II

Specific Regime of Taxation upon Transformation

Applicability

Article 125. (1) This Section shall apply upon merger by acquisition, merger by the formation of a new company, division, partial division, transfer of assets and exchange of shares or interests within the meaning given by Articles 126 to 131 herein, concerning resident companies and/or companies from another Member State of the European Union.

(2) This Section shall furthermore apply, mutatis mutandis, in the cases of restructuring of cooperative organizations, including such of other Member States of the EuropeanUnion, where the conditions specified therein exist.

Merger by Acquisition

Article 126. (1) “Merger by acquisition” shall be any transformation in respect of which the following conditions are simultaneously fulfilled:

all assets and liabilities of one or more transferring companies are transferred to another existing acquiring company, the transferring companies being dissolved without going into liquidation;
the shareholders or members of the transferring companies are issued shares or interests in the acquiring company.

(2) “Merger by acquisition” shall furthermore be any transformation whereupon all assets and liabilities of a transferring company are transferred to an acquiring company holding all shares or interests in the transferring company, and the transferring company is dissolved without going into liquidation.

Merger by Formation of New Company

Article 127. “Merger by the formation of a new company” shall be any transformation in respect of which the following conditions are simultaneously fulfilled:

all assets and liabilities of two or more transferring companies are transferred to a newly formed company, the transferring companies being dissolved without going into liquidation;
the shareholders or members of the transferring companies are issued shares or interests in the newly formed company.

Division

Article 128. “Division” shall be any transformation in respect of which the following conditions are simultaneously fulfilled:

(Supplemented, SG No. 110/2007) all assets and liabilities of a transferring company are transferred to two or more existing (acquiring) or newly formed companies, the transferring company being dissolved without going into liquidation;
the shareholders or members of the transferring company are issued shares or interests in each of the existing or newly formed companies, in proportion to the shares or interests held by the shareholders or members in the transferring company.

Partial Division

Article 129. “Partial division” shall be any transformation in respect of which the following conditions are simultaneously fulfilled:

(Supplemented, SG No. 110/2007) one or more branches of activity of a transferring company is transferred to one or more existing (acquiring) or newly formed companies, without the transferring company being dissolved and leaving therein at least one branch of activity;
the shareholders or members of the transferring company are issued shares or interests in the existing or newly formed companies in proportion to the shares or interests held thereby in the transferring company.

Transfer of Assets

Article 130. (Supplemented, SG No. 110/2007) “Transfer of assets” shall be a transformation whereupon one, more or all branches of activity of a transferring company are transferred to one or more existing (acquiring) or newly formed companies in exchange for shares or interests issued by the existing or newly formed companies in favour of the transferring company, without the transferring company being dissolved.

Exchange of Shares or Interests

Article 131. “Exchange of shares or interests” shall be any transformation in respect of which the following conditions are simultaneously fulfilled:

as a result of the transformation, the acquiring company holds more than one-half of the voting shares or of the interests in the acquired company or, if already having such holding in the capital, acquires a further holding in the shares or interests;
the shareholders or members of the acquired company exchange the shares or interests thereof for the issue of shares or interests in the acquiring company.

Additional Cash Payments and Non-Issue of Shares or Interests

Article 132. (1) In the cases of merger by acquisition, merger by the formation of a new company, division, partial division, transfer of assets and exchange of shares or interests, for the purpose of achieving a parity of exchange, cash payments not exceeding 10 per cent of the nominal value of the shares or interests issued as a result of the transformation may be effected to the shareholders or members of the transferring companies or acquired companies.

(2) (Amended, SG No. 110/2007) In the cases of merger by acquisition, division and partial division, shares or interests need not be issued where this is admissible by the Commerce Act.

Issue of Shares or Interests

Article 133. Within the meaning given by this Chapter, issue of shares or interests shall be in place where newly issued or held own shares or interests are provided by a newly formed, receiving or acquiring company.

Branch of Activity

Article 134. “Branch of activity” shall be the totality of assets and liabilities of a company which, from an organizational, functional and financial point of view, constitute an independent business.

Transferring Companies

Article 135. “Transferring companies,” within the meaning given by this Section, shall be:

a resident transferring company;
a transferring company from another Member State of the EuropeanUnion;
a permanent establishment in the country of a transferring company from another Member State of the EuropeanUnion.

Receiving Companies

Article 136. “Receiving companies”, within the meaning given by this Section, shall be:

a resident newly formed or receiving company;
a newly formed or receiving company from another Member State of the European Union;
a permanent establishment in the country of a newly formed or receiving company from another Member State of the European Union.

Company from Another Member State of the European Union

Article 137. “Company from another Member State of the European Union”, within the meaning given by this Section, shall be any company which simultaneously fulfils the following conditions:

the company takes a legal form in accordance with Annex 3 hereto;
the company is resident for tax purposes in another Member State of the European Union, according to the relevant tax legislation and by virtue of a convention for the avoidance of double taxation with a third State is not considered to be resident for tax purposes in another State outside the European Union;
the profits of the company are subject to a tax covered under Annex 4 hereto or to a similar profits tax and the company has no option or the possibility of being exempt from the levy of such tax.

Legal Succession

Article 138. For the purposes of this Section, upon transformation all rights and obligations arising from any acts performed by the transferring companies for the current period and the prior periods in respect of the assets and liabilities transferred under Item 1 of Article 139 herein, including the adjustments upon determination of the tax financial result, shall pass to the receiving companies.

Assets and Liabilities Subject to Transformation

Article 139. The assets and liabilities subject to transformation under this Section shall be allocated to the following categories:

assets and liabilities whereof the results of exploitation before and after the transformation are involved upon determination of the tax financial result under this Act;
assets and liabilities whereof the results of exploitation before the transformation were involved and, as a result of the transformation, cease to be involved upon determination of the tax financial result under this Act;
assets and liabilities whereof the results of exploitation before the transformation were not involved and, as a result of the transformation, become involved upon determination of the tax financial result under this Act.

Assets and Liabilities Transferred under Item 1 of Article 139 Herein

Article 140. (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) (1) The accounting profits or losses originating upon write-off of any assets and liabilities referred to in Item 1 of Article 139 herein as a result of the transformation shall not be recognized for tax purposes.

(2) The temporary tax differences related to any assets and liabilities referred to in Item 1 of Article 139 herein, which have originated before the transformation, shall not be recognized for tax purposes at the time of transformation and shall be considered as having originated at the receiving companies.

(3) Where any asset or liability is recognized according to accounting legislation at the receiving company at a value diverging from the pre-transformation value of the said asset or liability, the difference between the two values shall form a temporary tax difference from a subsequent valuation or the temporary tax difference referred to in Paragraph (2) shall be adjusted thereby.

(4) (Supplemented, SG No. 110/2007) The subsequent valuations reserve (revaluation reserve) in respect of any assets referred to in Item 1 of Article 139 herein, which are not tax depreciable assets, shall be transferred by the transferring company and shall be considered as having originated at the receiving company. The transferring company shall not apply Article 45 herein. Where the transferred subsequent valuations reserve (revaluation reserve) referred to in sentence one is not accounted for at the receiving company, the accounting financial result shall be credited with the amount of the reserve where the reserve is a positive quantity or, respectively, the accounting financial result shall be debited with the amount of the reserve where the reserve is a negative quantity, in the year of write-off of the relevant asset whereto the reserve is related.

(5) (Supplemented, SG No. 110/2007) Any tax depreciable assets acquired under Item 1 of Article 139 herein shall be posted in the tax depreciation schedule of the receiving company at values equal to the values of the said assets in the tax depreciation schedule of the transferring company at the time of transformation. A copy of the tax depreciation schedule of the transferring company at the time of transformation shall be delivered to the revenue authority together with the copy of the statement referred to in Paragraph (6).

(6) (Amended, SG No. 110/2007) Upon transformation of each asset or liability referred to in Item 1 of Article 139 herein, a statement shall be prepared according to the procedure established by Article 141 herein.

(7) (New, SG No. 110/2007) Where, as a result of the transformation, the receiving company recognizes according to accounting legislation any assets or liabilities which were not recognized at the transferring company, the post-transformation income and expenses accounted for in connection with the said assets and liabilities shall not be recognized for tax purposes. Where the assets referred to in sentence one are depreciable for tax purposes, the said assets shall be posted in the tax depreciation schedule of the receiving company and tax depreciations shall not be charged for the said assets. The accounting profit which has originated at the receiving company as a result of the transformation and, respectively, the income accounted for in connection with any negative goodwill generated, shall not be recognized for tax purposes.

(8) (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) Where any asset of the transferring company is not recognized according to accounting legislation at the receiving company, the accounting financial result shall be debited with the amount of the said asset upon determination of the tax financial result of the receiving company for the year of transformation. Where any liability of the transferring company is not recognized according to accounting legislation at the receiving company, the accounting financial result shall be credited with the amount of the said liability upon determination of the tax financial result of the receiving company for the year of transformation. The temporary tax differences related to any asset or liability referred to in sentence one, which have originated before the transformation, shall be recognized at the receiving company during the year of transformation according to the standard procedure established by the law.

(9) (New, SG No. 110/2007) Paragraphs (3), (6) and (8) shall not apply to:

any tax depreciable assets;
any assets and liabilities under deferred taxes;
the goodwill, where the accounting income and expenses accounted for in connection therewith are not recognized for tax purposes;
any amounts which are assets for the transferring company and liabilities for the receiving company;
any amounts which are liabilities for the transferring company and assets for the receiving company;
any shares or interests of the receiving company held by the transferring company;
any own shares purchased by the transferring company;
any subscribed capital unpaid of the transferring company;
any assets and liabilities referred to in Item 2 of Article 139 herein.

(10) (New, SG No. 110/2007) Paragraph (4) shall not apply to the financial assets and liabilities subsequent valuations reserve established by financial institutions, where the accounting financial result has been adjusted according to the procedure established by Article 97 herein for the profits and losses from the said subsequent valuations. This reserve shall not be stated in the statements referred to in Article 141 herein.

Statements of Assets and Liabilities Referred to in Item 1 of Article 139 Herein

Article 141. (1) The statement referred to in Article 140 (6) herein, prepared by the transferring companies, shall contain the following information on each asset and liability as at the date of transformation:

type and designation;
accounting value;
temporary tax difference;
(New, SG No. 110/2007) subsequent valuations reserve (revaluation reserve).

(2) A copy of the statement referred to in Paragraph (1) as prepared shall be delivered to the receiving companies and to the revenue authority not later than at the end of the month next succeeding the month of transformation.

(3) In the cases referred to in Article 140 (3) herein, a new statement shall be prepared by the receiving companies and a copy of the said statement shall be delivered to the revenue authority together with the annual tax return. The said statement shall contain the following information on each asset and liability:

type and designation;
accounting value;
pre-transformation temporary tax difference;
post-transformation temporary tax difference, determined according to the procedure established by Article 140 (3) herein;
(New, SG No. 110/2007) subsequent valuations reserve (revaluation reserve).

(4) Where the values of the assets and liabilities are adjusted according to accounting legislation as a result of the transformation after submission of the statement referred to in Paragraph (3), the receiving company shall prepare an adjusting statement. The adjusting statement shall be delivered to the revenue authority not later than at the end of the month next succeeding the month of occurrence of the circumstances necessitating the adjustment.

(5) The statements referred to in Paragraphs (1) and (3) shall indicate data identifying the transferring companies and receiving companies, as well as the date of transformation and the judgment of court on entry of the said transformation.

(6) (New, SG No. 110/2007) The copies of the statements covered under this Article and of the tax depreciation schedule referred to in Article 140 (5) herein shall be submitted to the National Revenue Agency territorial directorate exercising competence over the place of registration of the receiving companies on a magnetic or optical data carrier, or by electronic means.

Assets and Liabilities Transferred under Item 2 of Article 139 Herein

Article 142. (1) The accounting profits or losses originating upon write-off of any assets and liabilities referred to in Item 2 of Article 139 herein, related to a permanent establishment of a resident company in another Member State of the European Union, shall not be recognized for tax purposes.

(2) The temporary tax differences related to any assets and liabilities referred to in Paragraph 1 herein, shall not be recognized for tax purposes at the time of transformation and during the succeeding years.

(3) For tax purposes, outside the cases referred to in Paragraph (1), the assets and liabilities referred to in Item 2 of Article 139 herein, available at the date of transformation, shall be considered as having been sold at market prices and shall be written off.

(4) In the cases referred to in Paragraph (3), upon determination of the tax financial result, the accounting financial result shall be credited with the profit and shall be debited with the loss arrived at as a difference between the market price of the asset or liability and the accounting value thereof at the date of transformation. Any temporary tax differences related to the asset or liability shall be recognized during the last tax period according to the standard procedure established by this Act. Article 66 (1) and (2) herein shall apply upon determination of the tax financial result.

Assets and Liabilities Transferred under Item 3 of Article 139 Herein

Article 143. (1) The assets and liabilities referred to in Item 3 of Article 139 herein shall be valued for tax purposes at the receiving companies at the value of the said assets and liabilities determined according to national accounting legislation.

(2) The tax depreciable assets referred to in Item 3 of Article 139 herein shall be posted in the tax depreciation schedule according to the standard procedure established by this Act.

Carry-Forward of Tax Losses

Article 144. (1) Upon transformation under this Section, the receiving companies shall not have the right to carry forward the tax losses formed by the transferring companies.

(2) Paragraph (1) shall not apply in the cases of merger by acquisition or merger by the formation of a new company under this Section, as a result of which a permanent establishment of a company from another Member State of the European Union commences the legal existence thereof in the country and the said company has not had a permanent establishment in the country before the transformation.

Tax Losses by Permanent Establishment

Article 145. (1) Any tax losses not carried forward at the time of transformation, formed by a permanent establishment of a resident company in another Member State of the European Union, shall not be deducted.

(2) Upon determination of the tax financial result, the accounting financial result shall be credited with the tax losses carried forward at the time of transformation, formed by a permanent establishment of a resident company in another Member State of the European Union, which have not been deducted from the profits of the permanent establishment.

Regulation of Thin Capitalization

Article 146. (1) Upon transformation under this Section, the receiving companies shall not have the right to recognize for tax purposes any unrecognized expenses on interest payments in the transferring companies resulting from application of the thin capitalization regime.

Tax Prepayments by Receiving Companies

Article 147. (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) (1) (Last amendment – SG No. 94/2012, in force as of 01.01.2013) During the year of transformation the acquiring companies shall make the same advance payments after the transformation as before transformation, whereas the newly established companies shall make quarterly advance payments.

(2) (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) In the cases referred to in Article 144 (2) herein, the receiving companies shall make monthly or quarterly tax prepayments according to the standard procedure established by this Act on the basis of the net sales revenue of the transferring companies.

Write-Off of Holding

Article 148. (1) Where a receiving company has a holding in the capital of a transferring company, the accounting profits or losses in connection with the write-off of the said holding in the capital shall not be recognized for tax purposes.

(2) The income referred to in Paragraph (1) shall not be subject to levy of a tax withheld at source according to the procedure established by Part Three herein.

Tax Treatment of Shareholders of Members of Transferring Companies and Acquired Companies

Article 149. (1) The accounting profits or losses originating at shareholders or members of transferring companies or acquired companies as a result of an acquisition of shares or interests in receiving or acquiring companies shall not be recognized for tax purposes in the year of accounting for the said profits or losses and shall form a temporary tax difference from a subsequent valuation.

(2) The temporary tax differences, originating at the shareholders or members before the transformation, which are related to the written off shares or interests in the transferring companies or acquired companies, shall not be recognized for tax purposes at the time of transformation.

(3) The temporary tax differences referred to in Paragraphs (1) and (2) shall be considered as having originated in respect of the newly acquired shares or interests and shall be recognized according to the standard procedure established by this Act.

(4) The income accruing to any non-resident legal persons which are shareholders or members of resident transferring or acquired companies from acquisition of shares or interests as a result of transformation shall be taxed or shall be exempted from tax withheld at source according to the standard procedure established by this Act at the date of transformation.

(5) The tax withheld at source referred to in Paragraph (4) shall be due from the shareholder or member upon disposition in any form whatsoever of the newly acquired shares or interests and shall be remitted within sixty days after any such disposition.

(6) (Amended, SG No. 110/2007) On or before the 31st day of January of the relevant year, the non-resident legal persons referred to in Paragraphs (4), (5) and (8) shall submit a declaration to the Sofia Territorial Directorate of the National Revenue Agency, certifying thereby that the said persons have not disposed of the shares or interests newly acquired as a result of the transformation. Any such persons shall submit the declaration referred to in sentence one annually, until the year of disposition of the newly acquired shares or interests.

(7) Upon failure to submit the declaration referred to in Paragraph (6) when due, in addition to becoming liable to the administrative sanction, for the purposes of this Act the non-resident legal person shall furthermore be presumed to have disposed of the newly acquired shares or interests.

(8) (New, SG No. 110/2007) Upon acquisition of shares or interests as a result of transformation through partial division, income shall not accrue to a non-resident legal person, unless shared of the transferring company are cancelled upon the partial division. For the purposes of assessment of the tax at source upon subsequent disposition of the shares or interests referred to in sentence one, the documented cost of acquisition of the said shares or interests shall be zero.

Taxation of Transferring Company upon Transfer of Assets

Article 150. (1) The accounting profits or losses originating at a transferring company as a result of a transfer of assets shall not be recognized for tax purposes in the year of accounting for the said profits or losses and shall form a temporary tax difference from a subsequent valuation.

(2) The temporary tax difference referred to in Paragraph (1) shall be considered as having originated in respect of the newly acquired shares or interests and shall be recognized for tax purposes according to the standard procedure established by the Act.

(3) Where the shares or interests referred to in Paragraph (1) are held by the transferring company for an uninterrupted period of at least five years, the temporary tax difference referred to in Paragraph (1) shall not be recognized for tax purposes at the time of transformation and during the succeeding years.

Tax Evasion

Article 151. The provisions of this Section shall not apply where the transformation has as its objective tax evasion or tax avoidance. Tax evasion shall be presumed, inter alia, where the transformation is not carried out for valid commercial reasons or where the said transformation conceals the disposition of assets.

Section III

Transfer of Registered Office of European Company or European Cooperative Society

Applicability

Article 152. Within the meaning given by this Chapter, “transfer of the registered office of a European company or a European cooperative society” shall be an operation whereby:

the company, without being dissolved or without incorporation of a new legal person, transfers the registered office thereof from the country to another Member State of the European Union, according to Article 8 of Council Regulation (EC) No 2157/2001 or according to Council Regulation (EC) No 1435/2003, while the assets and liabilities of the company must remain effectively connected with the permanent establishment in the country and the results of exploitation of the said assets must be involved upon determination of the tax financial result, or
the company, without being dissolved or without incorporation of a new legal person, transfers the registered office thereof from another Member State of the European Union to the country according to Article 8 of Council Regulation (EC) No 2157/2001 or according to Council Regulation (EC) No 1435/2003, while the assets and liabilities of the company must remain effectively connected with the company which commences the legal existence thereof as a result of this operation, and the results of exploitation of the said assets must be involved upon determination of the tax financial result.

Legal Succession

Article 153. (1) For tax purposes, upon transfer of the registered office of a European company or a European cooperative society under the terms established by Item 1 of Article 152 herein:

all acts performed by the said company for the current period and the prior periods, including the adjustments of the tax financial result, shall be considered as having been performed by the permanent establishment;
corporation tax shall not be levied on the company for the period from the beginning of the year until the date of the operation;
corporation tax shall not be levied on the permanent establishment for the period commencing at the beginning of the year according to the standard procedure, and the activity carried out by the company in the year of the operation shall be considered as having been carried out by the permanent establishment;
the permanent establishment shall have the right to carry forward any tax losses not carried forward and formed by the company according to the standard procedure.

(2) For tax purposes, upon transfer of the registered office of a European copmany ot a European cooperative society under the terms established by item 2 of Article 152 herein:

all acts performed by the said permanent establishment for the current period and the prior periods, including the adjustments of the tax financial result, shall be considered as having been performed by the company;
corporation tax shall not be levied on the permanent establishment for the period from the beginning of the year until the date of the operation;
corporation tax shall not be levied on the company for the period commencing at the beginning of the year according to the standard procedure, and the activity carried out by the permanent establishment in the year of the operation shall be considered as having been carried out by the company;
the company shall have the right to carry forward any tax losses not carried forward and formed by the permanent establishment according to the standard procedure.

Provisions Applicable upon Transfer of Registered Office

Article 154. The provisions of Section II of this Chapter in respect of the assets and liabilities, profits and losses and temporary tax differences shall furthermore apply upon a transfer of the registered office of a European company or a European cooperative society.

Chapter Twelve

SPECIFIC RULES FOR DETERMINATION OF TAX FINANCIAL RESULT UPON TRANSFERS BETWEEN PERMANENT ESTABLISHMENT IN COUNTRY AND ANOTHER DIVISION OF SAME ENTERPRISE SITUATED OUTSIDE COUNTRY

Income from Transfer to Another Division of Enterprise

Article 155. (1) The accounting income, accounted for at market value and originating upon a transfer from a permanent establishment in the country to another division of the same enterprise situated outside the country, shall be recognized for tax purposes where:

the particular transfer coincides with the ordinary transactions of the said permanent establishment with third parties, or
the ordinary activity of the said permanent establishment consists in similar transfers to the other divisions of the enterprise.

(2) Any accounting income arising from cash resources provided by the permanent establishment to another division of the same enterprise situated outside the country shall not be recognized for tax purposes with the exception of financial institutions for which raising of cash resources and extending of loans is a core activity.

(3) Any accounting expense related to a transfer from a permanent establishment to another division of the same enterprise situated outside the country shall not be recognized for tax purposes where accounting income, which is recognized for tax purposes, does not arise at the said permanent establishment as a result of the transfer. Where, as a result of a transfer to another division of the same enterprise, situated outside the country, the permanent establishment charges accounting income at the amount of the costs actually incurred (at cost price), the accounting expenses charged in connection with the said transfer shall be recognized for tax purposes.

Expenses upon Transfer from Another Part of Enterprise

Article 156. (1) Any accounting expenses accounted for at market value in connection with any goods, services and rights which are the result of a transfer from another division of the same enterprise, situated outside the country, shall be recognized for tax purposes in the permanent establishment in the country where the said expenses are accounted for within the ordinary activity of the permanent establishment related to a sale of the transferred goods, services or rights in an altered or unaltered state.

(2) Any accounting expenses, accounted for at market value and originating upon transfer of any goods and services from another division of the same enterprise, situated outside the country, to a permanent establishment in the country, shall be recognized for tax purposes in the permanent establishment where:

the particular transfer coincides with the ordinary transactions of the said division of the enterprise with third parties, or
the ordinary activity of the said division of the enterprise consists in similar transfers to the other divisions of the enterprise.

(3) Any accounting expenses accounted for according to the costs actually incurred (cost price) and originating upon transfer of any services from another division of the same enterprise situated outside the country, outside the cases referred to in Paragraphs (1) and (2), shall be recognized for tax purposes in the permanent establishment in the country. Sentence one shall furthermore apply in respect of the administrative management services received in direct connection with the permanent establishment.

(4) Any accounting expenses, accounted for at costs actually incurred (cost price) and originating upon transfer of rights related to know-how, patents and other items of intellectual or industrial property, from another division of the same enterprise situated outside the country, outside the cases referred to in Paragraph (1), shall be recognized for tax purposes in the permanent establishment in the country. Where the said items are produced or acquired by the branch of activity of the enterprise which transfers the said items and which specialized in the creation or acquisition of any such items, the accounting expenses, accounted for at market value, shall be recognized for tax purposes.

(5) Where the rights transferred under Paragraph (4) satisfy the criteria for a tax intangible fixed asset, the expenses on the acquisition thereof under Paragraph (4) shall not be recognized for tax purposes and the amounts shall be posted in the tax depreciation schedule. The tax depreciable value of the said rights shall be determined according to the standard procedure established by this Act.

(6) Any accounting expenses arising from cash resources received in the permanent establishment from another division of the same enterprise situated outside the country shall not be recognized for tax purposes with the exception of:

the financial institutions, for which raising of cash resources and extending of loans is a core activity, or
the cases in which the cash resources are provided by a third party as an interest-bearing loan for the purposes of the permanent establishment and are used exclusively in the activity of the permanent establishment; in such case, the accounting expenses accounted for at the amount of the interest payments due to the third party shall be recognized for tax purposes upon compliance with the other provisions of this Act.

Treatment of Assets upon Transfer from or to Another Part of Enterprise

Article 157. (1) Any assets provided to the permanent establishment in the country by another division of the same enterprise situated outside the country, which are related to the activity of the permanent establishment, outside the cases referred to in Article 156 (1) herein, shall be valued for tax purposes at the costs actually incurred (cost price) by the division of the enterprise transferring the said assets. The tax depreciable assets referred to in sentence once, which are used in the activity of the permanent establishment for a period of at least two years, shall be posted in the tax depreciation schedule according to the standard procedure established by this Act.

(2) Where the tax depreciable assets referred to in Paragraph (1) are provided for temporary use for a period not exceeding two years, the permanent establishment in the country shall be recognized, for tax purposes, the accounting expenses charged to the amount of the depreciations charged by the transferring division of the enterprise for the said assets. The expenses charged may not exceed the annual tax depreciation which would have been charged if the maximum permissible annual rates of tax depreciation under Article 55 herein were used.

(3) For tax purposes, the assets transferred shall be considered as having been sold at market prices at the time of transfer of assets manufactured or acquired by the permanent establishment in the country to another division of the enterprise situated outside the country and shall be written off.

(4) In the cases referred to in Paragraph (3), upon determination of the tax financial result, the accounting financial result of the permanent establishment shall be credited with the profit and shall be debited with the loss arrived at as a difference between the market price of the asset and the accounting value thereof at the date of transfer. The temporary tax differences related to the said asset shall be recognized according to the standard procedure established by this Act. Article 66 (1) and (2) herein shall apply upon determination of the tax financial result.

(5) Paragraphs (3) and (4) shall not apply where accounting income (profit) or costs (losses) originate from the transfer of the assets. The standard procedure established by this Act shall apply in such cases.

Chapter Twenty-One

TAX REGULATION UPON DISSOLUTION THROUGH LIQUIDATION OR THROUGH ADJUDICATION IN BANKRUPTCY AND UPON DISTRIBUTION OF SHARE IN LIQUIDATION SURPLUS

Section I

General Dispositions

Article 158. (Last Amendment – SG No. 99/2011, in force as of 01.01.2012) Upon dissolution through liquidation or through adjudication in bankruptcy, for the period until the expungement thereof, the taxable person shall fulfil the obligations thereof according to the standard procedure established by this Act and in compliance with the requirements of this Chapter.

Section II

Corporation Tax upon Dissolution

Assessment of Tax upon Dissolution

Article 159. (1) Corporation tax shall be due at the date of entry of the dissolution in the Commercial Register.

(2) The corporation tax referred to in Paragraph (1) shall be assessed on the basis of the tax profit for the period from the beginning of the year until the date of entry of the dissolution.

(3) The prepayments remitted since the beginning of the year and until the date of entry of the dissolution shall be deducted upon assessment of the tax.

Remittance of Tax upon Dissolution

Article 160. (Last Amendment – SG No. 99/2011, in force as of 01.01.2012) (1) The corporation tax due under Article 159 herein shall be remitted within thirty days after the date of entry of the dissolution.

(2) The corporation tax remitted upon dissolution shall be deducted from the annual corporation tax due for the year of dissolution or from the corporation tax due for the last tax period, where the date of submission of the motion for expungement upon liquidation or the date of expungement upon bankruptcy, as the case may be, is in one and the same year as the date of dissolution.

(3) (Last Amendment – SG No. 99/2011, in force as of 01.01.2012) Where the date of dissolution and the date of submission of the motion for expungement upon liquidation, or the date of dissolution upon bankruptcy, as the case may be, are in different years, the annual activity report prepared as at the date of dissolution and the annual activity report prepared as at the 31st day of December of the year of dissolution of the taxable person shall be submitted with the annual tax return on the year of dissolution.

Section III

Corporation Tax on Last Tax Period

Last Tax Period

Article 161. (Last Amendment, SG No. 95/2009, in force as of 01.01.2010) (1) The last tax period of any taxable person dissolved through liquidation shall commence on the 1st day of January of the year in which the motion for expungement under Article 273 (1) of the Commerce Act was submitted and shall end on the date of submission of the said motion.

(2) The last tax period of any taxable person dissolved through adjudication in bankruptcy shall commence on the 1st day of January of the year in which the expungement was effected and shall end on the date of expungement.

(3) The last tax period of any permanent establishment of a non-resident person shall commence on the 1st day of January of the year in which the activity of the said establishment was discontinued and shall end on the date of discontinuance of the said activity.

(4) (New – SG No. 95/2009, in force as of 01.01.2010) The last tax period of an unincorporated partnership or social security fund comprises the period from 1.01 of the year in which the termination begins until the date of termination.

(5) (Former par. (4) – SG No. 95/2009, in force as of 01.01.2010) The taxable person shall be liable to corporation tax in respect of the tax profit realized during the last tax period according to the standard procedure established by this Act. The corporation tax due shall be final.

(6) (Former par. (5) – SG No. 95/2009, in force as of 01.01.2010) For tax purposes, the assets manufactured or acquired by the permanent establishment in the country at the date of dissolution shall be considered as having been sold at market prices and shall be written off. Upon determination of the tax financial result for the last tax period of the permanent establishment, the tax financial result shall be credited with the profit and shall be debited with the loss arrived at as a difference between the market price of the assets referred to in sentence one and the accounting value of the said assets at the date of transformation. The temporary tax differences related to the asset shall be recognized during the last tax period according to the standard procedure established by this Act. Article 66 (1) and (2) herein shall apply upon determination of the tax financial result.

Declaring of Tax on Last Tax Period

Article 162. (Last Amendment – SG No. 99/2011, in force as of 01.01.2012) (1) The tax return on the last tax period, determined under Article 161 (1) herein, shall be submitted on the date of submission of the motion for expungement together with a copy of the said motion.

(2) The tax return on the last tax period, as determined under Article 161 (2) herein, shall be submitted by the holder of the position of trustee in bankruptcy within thirty days after the date of expungement of the taxable person together with a copy of the judgement of court on the expungement.

(3) The tax return on the last tax period, as determined under Article 161 (3) herein, shall be submitted on the date of discontinuance of the activity.

(4) (New -SG No. 95 of 2009, in force as of 01.01.2010) In the cases upon Art. 161, par. 4 the corporate tax due for the last tax period is paid in until the date of termination. The tax is final.

(5) (Former par. (4) – SG No. 95/2009, in force as of 01.01.2010) Where the date of submission of the motion for expungement upon liquidation or the date of expungement upon bankruptcy, as the case may be, or the discontinuance of the activity of a permanent establishment is before the 31st day of March and the annual tax return for the last preceding year has not been submitted, the taxable person or the holder of the position of trustee in bankruptcy shall submit the said return within the time limits referred to in Paragraphs (1), (2) and (3).

(6) (Last Amendment – SG No. 99/2011, in force as of 01.01.2012) Where the date of dissolution and the date of submission of the motion for expungement upon liquidation, or the date of expungement upon bankruptcy, as the case may be, are in one and the same year, the annual activity report prepared at the date of dissolution and the annual activity report prepared at the date of submission of the motion for expungement or at the date of expungement, as the case may be, shall be submitted with the tax return referred to in Paragraphs (1) and (2).

Remittance of Tax on Last Tax Period

Article 163. (Last Amendment, SG No. 95/2009, in force as of 01.01.2010) (1) The corporation tax due on the last tax period, determined under Article 161 (1) herein, shall be remitted on or before the date of submission of the motion for expungement of the taxable person. The said tax shall be final.

(2) In the cases referred to in Article 161 (2) herein, the corporation tax due on the last tax period shall be remitted on or before the date of expungement.

(3) In the cases referred to in Article 161 (3) herein, the corporation tax due on the last tax period shall be remitted on or before the date of discontinuance of activity. The said tax shall be final.

(4) (Last Amendment, SG No. 95/2009, in force as of 01.01.2010) In the cases upon Art. 161, par. 4 the corporate tax due for the last tax period is paid in until the date of termination. The tax is final.

(5) (New, SG No. 95/2009, in force as of 01.01.2010) In the cases when the date of submission of the request for delisting in connection with a liquidation procedure, the date of cessation of the activities of the permanent establishment or the date of termination of the unincorporated partnership or insurance fund is prior 31.03 and the corporate tax due for the previous year is not paid in, the entity subject to taxation is obliged to pay in the corporate tax due for the previous year within the terms specified in par. 1-4.

Tax Treatment upon Continuation of Activity after Date of Submission of Motion for Expungement by Taxable Person Dissolved through Liquidation

Article 164. (1) Any taxable person, dissolved through liquidation, which continues the activity thereof after submission of a motion for expungement, shall fulfil the obligations thereof according to the standard procedure established by this Act for the period from the date of submission of the motion for expungement until the date of expungement, inter alia declaring and remitting the corporation tax due. The liquidator shall incur solidary liability with the taxable person for the tax liabilities of the said person which have arisen in connection with the continuation of activity.

(2) The last period for tax purposes in the cases referred to in Paragraph (1) shall commence on the 1st day of January of the year in which the expungement was effected and shall end on the date of expungement or shall commence on the date of submission of the motion for expungement and shall end on the date of expungement, when the said two dates are in one and the same year.

(3) The taxable person shall be liable to corporation tax in respect of the tax profit realized during the last tax period under Paragraph (2) according to the standard procedure established by this Act. The said tax shall be final.

(4) The tax return on the last period for tax purposes in the cases referred to in Paragraph (1) shall be submitted by the holder of the position of liquidator within thirty days after the date of expungement of the taxable person together with a copy of the judgment of court on the expungement. Where the date of expungement is before the 31st day of March and the annual tax return on the preceding year has not been submitted, the holder of the position of liquidator shall submit the said return within the time limit referred to in sentence one.

(5) The corporation tax due for the last period for tax purposes in the cases referred to in Paragraph (1) shall be remitted on or before the date of expungement. Where the date of expungement is before the 31st day of March and the corporation tax for the preceding year has not been remitted, the taxable person shall remit the corporation tax for the preceding year within the time limit referred to in sentence one.

Tax Treatment upon Distribution of Share in Liquidation Surplus or dividend

(Title Amendment – SG No. 94/2010, in force as of 01.01.2011)

Article 165. (Last Amendment – SG No. 94/2010, in force as of 01.01.2011) (1) Last Amendment – SG No. 94/2010, in force as of 01.01.2011) The assets distributed as a share in a liquidation surplus or dividend at the time of distribution for tax purposes shall be considered as having been sold by the taxable person at market prices and shall be written off.

(2) (Last Amendment – SG No. 94/2010, in force as of 01.01.2011) In the cases referred to in Paragraph (1), upon determination of the tax financial result, the accounting financial result shall be credited with the profit and shall be debited with the loss arrived at as a difference between the market price of the assets and the accounting value thereof at the date of distribution of the share in a liquidation surplus or dividend. The temporary tax differences related to the said assets shall be recognized according to the standard procedure established by the Act. Article 66 (1) and (2) herein shall apply upon determination of the tax financial result.

(3) (Last Amendment – SG No. 94/2010, in force as of 01.01.2011) Any accounting income and expenses, accounted for in connection with the distribution of a share in a liquidation surplus or dividend in the form of assets, shall not be recognized for tax purposes.

Chapter Twenty-Two

REDUCTION, RETENTION AND EXEMPTION FROM LEVY OF CORPORATION TAX

Section I

General Dispositions

Concept of Retention

Article 166. “Corporation tax retention” shall be the right of any taxable person not to remit to the executive budget the amounts of corporation tax as assessed according to the procedure established by this Act, which subsist in the patrimony of the taxable person and are spent for purposes prescribed by a law.

General Requirement for Corporation Tax Retention or Reduction

Article 167. (1) Corporation tax shall be retained or reduced and, respectively, the accounting financial result shall be debited according to the procedure established by this Chapter, subject to the condition that the taxable person does not incur at the 31st day of December of the relevant year:

any coercively enforceable public obligations, and
any obligations for sanctions under effective penalty decrees related to violation of statutory instruments regarding public obligations, and
any interest payments in connection with a failure to remit the obligations referred to in Items 1 and 2 when due.

(2) Fulfillment of the requirement covered under Paragraph (1) shall be certified by the taxable person in the annual tax return.

Accounting for Retained and Reduced Corporation Tax

Article 168. (1) The retained corporation tax and the corporation tax reduction according to the procedure established by this Chapter shall be accounted for in owners’ equity.

(2) (Repealed, SG No. 110/2007).

Partial Recognition of Undistributable Income or Expenses

Article 169. (1) The portion of the undistributable income or expenses, corresponding to the activities in respect of which the corporation tax retention is enjoyed, shall be arrived at by multiplying the total amount of the undistributable income or expenses by the proportion of the net turnover accruing from the activities in respect of which the corporation tax retention is enjoyed and the total net turnover.

(2) The undistributable amounts whereby the accounting financial result is adjusted, which cannot be related to any single specific activity and which are associated with the performance of an activity in respect of which a retention is enjoyed, shall be allocated to the activity in respect of which the corporation tax is retained, and the tax financial result in respect of the said activity shall be determined on the basis of the proportion referred to in Paragraph (1).

Declaring of Retained or Reduced Corporation Tax

Article 170. Where any taxable person is allowed to retain or reduce corporation tax on different grounds according to the procedure established by this Chapter, the said person shall mandatorily declare in the annual tax return the sequence in which the said person has enjoyed the different grounds for corporation tax retention or reduction.

Retention of Additionally Ascertained Corporation Tax

Article 171. (1) Any taxable person, who has been allowed to retain corporation tax in a prior year, shall furthermore have the right to retention in respect of the additionally ascertained undeclared corporation tax for the relevant prior year, subject to the condition that the said person fulfils all requirements provided for in this Chapter for the relevant corporation tax retention.

(2) The time limit for fulfilment of the said requirements shall begin to run as from the date of ascertainment of the additional corporation tax.

Cessation of Right to Retention

Article 172. (1) The right to reduction or retention according to the procedure established by this Chapter shall cease upon transformation of a taxable person, with the exception of transformation through change of the legal form according to the procedure established by Article 264 of the Commerce Act, as well as upon transfer of an enterprise under Article 15 of the Commerce Act.

(2) Paragraph (1) shall furthermore apply upon restructuring of cooperative organizations.

Non-fulfilment of Requirements

Article 173. (1) Where any requirements of this Chapter for subsequent use (spending) of retained corporation tax are not fulfilled, the said tax shall be due according to the standard procedure established by this Act for the year for which the said tax applies.

(2) Paragraph (1) shall not apply where, in the cases of transformation, the receiving companies or newly formed companies fulfil the obligations of the transferring companies in compliance with the terms and procedure established by this Chapter, referring to the transferring companies. In the cases referred to in sentence one, the receiving companies or newly formed companies shall incur solidary liability for the retained corporation tax of the transmitting companies.

(3) Paragraph (2) shall furthermore apply upon restructuring of cooperative organizations.

Section II

Exemption from Levy of Corporation Tax

Collective Investment Schemes and Investment Companies of Closed-End Type

Article 174. (Last Amendment – SG No. 77/2011) Any collective investment scheme, which has been admitted to public offering in the Republic of Bulgaria, and any licensed investment company of the closed-end type under the Collective Investment Schemes and Collective Investment Undertakings Activities Act, shall be exempt from the levy of corporation tax.

Special Purpose Investment Companies

Article 175. Any special purpose investment company under the Special Purpose Investment Companies Act shall be exempt from the levy of corporation tax.

Bulgarian Red Cross

Article 176.The Bulgarian Red Cross shall be exempt from the levy of corporation tax.

Section III

General Tax Reliefs

Tax Incentives upon Hiring of Unemployed Persons

Article 177. (Last Amendment – SG No. 106/2008, in force as of 01.01.2009) (1) Any taxable person shall have the right to debit the accounting financial result thereof upon determination of the tax financial result, where the said person has hired a person under an employment relationship for not less than twelve successive months who, at the time of the hiring thereof, was:

registered as unemployed for more than one year, or
a registered unemployed person who had attained the age of 50 years, or
an unemployed person of reduced working capacity.

(2) The debiting shall be performed by the amounts paid for labour remuneration and the contributions remitted for the account of the employer to the public social insurance funds and the National Health Insurance Fund during the first twelve months after the hiring. The said debiting shall be performed on a single occasion during the year wherein the twelve-month period lapses.

(3) Debiting shall not be performed in respect of any amounts received under the Employment Promotion Act.

(4) (Repeal – SG No. 106/2008, in force as of 01.01.2009).

Enterprises Hiring People with Disabilities

Article 178. (1) Any legal person, which is a specialized enterprise or a cooperative within the meaning given by the Integration of Persons with Disabilities Act, which as at the 31st day of December of the relevant year, is affiliated to the nationally representative organizations of and for people with disabilities, shall be allowed to retain 100 per cent of the corporation tax [due therefrom] if:

not less than 20 per cent of the total number of employees are blind and visually impaired persons;
not less than 30 per cent of the total number of employees are hearing-impaired persons;
not less than 50 per cent of the total number of employees are people with other disabilities.

(2) The legal persons referred to in Paragraph (1) shall be allowed to retain the corporation tax due therefrom in proportion to the number of people with disabilities or occupational rehabilitees to the total of number of employees, where the conditions for the number of hired persons under Paragraph (1) are not fulfilled.

(3) Retention shall be admissible where the tax retained is spent entirely on integration of people with disabilities or on the maintenance and creation of jobs for occupational rehabilitees during the two years next succeeding the year for which the retention is enjoyed. The said resources shall be planned, spent and accounted for by ordinances of the national organizations of and for people with disabilities in consultation with the Minister of Finance.

Agricultural Producers

Article 179. (Repealed, SG No.95/2009 , in force as of 01.01.2010).

Air Traffic Services Authority

Article 180. (Repealed, SG No.95/2009 , in force as of 01.01.2010).

Social and Health Insurance Funds

Article 181. (1) Any social and health insurance fund, which has been established by a law, shall be allowed to retain 50 per cent of the corporation tax [due therefrom] in respect of the economic activity thereof which is directly related or auxiliary to the implementation of the core activity thereof.

(2) Retention shall be admissible where the tax retained is invested in the core activity not later than before the end of the year next succeeding the year for which the retention is enjoyed.

Section IV

De Minimis or Regional State Aid in the Form of Tax Reliefs

(Heading amended, SG No. 110/2007, effective 1.01.2007)

Taxable Persons which May Not Enjoy Tax Reliefs

Article 182. (Last Amendment – SG No. 95/2009, in force as of 01.01.2010) (1) (Redesignated from Article 182 and amended, SG No. 110/2007, effective 1.01.2007) A tax relief constituting regional aid shall not apply in respect of any taxable persons which:

are active in the sectors of coal, steel, shipbuilding, synthetic fibres manufacture, fisheries, as well as production of agricultural products listed in Annex I to the Treaty establishing the European Union, for the respective activity, or
(Amended, SG No. 110/2007, effective 1.01.2007) are placed in liquidation, or are subject to rehabilitation proceedings, or
are defined as enterprises in difficulty.

(2) (New, SG No. 110/2007, effective 1.01.2007) A tax relief constituting de minimis aid shall not apply in respect of:

any taxable persons which are active in the fishery and aquaculture sector according to Council Regulation (EC) No 104/2000 on the common organization of the markets in fishery and aquaculture products;
any taxable persons which are active in the primary production of agricultural products listed in Annex I to the Treaty establishing the European Community;
any taxable persons which are active in the processing and marketing of agricultural products listed in Annex I to the Treaty establishing the European Community;
any taxable persons which are active in the coal sector according to Council Regulation (EC) No 1407/2002 on State aid to the coal industry;
any enterprise in difficulty;
the investment in any road freight transport vehicles, where provided by a taxable person performing road freight transport for hire or reward;
investment in any assets used in export-related activities towards third countries or Member States.

(3) (New, SG No. 110/2007, effective 1.01.2007) Any tax relief constituting regional aid may not be enjoyed, either, by a taxable person in respect of which any of the conditions under Paragraph (1) occurs during the period of implementation of the relevant initial investment.

(4) (New, SG No. 110/2007, effective 1.01.2007) Any tax relief constituting de minimis aid may not be enjoyed, either, by a taxable person in respect of which a condition under Paragraph (2) occurs during the period of investment.

(5) (New-S.G. No. 95 of 2009, in force as of 01.01.2010) Tax concession as state subsidies for agricultural manufacturers is not applied with reference to strained partnerships.

Municipalities with Unemployment Rate Above National Average

Article 183. (Last Amendment – SG No. 95/2009, in force as of 01.01.2010) (1) The municipalities where the rate of unemployment is by 35 per cent or more higher than the national average shall be designated annually by an order of the Minister of Finance on a motion by the Minister of Labour and Social Policy, which shall be promulgated in the State Gazette.

(2) (Repealed – SG No. 95 /2009, in force as of 01.01.2010).

(3) (Last Amendment – SG No. 95/2009, in force as of 01.01.2010) A municipality whereof the administrative centre is situated in another municipality shall be included in the list referred to in Paragraphs (1) on the basis of the average weighted level of unemployment in the relevant municipalities, determined on the basis of the size of the economically active population therein.

Tax Relief for Carrying Out Manufacturing Activities in Municipalities with Unemployment Rate Above National Average

Article 184. (Amended, SG No. 110/2007, effective 1.01.2007) Any taxable person shall be allowed to retain up to 100 per cent of the corporation tax [due therefrom] in respect of the tax profit derived thereby from the manufacturing activities carried out, including processing of materials supplied by customers, where the following conditions are simultaneously fulfilled:

the taxable person carries out manufacturing activities solely in municipalities where the rate of unemployment for the year preceding the current year was by 35 per cent or more higher than the national average for the same period;
(Amended, SG No. 110/2007, effective 1.01.2007) the conditions covered under:

(a) Article 188 – in the cases of de minimis aid, or

(b) Article 189 – in the cases of regional aid

are fulfilled.

Specific Cases of Retention

Article 185. (1) Where a municipality drops out of the scope of municipalities referred to in Article 183 herein as a result of an increase in employment, the person which has acquired the right to corporation tax retention shall preserve the said right during the next five successive years, reckoned from the year during which the region drops out of the list, subject to fulfilment of the rest of the conditions for retention.

(2) Where the taxable person satisfied the conditions referred to in Item 1 of Article 184 herein in the year preceding the year in which the municipality dropped out of the scope of municipalities referred to in Article 183 herein but did not carry out manufacturing activity during the said period owing to performance of preparatory work and the said manufacturing activity commences during a subsequent year, the right to tax retention shall accrue as from the year of commencement of the manufacturing activity and shall be preserved during the next four successive years, subject to fulfillment of the rest of the conditions for retention.

Investment Tax Credit

Article 186. (Repeal – SG No. 95 /2009, in force as of 01.01.2010).

Tax Relief for Cooperatives

Article 187. (Repeal – SG No. 94/2010, in force as of 01.01.2011).

Tax Relief Constituting De Minimis Aid

Article 188. (Last Amendment – SG No. 94/2010, in force as of 01.01.2011) (1) (Last Amendment – SG No. 106/2008, in force as of 01.01.2009) A tax relief constituting de minimis aid shall be available where the sum total of de minimis aids received by the taxable person during the last three years, including the current years, regardless of the form or source of acquisition of the said aids, does not exceed the lev equivalent of EUR 200,000, and in respect of taxable persons in the road transport sector, the lev equivalent of EUR 100,000, determined according to the official exchange rate of the lev against the euro. These ceilings shall apply regardless of whether the aid is financed in whole or in part by resources of the European Union. The sum total of de minimis aids received shall furthermore include the reduced or retained corporation tax due from the taxable person for the last three years, including the corporation tax which is subject to reduction or retention for the current year. The sum total of de minimis aids received shall not include the retained corporation tax in respect of which the conditions of Article 189 herein are fulfilled.

(2) (Last Amendment – SG No. 94/2010, in force as of 01.01.2011) The retained tax under Article 184 herein must be invested in material or immaterial fixed assets according to accounting legislation within four years after the beginning of the year for which the tax is retained.

(3) (Last Amendment – SG No. 95/2009, in force as of 01.01.2010) The retained tax, invested in the assets referred to in Paragraph (2), herein, shall be cumulateswith other State aid approved by decision of the European Commission or authorized under Article 9 of the State Aids Act in respect of the said assets, up to the maximum permissible intensity of the aid determined by the National Regional State aid map (OJ No. C 73 of 30 March 2007).

(4) The taxable person shall declare the amount of de minimis aids received, regardless of the form or source of acquisition of the said aids, during the last three years, including the current year, in the annual tax return for the year for which the corporation tax is retained.

Tax Relief Constituting Regional Aid

Article 189. (Amended, SG No. 110/2007, effective 1.01.2007) (1) Taxable persons must fulfil the following conditions for the grant of regional aid:

the retained corporation tax must be invested in material and immaterial assets which form part of an initial investment;
the initial investment must be made within four years after the beginning of the year for which the tax was retained;
the initial investment must be made in municipalities where the rate of unemployment for the year of retention is by 35 per cent or more higher than the national average for the same period;
the activity related to the initial investment must continue to be implemented in the respective municipality for a period of at least five years after the year of completion of the initial investment; this circumstance shall be declared annually by the annual tax returns until the lapse of the five-year period;
at least 25 per cent of the value of the material and immaterial assets forming part of the initial investment must be self-financed or debt-financed by the taxable person; the corporation tax retained, as well as other resources containing any State aid element whatsoever, shall not be treated as self-financing or debt-financing;
the material and immaterial forming part of the initial investment must have been acquired under market conditions not differing from the conditions between unrelated parties; the immaterial assets forming part of the initial investment must be depreciable assets;
the value of the eligible expenditure on the immaterial assets forming part of the initial investment must not exceed 50 per cent of the sum total of eligible expenditure on the material and immaterial assets forming part of the initial investment;
the immaterial assets forming part of the initial investment must be used solely in the activity of the taxable person and must be included in the assets thereof for a period of at least five years;
the tax retained must not exceed 50 per cent of the present value of the material and immaterial assets forming part of the initial investment, determined at the 31st day of December of the year of retention; the interest rate for the purposes of determination of the present value of the initial investment shall be the reference interest rate for the year of retention set by the European Commission;
the projected amount of the initial investment and the period of implementation thereof shall be declared by the annual tax return for the year for which the corporation tax is retained.

(2) The retained corporation tax shall be cumulated with other State aid approved by decision of the European Commission or authorized under Article 9 of the State Aids Act in respect of the same initial investment, up to the maximum permissible intensity of the aid determined by the National Regional State aid map.

(3) In the cases where the tax relief is granted for a large investment project which has received aid from all sources whereof the total value exceeds the lev equivalent of EUR 37.5 million, determined according to the official exchange rate of the lev against the euro, the tax relief may be enjoyed for the relevant year solely if:

the taxable person has notified the revenue authority of the project at the latest before commencement of the implementation thereof;
a positive decision from the European Commission has been received following a notification procedure provided for in Article 88 (3) of the Treaty establishing the European Community.

The Minister of Finance shall inform the European Commission according to the procedures established in the State Aids Act. The taxable person shall be obligated to provide the Minister of Finance with the information necessary for the transmission of a notification to the European Commission.

(4) Where Paragraph (3) must not be applied to a large investment project, the tax relief may be enjoyed solely if the adjusted regional aid ceiling for large investment project is complied with as laid down in the Decision of the European Commission approving a National Regional State aid map.

(5) For the purposes of Paragraph (3), the value of the aid and the value of the eligible expenditure on the material and immaterial assets included in a large investment project shall be determined at present value at the date of notification of the European Commission according to the procedure established by the Article 88 (3) of the Treaty establishing the European Community. For the purposes of Paragraph (4), the value of the aid and the value of the eligible expenditure on the material and immaterial assets included in a large investment project shall be determined at present value at the date of commencement of the implementation of the project.

Tax relief for activities in the sphere of agriculture, processing industry, manufacture, hi-tech and infrastructure

Article 189a. (Repealed – SG No. 95 /2009, in force as of 01.01.2010).

Tax relief as a state subsidy for agricultural manufacturers

Art. 189b. (Last Amendment – SG No. 19/2011, in force as of 08.03.2011) (1) The corporate tax relief provides the right for remittance of income tax at the amount of 60 per cent to entities subject to taxation, registered as agriculture manufacturers, for their taxable income from the manufacturing of unprocessed vegetal and animal production.

(2)The corporate tax is remitted if the following requirements are met:

The tax remitted is invested in new buildings and new agricultural machines which are necessary for the implementation of the activities specified in par. 1 within the end of the year, the next year for which the concession is used.
the assets under section 1 are acquired at market conditions in conformity with those of not involved entities;
the activity under par. 1 have to prolong its implementation for at least three-year-long period after the year of remission; this circumstance have to be declared every year in the annual tax declarations until the expiration of the three-year term;
the tax remitted may not exceed 50 per cent of the value of the assets under section 1;
(New – SG No. 19/2011, in force as of 08.03.2011) the assets under pt. 1 do not substitute existing assets;
(New – SG No. 19/2011, in force as of 08.03.2011) for the assets under pt. 1 the agricultural producer is not a recipient (beneficiary) of any of the following types of assistance:
a) aid within the meaning of Art. 107(1) of the Treaty on the Functioning of the European Union;
b) de minimis aid within the meaning of Commission Regulation (EC) No 1535/2007 of 20 December 2007 on the application of Articles 87 and 88 of the EC Treaty to de minimis aid in the sector of agricultural production (OJ, L 337/35 21 December 2007);
c) financial aid under the Program for development of agricultural areas;
d) any other public financial assistance from the national budget or the budget of the European Union.

(3) (Repeal – SG No. 19/2011, in force as of 08.03.2011).

(4) (Repeal – SG No. 19/2011, in force as of 08.03.2011).

Restrictions upon Enjoyment of Tax Reliefs

Article 190. (1) (Amended, SG No. 110/2007, effective 1.01.2007) (1) A taxable person may not enjoy more than one tax relief under this Section during one and the same year.

(2) The assets in which a tax retained according to Article 188 (2) herein is invested shall be excluded from the scope of the initial investment.

Section V

Tax Reliefs Satisfying Requirements for Permissible State Aid for Employment

(Repeal – SG No. 106/2008, in force as of 01.01.2009)

Taxable Persons which May Not Enjoy Tax Reliefs

Article 191. (Repeal – SG No. 106/2008, in force as of 01.01.2009).

Tax Relief for Employment Promotion

Article 192. (Repeal – SG No. 106/2008, in force as of 01.01.2009).

General Conditions

Article 193. (Repeal – SG No. 106/2008, in force as of 01.01.2009).

PART THREE

WITHHOLDING TAX

Chapter Twenty-Three

SCOPE OF TAXATION

Withholding Tax on Income from Dividend and Shares in Liquidation Surplus

Article 194. (Last Amendment – SG No. 95/2009, in force as of 01.01.2010) (1) A tax withheld at source shall be levied on any dividends and shares in a liquidation surplus, as distributed (apportioned) by any resident legal person in favour of:

any non-resident legal persons, with the exception of the cases where the dividends accrue to a non-resident legal person through a permanent establishment in the country;
any resident legal persons which are not merchants, including any municipalities.

(2) The tax referred to in Paragraph (1) shall be final and shall be withheld by the resident legal persons distributing dividends or shares in a liquidation surplus.

(3) Paragraph (1) shall not apply where the dividends and shares in a liquidation surplus are distributed in favour of:

any resident legal person which participates in the capital of the company as a representative of the State;
any common fund.
(Last Amendment – SG No. 95/2009, in force as of 01.01.2010) foreign legal person who is resident for tax purposes in a Member State of the European Union or in another State which is a Contracting Party to the the Agreement on the European Economic Area, except in cases of covert distribution of profits.

Tax Withheld on Income of Non-resident Persons

Article 195. (Last Amendment – SG No. 94/2010, in force as of 01.01.2011) (1) (Last Amendment – SG No. 94/2010, in force as of 01.01.2011) Any income which has its source inside the country, referred to in Article 12 (2), (3), (5) and (8), accruing to any foreign legal person, where not accruing through a place of economic activity inside the country, and the incomes from a source inside the country referred to in Art. 12 (9) accruing to any foreign legal person established in jurisdiction with preferential fiscal arrangements, where not accruing through a place of economic activity inside the country, are subject to levy of a tax withheld at source which shall be final.

(2) (Last Amendment – SG No. 94/2010, in force as of 01.01.2011) The tax referred to in Paragraph (1) shall be withheld by the resident legal persons, the sole traders or the permanent establishments in the country which charge the income to the non-resident legal persons, with the exception of the income referred to in Article 12 (3) and (8), item 2 herein.

(3) (Last Amendment – SG No. 94/2010, in force as of 01.01.2011) Where the payer of the income is not a taxable person covered under Article 2 herein and in respect of the income referred to in Article 12 (3) and (8), item 2 herein, the tax shall be withheld from the recipient of the income.

(4) Paragraphs (1) and (2) shall furthermore apply where the non-resident person, acting through a permanent establishment, charges the said income to other divisions of the enterprise thereof situated outside the country, with the exception of the cases where accounting expenses are not recognized for tax purposes or accounting expenses or assets, accounted for at the costs actually incurred (cost price) are recognized for tax purposes of a permanent establishment.

(5) The prepayments in connection with the income referred to in Paragraph (1) shall not be subject to levy of a tax withheld at source.

Securities Traded on Regulated Market

Article 196. (Last Amendment – SG No. 106/2008, in force as of 01.01.2009) Proceeds from disposal of financial instruments under the meaning of § 1, Subpar. 21 of the supplementary provisions shall not be taxable for the source.

Chapter Twenty-Four

TAXABLE AMOUNT

Taxable Amount for Withholding Tax on Dividend Income

Article 197. The taxable amount for assessment of the tax withheld at source on any income accruing from dividends shall be the gross amount of the dividends distributed.

Taxable Amount for Withholding Tax on Liquidation Surplus Share

Article 198. The taxable amount for assessment of the tax withheld at source on any income accruing from shares in a liquidation surplus shall be the difference between the market price of the claim by the relevant shareholder or member and the documented cost of acquisition of the shares or interests thereof.

Taxable Amount for Withholding Tax on Non-resident Persons’ Income

Article 199. (1) The taxable amount for assessment of the tax withheld at source on the income referred to in Article 195 (1) herein shall be the gross amount of the said income, with the exception of the cases referred to in Paragraphs (3) and (4).

(2) The taxable amount for assessment of the tax withheld at source on any income accruing to any non-resident legal persons from interest payments under financial lease contracts, in the cases where the contract does not stipulate the rate of the said interest, shall be determined on the basis of the market rate of interest.

(3) The taxable amount for assessment of the tax withheld at source on any income accruing to any non-resident legal persons from acts of disposition of financial assets shall be the positive difference between the selling price of the said assets and the documented cost of acquisition thereof.

(4) The taxable amount for assessment of the tax withheld at source on any income accruing to any non-resident legal persons from disposition of immovable property shall be the positive difference between the selling price and the documented cost of acquisition of the immovable property.

(5) The selling price, for the purposes of Paragraphs (3) and (4), shall be the valuable consideration under the transaction, including the reward other than money, which shall be valued at market prices as at the date of charging of the income.

(6) Upon termination of a financial lease contract before expiry of the term of validity thereof and without passing of the right of ownership to the relevant assets which are subject of the contract, the non-refundable lease payments shall be considered income from use of property acquired by the non-resident legal person at the time of termination. The withholding tax on the income from interest payments, remitted until the time of termination of the lease contract, shall be deducted from the withholding tax due on income from use of the property.

Chapter Twenty-Five

RATES OF TAX

Rates of Tax

Article 200. (Last Amendment – SG No. 94/2010, in force as of 01.01.2011) (1) (Amended, SG No. 110/2007) The rate of tax on the income covered under Article 194 herein shall be 5 per cent.

(2) (Last Amendment – SG No. 94/2010, in force as of 01.01.2011) The rate of tax on the income covered under Article 195 herein shall be 10 per cent except in cases under Article 200a.

Tax Rate for Incomes from Interest and Royalties

Article 200a. (New – SG No. 94/2010, in force as of 01.01.2011) (1) Tax rate on the income from interest and royalties is 5% where the following conditions are simultaneously present:

the beneficial owner of the interest or royalties is a foreign legal person from a Member State of the European Union or a permanent establishment situated in a Member State of the European Union of a foreign legal person of a Member State of the European Union;

the local legal person which is the payer, or the person whose permanent establishment in the Republic of Bulgaria is treated as the payer, of interest or royalties is an associated person of the foreign legal person which is the beneficial owner, or whose permanent establishment is treated as the beneficial owner, of that interest or those royalties.

(2) Where an income subject to taxation with the tax rate under par. 1 is taxed on a higher rate, the beneficial owner has the right to request reimbursement of the tax paid. The reimbursement is carried out under the terms and conditions of the Tax – Insurance Procedure Code and not later than one year after the request has been made.

(3) Paragraphs 1 and 2 do not apply for:

incomes representing distribution of profit or repayment of capital;

incomes from debt-claims, which establish the right to participate in the profits of the debtor;

incomes from debt-claims, which give to the creditor the right to exchange interest rights for rights to participate in the profits of the debtor;

incomes from debt-claims, where there is no clause for repayment of principal or the date of repayment is more than 50 years after emission of the debt;

incomes, consisting of unrecognized for tax purposes expenses of a place of economic activity in the Republic of Bulgaria with the exception of those under Art. 43;

incomes charged by a foreign legal person from a state, which is not a member of the European Union, through a place of economic activity in the Republic of Bulgaria;

incomes from deals where the basic or one of the basic motives is tax evasion, fraud or abuse.

(4) For the purposes of this Article:

foreign legal person from a member State of the European Union is every foreign legal person for which at least the following conditions are met:

a) the legal person has one of the legal forms in accordance with Annex No. 5;

b) the legal person in accordance with the tax laws of a Member State of the European Union is considered to be resident in that Member State and is not, within the meaning of a Double Taxation Convention on Income concluded with a third state, considered to be resident for tax purposes outside the European Union;

c) the foreign legal person is subject to one of the taxes under Annex No. 6 with no right to exemption, or subject to identical or similar tax imposed as addition or instead of these taxes;

a person is an associated person of a second person if, at least at the moment the income is calculated:

a) the first person has a minimum holding of 25 % in the capital of the second person, for a period of at least two years;

b) the second person has a minimum holding of 25 % in the capital of the first person, for a period of at least two years;

c) a third person, which is local legal person or a foreign legal person from a Member State of the European Union has a minimum holding of 25 % both in the capital of the first person and in the capital of the second person ;

a foreign legal person is beneficiary owner of income when receiving this income on its behalf and not as a representative or agent of other person;

place of economic activity/permanent establishment is beneficiary owner of income when, at least:

a) debt-claim, the right or use of information, with regard to which interest or royalties arise, are effectively related to this place of establishment;

b) the interest or royalties are income, with regard to which the place of establishment is taxed in the Member State of the European Union, where it is located, with some of the taxes enumerated in Annex No. 6 or in Belgium – with „impot des non-residents/belasting der niet-verblijfhouders”, or in Spain-with „Impuesto sobre la Renta de no Residentes”, or with identical or similar tax imposed as addition or instead of these taxes.

Chapter Twenty-Six

DECLARING OF TAX

Declaring of Tax. Certificate of Tax Withheld on Foreign Persons’ Income

Article 201. (Last amendment – SG No. 94/2012, in force as of 01.01.2013) (1) The persons that are obligated to withhold and pay the tax at the source under Arts. 194 and 195, shall declare the tax due for the relevant quarter by way of a declaration in standard form until the end of the month subsequent to such quarter. The declaration shall be filed with the territorial directorate of the National Revenue Agency either by registration of the payer of income or by the place where the payer of income is subject to registration.

(2) In case the payer of income is not subject to registration, the tax return shall be filed with the territorial directorate of the National Revenue Agency in Sofia.

(3) In case the payer of income is a person that is not obligated to withhold and pay a tax, the tax return shall be filed by the recipient of the income.

(4) Upon the request of the person concerned, a certificate in standard form shall be issued regarding the tax paid on the income of foreign legal entities by virtue of this Act. The said certificate shall be issued by the territorial directorate of the National Revenue Agency with which the declaration under Par. 1 is filed or is subject to filing.

Chapter Twenty-Seven

TAX REMITTANCE

Tax Remittance

Article 202. (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) (1) (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) The payers of income withholding the tax at the source under Art. 194 shall be obligated to pay the taxes due by the end of the month following the quarter during which the decision for allocation of dividends or liquidation quotas has been adopted.

(2) (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) The payers of income withholding the tax at the source under Art. 195 shall be obligated to pay the taxes due by the end of the month following the quarter during which the income has been accrued.

(3) The tax due referred to in Paragraphs (1) and (2) shall be remitted to the relevant National Revenue Agency territorial directorate exercising competence over the place of registration or over the place where the payer of the income is registrable.

(4) (Last Amendment – SG No. 94/2010, in force as of 01.01.2011) Where any payer of income referred to in Paragraph (2) is not a taxable person and in respect of any income referred to in Article 12 (3) and (8), item 2 herein, the tax shall be remitted by the recipient of the income within the time limit referred to in Paragraph (2), and the income shall be considered to be charged as from the date of receipt of the said income by the non-resident legal person. The tax due shall be remitted to the relevant National Revenue Agency territorial directorate exercising competence over the place of registration or over the place where the payer of the income is registrable. Where the payer of the income is not registrable, the tax shall be remitted to the Sofia Territorial Directorate of the National Revenue Agency.

(5) Any overremitted tax shall be refunded by the National Revenue Agency territorial directorate whereto the tax is subject to remittance.

Tax recalculation withholding taxes

Art. 202а. (New – SG No. 95/2009, in force as of 01.01.2010) (1)Foreign legal entity that is a local entity for tax purposes of a member state of the European Union or another state which is a party to the European Economic Area agreement is entitled to choose to recalculate the withholding tax paid under the procedure specified in Art. 12, par. 2, 3, 5 and 8. In case the foreign entity chooses to recalculate the withholding tax, all taxable incomes under Art. 12, par. 2, 3, 5 and 8 which are gained through the year are subject to recalculation.

(2) In case the foreign legal entity chooses to recalculate the withholding tax of the income realized, the recalculated tax have to be equal to the corporate income tax which would be due for the same income realized by a local legal entity. In case the foreign entity has made expenses related to the income under the previous sentence, for which tax on the expenses would be due if they were made by a local legal entity, then this tax increases the amount of the recalculated tax.

(3) In case the amount of the paid withholding tax under Art. 195, par. 1 exceeds the amount of the recalculated tax under par. 2,the difference is subject to refund up to the amount of the withholding tax under Art. 195, par. 1 which cannot be deducted as tax credit by the foreign legal entity in the country of residence.

(4) The choice for recalculation of the withholding tax paid is implemented by submitting an annual tax declaration of a standard form. The foreign legal entity has to submit the tax declaration to the Territorial Directorate of National Revenue Agency-Sofia by 31 December of the year following the year of charging the income.

(5) The refund of the tax under par. 3 is made by the Territorial Directorate of National Revenue Agency-Sofia under the procedure specified in the Tax-Insurance Procedure Code.

(6) Paragraphs 1-5 are not applicable in case the foreign legal entity is a local legal entity for tax purposes of a state which is a party to the European Economic Area agreement but is not a state member of the European Union with which the Republic of Bulgaria:

has no valid agreement for avoidance of double taxation, or
has valid agreement for avoidance of double taxation which does not provide:
a) information exchange, or
b) cooperation upon collection of taxes

Liability

Article 203. Where the tax referred to in Articles 194 and 195 herein has not been withheld and remitted according to the relevant procedure, the said tax shall be due solidarily by the persons which incur tax liability for the relevant income.

PART FOUR

TAX ON EXPENSES

Chapter Twenty-Eight

GENERAL DISPOSITIONS

Scope of Taxation

Article 204. (Last Amendment – SG No. 106/2008, in force as of 01.01.2009) A tax on expenses shall be levied on the following expenses supported by documents:

any business entertainment expenses;
any expenses on fringe benefits provided in kind to factory and office workers and to persons hired under a management and control contracts (hired persons); the expenses on fringe benefits provided in kind shall furthermore include:

(a) (Last Amendment – SG No. 106/2008, in force as of 01.01.2009) the expenses on premium for additional voluntary social security, for voluntary medical security and for life insurance;

(b) the expenses on food vouchers;

the expenses related to operation of means of transport where used to service management operations.

Expenses on Fringe Benefits Not Provided in Kind

Article 205. Any expenses on fringe benefits, which are not provided in kind and which constitute income of a natural person, shall be taxed under the terms and according to the procedure established by the Income Taxes on Natural Persons Act.

Recognition of Tax on Expenses

Article 206. (1) The expense and the tax thereon shall be recognized for tax purposes in the year of charging and shall not form a temporary tax difference according to the procedure established by Chapter Eight herein.

(2) The tax on expenses shall be final.

Taxable Persons

Article 207. (1) Taxable persons in respect of the tax referred to in Items 1 and 3 of Article 204 herein shall be the persons which are subject to levy of corporation tax.

(2) Taxable persons in respect of the tax referred to in Item 2 of Article 204 herein shall be all employers or commissioning entities under management and control contracts.

Exemption from Taxation of Fringe Benefit Expenses on Contributions and Premiums for Supplementary Social Insurance and Life Assurance

Article 208. No tax shall be levied on any expenses on fringe benefits referred to in Item 2 (a) of Article 204 herein not exceeding the amount of BGN 60 per month per hired person, where the taxable persons do not incur any coercively enforceable public obligations at the time of incurrence of the expenses.

Exemption from Taxation of Fringe Benefit Expenses on Food Vouchers

Article 209. (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) (1) (Last Amendment – SG No. 106/2008, in force as of 01.01.2009) No tax shall be levied on any expenses on fringe benefits referred to in Item 2 (b) of Article 204 herein not exceeding the amount of BGN60 per month, provided in the form of food vouchers to each hired person, where the following conditions are simultaneously fulfilled:

(Last Amendment – SG No. 110/2007, in force as of 01.01.2008) the agreed basic monthly remuneration of the person in the month of provision of the vouchers is not lesser than the average monthly agreed basic remuneration of the said person for the last preceding three months;
the taxable person does not incur any coercively enforceable public obligations at the time of provision of the vouchers;
the vouchers are provided to the taxable person by a person which has obtained authorization to carry on operator business from the Minister of Finance on the basis of a competitive procedure;
(Repeal – SG No. 94/2010, in force as of 01.01.2011);
(Repeal – SG No. 94/2010, in force as of 01.01.2011).

(2) The right to carry on operator business shall be limited to a person which has obtained authorization from the Minister of Finance and which:

has a paid up share (registered) capital of at least BGN 2 million at the time of submission of the documents for the grant of authorization;
is registered under the Value Added Tax Act;
is not subject to bankruptcy proceedings or is not placed in liquidation;
does not incur any coercively enforceable public obligations at the time of submission of the documents for authorization;
is represented by any persons who:

(a) have not been convicted of a premeditated offence at public law, unless rehabilitated;

(b) have not been members of a supervisory body or a management body of any corporation dissolved through bankruptcy during the two years last preceding the date of the judgment on institution of bankruptcy proceedings, if any creditors have been left unsatisfied.

(3) (Last Amendment – SG No. 106/2008, in force as of 01.01.2009) The permission shall be granted by the Minister of Finance on the basis of a contest and shall be withdrawn in case the operator:

(Last Amendment – SG No. 94/2010, in force as of 01.01.2011) Fails to comply with any of the requirements under Par. 2, 8 and 9.
Terminates its activity;
(Last Amendment – SG No. 94/2012, in force as of 01.01.2013) Has not exercised activity in the preceding two years which he received first individual quota in the year before the last year.
(Last Amendment – SG No. 94/2010, in force as of 01.01.2011) Has allocated food vouchers to employers under individual quota for grant of food vouchers, which have nominal value exceeding the individual quota, or has allocated food vouchers with no individual quota received.

(4) The grant, refusal of authorization or withdrawal of an authorization granted shall be effected by a written order of the Minister of Finance.

(5) Any refusal to grant an authorization and any withdrawal of an authorization shall be appealable according to the procedure established by the Administrative Procedure Code.

(6) The procedure for the conduct of a competitive procedure, for the grant and withdrawal of an authorization, the terms and a procedure for the printing of vouchers, the number of vouchers issued, the terms for organization and control of the conduct of operator business shall be established by an ordinance of the Minister of Labour and Social Policy and the Minister of Finance.

(7) (New – SG No. 94/2010, in force as of 01.01.2011) The total annual quota for food vouchers is affirmed by the state budget act for the Republic of Bulgaria for the respective year.

(8) (New – SG No. 94/2010, in force as of 01.01.2011) The operator uses the sums received by the employers under the food vouchers granted to them solely for bank payments to the suppliers, which have a service contract with the operator, or for repayment of the nominal value of the food vouchers submitted by the employers where the authorization of the operator has been withdrawn.

(9) (New – SG No. 94/2010, in force as of 01.01.2011) The operator signs service contracts solely with suppliers registered under the value Added Tax Act.

Exemption from Taxation of Fringe Benefit Expenses on Transportation of Factory and Office Workers and Persons Hired under Management and Control Contract

Article 210. (1) No tax shall be levied under Item 2 of Article 204 herein on any expenses on fringe benefits incurred on transportation of factory and office workers and of persons hired under a management and control contract from the place of residence to the place of work and back.

(2) Paragraph (1) shall not apply where any such transportation is carried out by passenger car or by extra bus services.

(3) Paragraph (1) shall furthermore apply where the transportation of factory and office workers is carried out by passenger car to inaccessible and remote areas and the taxable person cannot ensure the implementation of the activity thereof without incurrence of the expense.

Chapter Twenty-Nine

TAXABLE AMOUNT

Taxable Amount for Tax on Entertainment Expenses

Article 211. (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) The taxable amount for assessment of the tax on expenses referred to in Item 1 of Article 204 herein shall be the expenses charged for the calendar year.

Taxable Amount for Tax on Fringe Benefit Expenses Provided in Kind

Article 212. (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) The taxable amount for assessment of the tax on expenses referred to in Item 2 of Article 204 herein shall be the expenses on fringe benefits provided in kind debited with the income related to the said expenses for the calendar year.

Taxable Amount for Tax on Fringe Benefit Expenses on Contributions (Premiums) for Supplementary Social Insurance and Life Assurance

Article 213. (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) (1) (New – SG No. 94/2012, in force as of 01.01.2013) The taxation basis for determining the tax on the expenses under Art. 204, Par. 2, litterra “а” shall be the total of the taxation bases for the months of the calendar year determined pursuant to Pars. 2 and 3.

(2) (Former Par. 1, Last Amendment – SG No. 94/2012, in force as of 01.01.2013) The taxable amount for assessment of the tax on expenses for a calendar month referred to in Item 2 (a) of Article 204 herein shall be the excess of the said expenses over BGN 60 per month per hired person.

(3) (Former Par. 2, Last Amendment – SG No. 94/2012, in force as of 01.01.2013) Where the taxable persons incur any coercively enforceable public obligations at the time of charging of the expenses, the taxable amount for assessment of the tax on expenses shall be the full amount of the expenses charged for the calendar mnth.

Taxable Amount for Tax on Fringe Benefit Expenses on Food Vouchers

Article 214. (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) (1) (New – SG No. 94/2012, in force as of 01.01.2013) The taxation basis for determining the tax on the expenses under Art. 204, Par. 2, litterra “b” shall be the total of the taxation bases for the months of the calendar year determined pursuant to Pars. 2 and 3.

(2) (Former Par. 1, Last Amendment – SG No. 94/2012, in force as of 01.01.2013) The taxable amount for assessment of the tax on expenses for the calendar month referred to in Item 2 (b) of Article 204 herein shall be the excess of the said expenses over BGN60 per month per hired person.

(3) (Former Par. 2, Last Amendment – SG No. 94/2012, in force as of 01.01.2013) Where the conditions for exemptions from tax under Article 209 herein are not fulfilled, the taxable amount for assessment of the tax on expenses shall be the full amount of the expenses charged for the calendar month.

Taxable Amount for Tax on Expenses Related to Maintenance, Repair and Operation of Means of Transport

Article 215. (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) (1) (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) The taxable amount for assessment of the tax on expenses referred to in Item 3 of Article 204 herein shall be the expenses on maintenance, repair and operation of means of transport, charged during the calendar year, debited with the income charged from insurance benefits associated with the means of transport, up to the amount of the expenses on repair incurred whereto the benefit applies.

(2) Where means of transport are used concurrently to carry out activity as a regular business and to service management operations, upon determination of the taxable amount referred to in Paragraph (1):

(Last Amendment – SG No. 94/2012, in force as of 01.01.2013) the expenses on operation shall relate to the management operations on the basis of the total kilometres covered for the said operations during the calendar year;
(Last Amendment – SG No. 94/2012, in force as of 01.01.2013) the expenses on maintenance and repair shall relate to the management operations on the basis of the kilometres covered for the said operations in relation to the total kilometres covered by the relevant means of transport during the calendar year, including the current month.

(3) (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) Where the taxable amount referred to in Paragraph (1) is a negative quantity, it shall be deducted successively from the taxable amount for the succeeding years.

Chapter Thirty

RATE OF TAX, DECLARING AND REMITTANCE OF TAX ON EXPENSES

(Heading amended, SG No. 110/2007, effective 1.01.2007)

Rate of Tax

Article 216. The rate of the tax on expenses referred to in Article 204 herein shall be 10 per cent.

Tax Declaring and Remittance

(Heading amended, SG No. 110/2007, effective 1.01.2007)

Article 217. (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) (1) (New, SG No. 110/2007, effective 1.01.2007) The tax on expenses shall be declared by the annual tax return submitted by the taxable person.

(2) (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) The tax on expenses shall be paid until 31 March of the following year.

PART FIVE

ALTERNATIVE TAXES

Chapter Thirty-One

GENERAL DISPOSITIONS

Alternative Tax

Article 218. (1) The taxable persons specified in this Part shall be liable, instead of corporation tax, to an alternative tax in respect of the activities specified in this Part.

(2) In respect of all other activities, the persons referred to in Paragraph (1) shall be liable to corporation tax, with the exception of public-finance enterprises.

Chapter Thirty-Two

TAX ON GAMBLING ACTIVITY

Section I

General Dispositions

Accounting

Article 219. (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) (1) The tax liable persons under this Chapter are obligated to keep detailed accounts and to store data sufficient for establishment of the obligations thereof under this Act by the revenue bodies of the National Revenue Agency.

(2) The tax liable persons are obligated to keep daily and monthly accounts of the sums received and paid for participation in gambling games, these being accounts of a standard form approved by the Minister of Finance.

(3) Par. 2 shall not apply:

to the gambling activity referred to in Section V;
to the gambling games in which the value of the bet for participation is expressed in the form of the price of a telephone or another electronic communication service;
to the gambling games which according to the Gambling Act are ensured by a central computer system approved by the State Commission on Gambling, including a system for online supply of information for formation and allocation of profits ensuring supply of information to a server with the National Revenue Agency, where such games mandatorily ensure online registration of each transaction in the National Revenue Agency’s system.

Section II

Tax on Gambling Activity of Toto and Lotto Games, Bets on Results of Sports Competitions, Horse and Dog Races, Games of Chance and Bets related to Knowledge of Facts, including Distance Games

(Title Last Amendment – SG No. 94/2012 in force as of 01.01.2013)

General Dispositions

Article 220. (Last amendment – SG No. 94/2012 in force as of 01.01.2013) The gambling activities of toto and lotto games, making of bets on results of sports competitions, horse and dog races, chance events and bets related to knowledge of facts shall be taxed with a tax on gambling activity which shall be final.

Taxable Persons

Article 221. (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) The tax liable persons under this Section shall be the organizers of toto and lotto gambling games, making bets on results of sports competitions, horse and dog races, bets on chance events and bets related to knowledge of facts.

Taxation Basis

Article 222. (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) The basis of taxation for determining the tax on toto and lotto, betting on results of sports competitions, horse and dog races, chance events and knowledge of facts gambling activities, including for games under this Section, organized from distance, shall be the value of bets made for each game.

Tax Rates

Article 223. (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) The tax rate of the tax on gambling activity under this Section, including for games organized from distance, shall be 15 percent.

Declaring of Tax

Article 224. (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) (1) The tax liable persons shall declare the tax under this Section by way of a tax return in a standard form within 7 days after determining the results of the game.

(2) The tax return under Par. 1 shall be filed with the territorial directorate of the National Revenue Agency by the person’s venue of registration via electronic means with a qualified electronic signature.

Paying of tax

Article 225. (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) The tax on gambling activity under this Section shall be paid within the period for declaring thereof.

Income from Ancillary and Auxiliary Activities

Article 226. (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) (1) (Last Amendment – SG No. 95/2009, in force as of 01.01.2010) Any income accruing from ancillary and auxiliary activities within the meaning given by the Gambling Act shall attract an alternative tax on the value of the said income at the rate of 12 per cent.

(2) (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) The tax shall be paid until 31 March of the following calendar year.

Section III

Tax on Gambling Activity of Lotteries, Rattles, and Bingo and Keno Lottery Games with Numbers, including Distance Games

(Title Last Amendment – SG No. 94/2012 in force as of 01.01.2013)

General Dispositions

Article 227. The gambling activity of lotteries, raffles and bingo and keno numbers lotteries shall attract a tax on gambling activity which shall be final.

Taxable Persons

Article 228. Taxable persons under this Section shall be the organizers of the games of chance: lotteries, raffles, and bingo and keno numbers lotteries.

Taxation Basis

Article 229. (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) (1) The basis of taxation for determining the tax on gambling activity under this Section shall be the nominal value of the bet specified in slips, talons, or other documents certifying participation in gambling games.

(2) The basis of taxation for lottery games – traditional lottery and Bingo and Keno lottery games, organized from distance via Internet, shall be the bets made by registered participants.

Tax Rate

Article 230. (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) The tax rate of the tax on gambling activity under this Section, including on lottery games – traditional lottery and Bingo and Keno lottery games, organized from distance via Internet, shall be 15 percent.

Declaring of Tax

Article 231. (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) The tax liable persons shall declare the tax under this Section by way of a tax return in a standard form until the 10th day of the month subsequent to the month of receiving certifying documents for participation in gambling games, whereas for gambling games, organized from distance via Internet – until the 10th day of the month subsequent to the month of closing of game.

Paying of Tax

Article 232. (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) (1) The tax on gambling activity under this Section shall be paid in prior to receiving the certifying documents for participation or importing them.

(2) The certifying documents for participation shall be submitted by the tax liable persons only after submission of documents evidencing that payment of tax.

(3) The tax on gambling activity for games under this Section organized from distance via Internet shall be paid in until the 10^th day of the month subsequent to the month of closing of game.

Refund of Tax

Article 233. (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) (1) The tax paid on certifying documents for participation which have not been used shall be recovered by the territorial directorate of the National Revenue Agency by registration of the person:

after completion of each part (drawing) of the lottery games, or

where the license of the organizer is withdrawn on the grounds of Art. 35, Par. 1, item 4 of the Gambling Act.

(2) The tax under Par. 1 shall be recovered upon submission of a request for recovery under Art. 129, Par. 1 of the Tax Insurance Procedure Code.

(3) The request for recovery under Par. 2 shall be accompanied by the unused certifying documents for participation, and the decision for withdrawal of license in the cases referred to in Par. 1, item 2.

Income from Ancillary and Auxiliary Activities

Article 234. (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) (1) Any income accruing from ancillary and auxiliary activities within the meaning given by the Gambling Act shall attract an alternative tax on the value of the said income at the rate of 12 per cent.

(2) (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) The tax shall be paid until the 31 March of the following calendar year.

Section IV

Tax on Gambling Activity Games, Organized from Distance, in Which the Bet for Participation Is related to the Price of a Telephone or Other Electronic Communication Service

(Title Last Amendment – SG No. 94/2012 in force as of 01.01.2013)

General Dispositions

Article 235. (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) The gambling activity of games, organized from distance, in which the value of the bet for participation is expressed in the price of a telephone or another electronic communication service, shall be levied by a tax on gambling activity which shall be final.

Tax Liable Persons

Article 236. (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) Tax liable persons under this Section shall be the organizers of those gambling games, organized from distance, in which the value of the bet for participation is expressed in the price of a telephone or another electronic communication service.

Taxation Basis

Article 237. (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) The basis of taxation for determining the tax under this Section shall be the increase in the price of the telephone or other electronic communication service.

Rate of Tax

Article 238. (Last Amendment – SG No. 95/2009, in force as of 01.01.2010) The tax stake under the tax of this section is 15 per cent.

Declaring of Bets Made and of Tax

Article 239. (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) (1) The organizer of the gambling game shall declare the bets made and the tax under this Section with the territorial directorate of the National Revenue Agency by his registration until the 10th day of the month following the month in which the games are held, by way of a tax return in standard form.

(2) The operator of the telephone or other electronic communication service shall declare the bets made and the tax under this Section with the territorial directorate of the National Revenue Agency by his registration until the 10th day of the month following the month in which the games are held, by way of a tax return in standard form.

Paying of Tax

Article 240. (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) (1) The tax on the gambling activity under this Section shall be withheld and paid by the operator of the telephone or other electronic communication service until the 10th day of the month following the month in which the games are held.

(2) The operator of the telephone or other electronic communication service is obligated to make sure that the organizer of the gambling game has obtained permission from the State Commission on Gambling, and to submit to the territorial directorate of the National Revenue Agency the contract on the basis of which he accepts the bets, the said contract containing a clause regarding the increase in the price of the telephone or other electronic communication service.

Income from Ancillary and Auxiliary Activities

Article 241. (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) (1) Any income accruing from ancillary and auxiliary activities within the meaning given by the Gambling Act shall attract an alternative tax on the value of the said income at the rate of 12 per cent.

(2) (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) The tax shall be paid by the organizer of the gambling game until 31 March of the following calendar year.

Section V

Tax on Gambling Activity with Gambling Devices and Casino Games including Distance Games

(Title Amendment – SG No. 94/2012 in force as of 01.01.2013)

General Dispositions

Article 242. (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) The gambling activity with gambling machines and casino games, including such organized from distance, shall be levied by a tax on gambling activity, which tax shall be final.

Tax Liable Persons

Article 243. (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) Tax liable persons under this Section shall be the organizers of the gambling games under Art. 242.

Determination of Tax

Article 244. (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) The tax under this Section shall be determined on the basis of the following elements entered in the certificate for issued license:

gaming machines and/or virtual gaming machines in a gaming house, and each gaming seat thereof, respectively;

gaming tables and/or virtual gaming tables and gaming machines and/or virtual gaming gaming machines in a gaming casino, and each gaming seat thereof, respectively.

Amount of Tax

Article 245. (Last amendment – SG No. 94/2012 in force as of 01.01.2013) (1) The amount of the tax on gambling activity under this Section shall be as follows:

per gaming machine and/or virtual gaming machine in a gaming house and casino, per gaming seat thereof, respectively – BGN 500 quarterly;

per roulette and/or virtual roulette with a maximum number up to 10 simultaneous gaming sessions in a casino, per gaming table – BGN 22,000 quarterly per each gaming table;

per another gaming device and/or virtual gaming device with a maximum number up to 7 simultaneous gaming sessions in a casino – BGN 5,000 quarterly per each gaming device;

per games in a casino for which fees and commissions for participation are collected – 15 percent of the fees and commissions collected for the relevant quarter.

(2) No tax under Par. 1, item 1 shall be due for the quarters prior to the issue of the license for organizing gambling games with the respective gaming device or for the quarters after the revocation thereof.

(3) The tax under Par. 1, item 1 shall be due in full amount for the quarter in which the license for organizing gambling games with the respective gaming device is issued as well as for the quarter in which it is withdrawn.

(4) In the cases under Art. 40 of the Gambling Act the tax under Par. 1, items 1-3 shall be due in full amount for the quarter in which the activity is suspended or renewed.

Declaring of Tax

Article 246. (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) (1) The tax liable persons shall declare the tax under this Section by filing a tax return in a standard form until the 15th day of the month following the respective quarter.

(2) The tax return under Par. 1 shall be filed with the territorial directorate of the National Revenue Agency by the person’s registration.

Paying of Tax

Article 247. (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) The tax on the gambling activity under this Section shall be paid within the time limits for declaring thereof.

Chapter Thirty-Three

TAX ON PUBLIC-FINANCED ENTERPRISE’ INCOME

General Dispositions

Article 248. Any income accruing to any public-financed enterprise from any transactions covered under Article 1 of the Commerce Act, as well as from rent of movable and immovable property, shall attract a tax on income according to the procedure established by this Chapter.

Taxation Basis

Article 249. (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) The basis of taxation for determining the tax on receipts shall be the receipts of the budget undertaking from transactions under Art. 1 of the Commerce Act, as well as from renting of movable and immovable property, accrued over the relevant year.

Rates of Tax

Article 250. (1) The rate of tax on income shall be 3 per cent.

(2) The rate of tax on income accruing to the municipalities shall be 2 per cent.

Tax Retention

Article 251. (1) Any public-financed scientific research enterprise, public higher school, state-owned and municipal school included in the system of public education shall be allowed to retain 50 per cent of the tax on income [due therefrom] in respect of the economic activity thereof as is directly related or auxiliary to the implementation of the core activity thereof.

(2) The tax so retained shall be shown as a written-off obligation to the State.

Declaring of Tax

Article 252. (Last Amendment – SG No. 95/2009, in force as of 01.01.2010) (1) (Former Art. 252 – SG No. 95/2009, in force as of 01.01.2010) Any public-financed enterprises subject to levy of a tax on income for the relevant year shall submit an annual tax return in a standard form on or before the 31st day of March of the next succeeding year.

(2) (New – SG No. 95/2009, in force as of 01.01.2010) An annual activity report is submitted together with the annual tax declaration.

Paying of Tax

Article 253. (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) The tax on receipts shall be paid in until 31 March of the following year.

Chapter Thirty-Four

TAX ON VESSELS OPERATION ACTIVITY

General Dispositions

Article 254. (1) The taxable persons, specified in this Chapter, may elect that the vessels operation activity thereof attract a tax on vessels operations activity.

(2) The tax referred to in Paragraph (1) shall be levied on the taxable persons which have elected to be liable for the said tax for a period not exceeding five years.

Taxable Persons

Article 255. (Former Art. 255, Last Amendment – SG No. 94/2010, in force as of 01.01.2011) (1) Taxable persons according to the procedure established by this Chapter shall be the persons carrying out maritime merchant shipping which simultaneously fulfil the following conditions:

they are corporations registered under the Commerce Act, or permanent establishments of a corporation which is resident for tax purposes in another Member State of the European Union, or a Member State of the European Economic Area, according to the relevant tax legislation and by virtue of a convention for the avoidance of double taxation with a third State is not considered to be resident for tax purposes in another State outside the European Union or the European Economic Area;
(Last Amendment – SG No. 94/2010, in force as of 01.01.2011) they operate their own vessels or chartered vessels, as well as charter vessels;
they do not refuse to train apprentices on board the vessels, with the exception of the cases where the number of apprentices exceeds one per fifteen officer members of the ship’s complement;
they man the vessel with Bulgarian citizens or with nationals of other Member States of the European Union or of the European Economic Area;
(Last Amendment – SG No. 94/2010, in force as of 01.01.2011) vessels flying the Bulgarian flag or a flag of another Member State of the European Union or of the European Economic Area account for at least 60 per cent of the net tonnage of the vessels operated.

*[editor’s note: the amendment is not appropriate for translation due to the fact that such amendment is aimed only at replacing the loan-word “flag” with its proper Bulgarian equivalent.]

(New – SG No. 94/2010, in force as of 01.01.2011) conduct their activity in accordance with the requirements of the international conventions and the European Union Law on safety of maritime shipping, protection of environment from pollution caused by ships, and the conditions of life and work aboard vessels.

(2) (New – SG No. 94/2010, in force as of 01.01.2011) taxable persons under this Chapter are also persons carrying out maritime merchant shipping, where mastering vessels on the grounds of management contract and meeting at least the following conditions:

they comply with the conditions of par. 1, pts. 1, 5 and 6;

more than half of the administrative staff on shore, or of the crew consists of Bulgarian citizens or citizens of the European Union, or the European Economic Area;

more than two-thirds of the tonnage of the vessels mastered is managed by companies, which are local persons for tax purposes for a Member State of the European Union, or for a country – party to the European Economic Area Agreement.

Restrictions on Scope of Tax

Article 256. The taxable persons shall not have the right to apply the procedure for taxation under this Chapter in respect of:

any seagoing vessels of a net tonnage under 100 tons;
any fishing vessels;
any pleasure vessels, with the exception of passenger vessels;
any vessels which the taxable persons have provided for management or under a bareboat charter, with the exception of the cases where any such vessels have been provided to the State;
any rigs for extraction of subsurface resources, any oil production platforms, and any vessels engaged in dredging operations and in tugging and towage operations.

Taxable Amount

Article 257. (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) (1) The taxable amount per vessel per day of service shall be determined as follows:

in respect of any vessel of a net tonnage of up to 1,000 tons inclusive: BGN 3.50 for each 100 tons or fraction;
in respect of any vessel of a net tonnage from 1,001 up to 10,000 tons inclusive: BGN 35 plus BGN 3.00 for each 100 tons or fraction;
in respect of any vessel of a net tonnage from 10,001 up to 25,000 tons inclusive: BGN 305 plus BGN 2.50 for each 100 tons or fraction above 10,000 tons;
in respect of any vessel of a net tonnage in excess of 25,001 tons: BGN 680 plus BGN 1 for each 100 tons or fraction above 25,000 tons.

(2) (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) The taxable amount per ship for a calendar year shall be determined by multiplying the taxable amount for the relevant vessel per day of service, as determined according to the procedure established by Paragraph (1), by the days of service of the relevant vessel during the calendar year.

(3) The taxable amount for assessment of the tax under this Chapter shall be the sum total of the taxable amounts determined for each vessels according to the procedure established by Paragraph (2).

Rate of Tax

Article 258. The rate of tax under this Chapter shall be 10 per cent.

Declaring of Tax

Article 259. (Last Amendment – SG No. 95/2009, in force as of 01.01.2010) (1) The taxable persons shall exercise the right of choice thereof to levy of a tax under this Chapter by means of submission of a declaration in a standard form on or before the 31st day of December of the last preceding year.

(2) The taxable persons shall submit an annual tax return in a standard form on the tax due under this Chapter on or before the 31st day of March of the next succeeding year.

(3) (New – SG No. 95/2009, in force as of 01.01.2010) An annual activity report is submitted together with the annual tax declaration.

Tax Remittance

Article 260. (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) The taxable persons shall remit the tax due under this Chapter by 31th of March in the following year.

PART SIX

ADMINISTRATIVE PENALTY PROVISIONS

Chapter Thirty-Five

ADMINISTRATIVE VIOLATIONS AND SANCTIONS

Article 261. (1) Any taxable person, which fails to submit a tax return under this Act, which fails to submit any such return when due, or which fails to state or misstates any particulars or circumstances leading to underassessment of the tax due or to undue reduction, retention of or exemption from tax, shall be liable to a pecuniary penalty of BGN 500 or exceeding this amount but not exceeding BGN 3,000.

(2) Any repeated violation under Paragraph (1) shall be punishable by a pecuniary penalty of BGN 1,000 or exceeding this amount but not exceeding BGN 6,000.

Article 262. (1) Any taxable person, which fails to submit any supplement to the annual tax return or which states any untrue particulars or circumstances in any such supplement, shall be liable to a pecuniary penalty of BGN 100 or exceeding this amount but not exceeding BGN 1,000.

(2) Any repeated violation under Paragraph (1) shall be punishable by a pecuniary penalty of BGN 200 or exceeding this amount but not exceeding BGN 2,000.

Article 263. (1) Any taxable person, which accounts for any business transaction in breach of the accounting policies thereof and this leads to a misdetermination of the accounting financial result of the said person, shall be liable to a pecuniary penalty of BGN 100 or exceeding this amount but not exceeding BGN 1,000 for each such breach.

(2) Any repeated violation under Paragraph (1) shall be punishable by a pecuniary penalty of BGN 200 or exceeding this amount but not exceeding BGN 2,000.

Article 264. (1) Any managing director, liquidator or trustee in bankruptcy, or holder of the position of liquidator or trustee in bankruptcy, who by any act or omission has committed any violation specified in Articles 261, 262 or 263 herein, shall be liable to a pecuniary penalty or a fine of BGN 200 or exceeding this amount but not exceeding BGN 1,000.

(2) Any repeated violation under Paragraph (1) shall be punishable by a pecuniary penalty or a fine of BGN 400 or exceeding this amount but not exceeding BGN 2,000.

Article 265. (Amended, SG No. 110/2007) Any taxable person, who or which fails to issue an accounting source document for the accounting for income, shall be liable to the sanction under Article 182 of the Value Added Tax Act unless subject to a severer sanction.

Article 266. (Amended, SG No. 110/2007) Any taxable person, who or which fails to fulfil the obligation thereof under Article 10 (4) herein, shall be liable to the sanction under Article 185 of the Value Added Tax Act.

Article 267. (Amended, SG No. 110/2007) Any taxable person, who effects a hidden profit distribution, shall be liable to a pecuniary penalty to the amount of 20 per cent of the expense charged constituting a hidden profit distribution.

Article 268. (1) Any organizer of games of chance, which fails to fulfil the obligation thereof to keep daily and monthly records under Article 219 herein, shall be liable to a pecuniary penalty of BGN 2,000 or exceeding this amount but not exceeding BGN 10,000.

(2) Any repeated violation under Paragraph (1) shall be punishable by a pecuniary penalty of BGN 4,000 or exceeding this amount but not exceeding BGN 20,000.

Article 269. (1) Any enterprise referred to in Article 232 herein, printing tokens certifying participation or importing such tokens, which provides the tokens certifying participation without presentation thereto of the documents on the tax paid, shall be liable to a pecuniary penalty equivalent to the unremitted tax.

(2) Any repeated violation under Paragraph (1) shall be punishable by a pecuniary penalty in a double amount, and the Minister of Finance shall disqualify the enterprise affected from printing or importing tokens certifying participation in the games covered under Section III of Chapter Thirty-Two herein for a period not exceeding six months.

Article 270. (1) Any organizer of games of chances referred to in Article 228 herein, which conducts such games without having paid the full amount of the tax due, shall be liable to a pecuniary penalty equivalent to double the amount of the tax due but in any case not less than BGN 2,000.

(2) The pecuniary penalty referred to in Paragraph (1) shall furthermore be imposed on any organizer of games of chance referred to in Article 228 herein which offers, sells or provides to any participant in the game of chance any token certifying participation which does not satisfy the statutorily established requirements as to the printing, form, type and cost price, or at a price exceeding the nominal value as printed on the relevant token certifying participation. No sanction shall be imposed where the tokens certifying participation have been revalued in respect of the series and the nominal value according to an inventory memorandum certified by a representative of the Ministry of Finance, a representative of the enterprise printing the tokens, and a revenue authority of the competent National Revenue Agency territorial directorate exercising competence over the place of registration of the organizer.

(3) Any repeated violation under Paragraphs (1) and (2) shall be punishable by a pecuniary penalty equivalent to the double amount of the tax due but in any case not less than:

BGN 4,000 and disqualification from practice of the activity according to the procedure established by Article 272 herein, where the repeated violation is under Paragraph (1);
BGN 6,000 and disqualification from practice of the activity according to the procedure established by Article 272 herein, where the repeated violation is under Paragraph (2).

Article 271. The pecuniary penalties referred to in Articles 269 and 270 herein shall be imposed notwithstanding the sanctions provided for in other laws, and the control authorities under the Gambling Act shall be notified of the violations as ascertained.

Article 272. (1) The administrative sanction of disqualification from practice of activity shall be imposed for a period of one month or exceeding this period but not exceeding six months.

(2) In the cases under Article 270 (2) herein, the revenue authorities shall seize and destroy the tokens certifying participation which do not satisfy the statutorily established requirements as to the printing, form, type and cost price, or any such tokens [which are sold] at a price exceeding the nominal value as printed thereon. The expenses shall be for the account of the taxable person.

(3) In the cases of imposition of an administrative sanction of disqualification from practice of activity, a coercive administrative measure of sealing of the establishment or establishments and prohibition of access thereto shall furthermore be imposed.

Article 273. (1) The implementation of the administrative sanction of disqualification from practice of activity shall be discontinued by the imposing authority at the request of the taxable person sanctioned according to an administrative procedure and after the said person has proved that the pecuniary penalty as imposed has been fully paid.

(2) In the cases referred to in Paragraph (1), the revenue authority shall furthermore decree unsealing of the establishment, which shall be performed with the obligation to cooperate on the part of the tax subject.

Article 274. The penalty decrees in the part thereof imposing the administrative sanction of disqualification from practice of activity and a coercive administrative measure of sealing of the establishment or establishments and denial of access thereto, as well as the decrees referred to in Article 273 herein, shall be subject to anticipatory enforcement unless the court orders otherwise.

Article 275. (Repeal – SG No. 94/2010, in force as of 01.01.2011)

Article 276. (Last Amendment – SG No. 99/2011, in force as of 01.01.2012) Legal entity that is subject of taxation who fails to fulfil his/her obligations under Art. 92, par. 3, Art. 160, par. 3, Art. 162, par. 6, Art. 219, par. 4, Art. 252, par. 2 or Art. 259, par. 3 is imposed a property sanction from 500 to 2000 BGN, in case of repeated infringement-from 1500 to 5000 BGN.

Article 277. (1) Any taxable persons, which have applied the procedure for taxation under Chapter Thirty-Four herein without qualifying for the right of choice, shall be liable to a pecuniary penalty of BGN 20,000 or exceeding this amount but not exceeding BGN 30,000 and, upon a repeated commission of the violation, to a pecuniary penalty of BGN 40,000 or exceeding this amount but not exceeding BGN 60,000.

(2) The persons referred to in Paragraph (1) shall have no right to apply the procedure for taxation on the net tonnage of vessels for a period of five years.

Article 277а. (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) (1) A person allocating food vouchers to employers under individual quota, which vouchers has nominal value exceeding the individual quota is subject to property sanction to the amount of the exceeded nominal value of the food vouchers allocated to the employer under the authorized individual quota, exceeding this individual quota and no less than BGN 2 000.

(2) A person allocating food vouchers to employers with no authorized individual quota is subject to property sanction equal to the nominal value of the food vouchers allocated to the employer and no less than BGN 2 000.

(3) (New – SG No. 94/2012, in force as of 01.01.2013) A person who has provided to employers food vouchers that do not comply with the requirements and procedure for printing of food vouchers set forth in the ordinance under Art. 209, Par. 6, shall be subject to pecuniary sanction to the amount of the nominal value of the food vouchers provided, but not less than BGN 2000.

Article 277b. (New – SG No. 106/2008, in force as of 01.01.2009) A foodstuff voucher operator who fails to submit a reference regarding the granted and paid vouchers shall be imposed a property sanction to the amount from 1000 to 1500 BGN; in case of repeated malpractice – from 2000 to 2500 BGN.

Article 277c. (New – SG No. 94/2010, in force as of 01.01.2011) Food voucher operator not complying with the requirements of Art. 209 (8) with regard to payments related to allocated food vouchers is subject to property sanction to the amount of BGN 10 000 to 15 000, and in case of second violation – BGN 20 000 to 30 000.

Article 278. (1) The written statements ascertaining the violations shall be drawn up by the authorities of the National Revenue Agency, and the penalty decrees shall be issued by the Executive Director of the National Revenue Agency or by an official authorized thereby.

(2) The ascertainment of violations, the issue, appeal against and enforcement of penalty decrees shall follow the procedure established by the Administrative Violations and Sanctions Act.

SUPPLEMENTARY PROVISIONS

1. (Last Amendment – SG No. 94/2012, in force as of 01.01.2013) Within the meaning given by this Act:

“The country” shall be the geographical territory over which the Republic of Bulgaria exercises the State sovereignty thereof, as well as the continental shelf and the exclusive economic zone wherewithin the Republic of Bulgaria exercises sovereign rights in conformity with international law.
“Permanent establishment” shall be a permanent establishment within the meaning given by Item 5 of § 1 of the Supplementary Provisions of the Tax and Social-Insurance Procedure Code.
“Financial asset” shall be the asset as defined in the applicable accounting standards, including the compensation instruments within the meaning given by Article 2 of the Transactions in Compensation Instruments Act. Where the person is not an enterprise within the meaning given by the Accountancy Act, the applicable accounting standards for the purposes of sentence one shall be the international accounting standards applicable in the country for the relevant year.
“Dividend” shall be the distribution in favour of a person, arising from the holding that such person has in the capital of another person, resulting in a reduction of the owners’ equity of the latter, including:

(a) (Last Amendment – SG No. 95/2009, in force as of 01.01.2010) the sums that are not related to the activity which is carried out by the legal entity subject to taxation or exceeding the usual market leves, assessed, paid or distributed in any form to the advantage of the shareholders, partners or other entities that are connected to them, with the exception of the dividends under section 4, letters ’a’ and ’b’;

(b) income from participating interests, even in unincorporated associations, and from other corporate rights, where treated as income from shares;

Any distribution which, according to accounting legislation, has been accounted for at the distributing person as an expense shall not be a dividend, with the exception of the cases of hidden profit distribution.

(LastAmendment – SG No. 110/2007, in force as of 01.01.2008) “Hidden profit distribution” shall be:

(a) any expenses charged by a taxable person without being connected with the economic activity carried out thereby or exceeding the customary market levels, in the cases where made in favour of shareholders, members or any parties related thereto;

(b) any expenses on interest payments charged (unless the conditions of the loan are agreed in conformity with requirements provided for in a statutory instrument) where at least three of the following conditions are fulfilled:

(aa) the loan exceeds the owners’ equity of the payer of the income at the 31st day of December of the last preceding year;

(bb) the repayment of the loan or the payment of interest thereon is not limited by a fixed period;

(cc) the repayment of the loan or the payment of interest thereon depends on the existence or on the amount of profits accruing to the payer of the income;

(dd) the repayment of the loan depends on satisfaction of the claims of other creditors or on the payment of dividends.

“Share in a liquidation surplus” shall be the distribution of a share in the property of a person upon the dissolution thereof in favour or another person or upon cessation of membership of that other person.
“Interest payment” shall be income from debt claims of every kind, whether or not secured by mortgage and whether or not carrying a right to participate in the debtor’s profits, including interest paid on deposits with banks and income (premiums) from debentures and bonds. For the purposes of Part Three herein, any income which constitutes a dividend, penalty charges for late payments and damages shall not be regarded as interest payments.
(Last Amendment – SG No. 95/2009, in force as of 01.01.2010) “Copyright and licence royalties” shall be payments of any kind received as a consideration for: the use of, or the right to use, any copyright of scientific, artistic or literary work, including cinematograph films and television films and recordings for transmission by radio or television or software; of any patent, trade mark, industrial design or utility model, drawing, plan, secret formula or process, as well as for the use of, or the right to use, industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience. The payment for acquisition of a right to use software in which only a copy of the relevant program is incorporated shall not be considered to be copyright and licence royalties in case the rights to copy, reproduce, distribute, modify, publicly display or make commercial use in any other form are not granted. Industrial, commercial and scientific equipment are all movable objects, including vehicles, facilities, means of production, means of offering services and any other means used by the company while carrying out its commercial activities.
“Technical assistance fees” shall be the payments from a source inside the Republic of Bulgaria for erection or installation of tangible assets, as well as any services of a consulting nature and marketing research as provided by any non-resident person.
“Franchising” shall be a totality of industrial or intellectual property rights relating to trade marks, trade names, logotypes, utility models, designs, copyright, know-how or patents, granted in return for a royalty, to be used for sale of goods and/or provision of services.
“Factoring” shall be a transaction whereby single or periodic monetary claims arising from a supply of goods or a provision of services are transferred, regardless of whether the person who has acquired the claims (the factor) assumes the risk of collection of the said claims in consideration of the payment of a reward.
“Foreign tax credit” shall be the right, enjoyable under conditions as specified by this Act, to deduct a profits tax or a tax on income already paid abroad.
“Related parties” shall be the parties within the meaning given by Item 3 of § 1 of the Supplementary Provisions of the Tax and Social-Insurance Procedure Code.
“Market price” shall be the price within the meaning given by Item 8 of § 1 of the Supplementary Provisions of the Tax and Social-Insurance Procedure Code.
“Transfer between a permanent establishment and another division of the same enterprise” shall be the term referred to in Item 6 of § 1 of the Supplementary Provisions of the Tax and Social-Insurance Procedure Code.
“Accounting financial result” shall be the profit (loss) according to the profit-and-loss account (income statement) for a specified period before charging the tax expenses on the profit.
“Undistributable expenses” shall be all selling expenses, administrative, financial and extraordinary expenses which do not relate to a particular activity only and are associated with the implementation of any activity:

(a) in respect of which corporation tax retention is enjoyable, or

(b) subject to levy of corporation tax, performed by not-for-profit legal entities.

“Undistributable income” shall be all financial and extraordinary income which does not arise from the implementation of a particular activity only and is associated with implementation of any activity in respect of which corporation tax retention is enjoyable.
“Expenses on provisions for debts” shall be the expenses on provisions as accounted for, which meet the criteria for recognition of a provision according to the applicable accounting standards, including:

(a) the expected excesses of the total amount of expenses over income and the expected losses under construction contracts;

(b) the termination and post-employment benefits, equity compensation benefits and other long-term employee benefits.

“Debt capital”, within the meaning given by Article 43 (6) herein, shall be the total liabilities of the enterprise, excluding the investment grants and subsidies.
(Last Amendment – SG No. 106/2008, in force as of 01.01.2009) “Disposal of financial instruments” for the purposes of Art. 44 and 196 shall be the following transactions:

а) Transactions with shares in collective investment schemes, shares and rights performed on a regulated market under the meaning of Art. 73 of the Financial instruments market Act, “rights” for the purpose of sentence one shall be securities entitling to subscription for a particular number of shares in connection with an adopted resolution for increase in the authorized capital;

b) Transactions concluded in accordance with the provisions for pre-emption by collective investment schemes, admitted for public offer in the country or in another member-state of the European Union, or in a member-state under the European Economic Area Agreement;
c) Transactions concluded in accordance with the provisions of bid proposal under chapter eleven, section II of the Public offer of securities Act, or identical transactions in another member-state of the European Union, or in a member-state under the European Economic Area Agreement.
(Last Amendment – SG No. 110/2007, in force as of 01.01.2008) “Documented cost of acquisition of securities or interests” shall be the cost of acquisition of the relevant securities which the person has documented according to the procedure established by the relevant statutory instruments. Where securities or interests of a particular type, issued by a particular person, have been acquired at different prices and part of the said securities or interests are subsequently sold and it is impossible to prove which of the said securities or interests are sold, the cost of acquisition of the securities or interests sold shall be the weighted average price arrived at on the basis of the cost of acquisition of the securities or interests held at the time of the sale. Sentence two shall apply in all cases of acts of disposition of securities or interests. Where new shares or interests are acquired as a result of a distribution which has not led to a reduction of the owners’ equity of the person distributing the shares or interests, the documented cost of acquisition of the shares or interests held shall be recalculated. After acquisition of the new shares or interests under the foregoing sentence, the documented cost of acquisition of each share or interest, including the newly acquired ones, shall equal the sum total of the documented costs of acquisition of the shares or interests prior to the acquisition of the new shares or interests, divided by the total number of shares or interests held after the acquisition, including the newly acquired ones.
“Computer peripheral equipment” shall be all devices which are connected to the basic input/output system of a computer or are controlled by a computer but are not essential for the functioning of the said computer.
“Development activity” shall be the activity of developing, designing, building and testing new goods, materials, manufacturing technologies and industrial systems and other industrial property items, as well as improving existing products and technologies.
“Tax loss from a source outside Bulgaria”, for the purposes of Articles 73 and 74 herein, shall be the sum total of the losses from all permanent establishments in the respective foreign State.
“Financial institutions” shall be:

(a) (Last Amendment – SG No. 110/2007, in force as of 01.01.2007) the credit and financial institutions under the Credit Institutions Act;

(b) the insurers, reinsurers and non-resident persons carrying on insurance or reinsurance business through a permanent establishment under the Insurance Code;

(c) (Last Amendment – SG No. 77/2011) the investment intermediaries under the Markets in Financial Instruments Act and the management companies under the Collective Investment Schemes and Collective Investment Undertakings Activities Act;

(d) the companies carrying on business for the provision of supplementary social insurance;

(e) (New – SG No. 110/2007, in force as of 01.01.2007) the health insurance companies under Article 91 of the Health Insurance Act.

(Last Amendment – SG No. 95/2009, in force as of 01.01.2010) Unprocessed vegetal an animal production is each initial product, obtained by the plants and the animals, which is not subjected to any technological treatment or processing which as a result may lead to physico-chemical alteration in their composition, and is indicated in Appendix 1 of Treaty establishing the European Community.
“Manufacturing activities”, for the purposes of Article 184 herein, shall be the process of creation of a new product by means of mechanical, physical or chemical conversion (treatment or processing) of raw and prime materials for the purpose of subsequent sale and biological transformation of live animals or plants.
(Last Amendment – SG No. 110/2007, in force as of 01.01.2007) “Initial investment” shall be an investment in new material and immaterial assets, which are eligible expenditures relating to:
the setting-up of a new establishment;
the extension of an existing establishment;
diversification of the output of an establishment into new additional products;
a fundamental change in the existing production process.

An investment in an asset which replaces an existing asset shall not qualify as initial investment;

(Last Amendment – SG No. 110/2007, in force as of 01.01.2007) “Enterprise in difficulty” shall be an enterprise meeting one of the following criteria:

(a) in the case of a limited liability company or a joint-stock company: where more than 50 per cent of the registered capital thereof has disappeared, and more than 25 per cent of that capital has been lost over the last preceding twelve months;

(b) in respect of all other corporations: where more than 50 per cent of the owners’ equity thereof has disappeared, and more than 25 per cent of that capital has been lost over the last preceding twelve months;

(c) (Last Amendment – SG No. 110/2007, in force as of 01.01.2007) where the corporation fulfils the criteria under the Commerce Act or under the law of the place of registration for institution of bankruptcy proceedings.

(Last Amendment – SG No. 110/2007, in force as of 01.01.2007) “De minimis aid” shall be the aid within the meaning given by Commission Regulation (EC) No 1998/2006 of 15 December 2006 on the application of Articles 87 and 88 of the Treaty to de minimis aid.
“Market rate of interest” shall be the interest that would have been paid under the same conditions for credit extended or received under any form whatsoever under a transaction between parties who or which are not related. The market rate of interest shall be determined according to the conditions of the market, taking into account all quantitative and qualitative characteristics of the transaction: form, amount and currency of the resources provided, period of the provision thereof, type, amount and liquidity of the collateral security, credit risk and other risks related to the transaction, profile of the borrower or lessee, as well as all other conditions and circumstances influencing the rate of interest.
“Advertising expenses” shall be the expenses incurred for the promotion of goods and service, including gifts which bear the trade name or the trade mark of the taxable persons, within the limits of the customary for the activity carried out by the person.
“Expenses on fringe benefits provided in kind” shall be the perquisites accounted for as expenses covered under Article 294 of the Labour Code and provided according to the procedure and manner defined in Article 293 of the Labour Code or according to a procedure and manner determined by the management of the enterprise. The said perquisites must be available to all factory and office workers and to the persons hired under a management and control contract. Where monetary relationships under any form whatsoever exist between the employer of commissioning entity and the persons referred to in sentence two in respect of the perquisites received, this shall not represent provision of expenses on fringe benefits in kind.
(Last Amendment – SG No. 94/2010, in force as of 01.01.2011) “Operator”, within the meaning given by Article 209 herein, shall be any person which has obtained authorization from the Minister of Finance and which engages in the activities of printing, organizing, control and settlement in connection with food vouchers according to a procedure established by an ordinance of the Minister of Labour and Social Policy and the Minister of Finance.
“Food vouchers” shall be a type of paper medium of exchange provided through an employer to factory and office workers, including persons hired under management contracts, which are used as a medium of payment at restaurants, fast-food outlets and food trading establishments, according to a contract for provision of services concluded with an operator.
“Passenger car” shall be such car as defined in the Road Traffic Tax.
“Extra bus services” shall be bus services running according to an endorsed transportation scheme in a mode allowing the vehicles to stop and passengers to alight and board at request where this is legally possible, complementing the principal urban transport services without fully duplicating them.
“Expenses on maintenance, repair and operation of means of transport” shall be the accounting expenses, related to the maintenance, repair and operation of the means of transport, incurred on:

(a) fuel, lubricants and other consumables;

(b) spare parts;

(d) technical inspections and parking;

(e) vehicle care products and accessories.

“Means of transport” shall be the means of transport as specified in Section Four of Chapter Two of the Local Taxes and Fees Act, regardless of whether entered in a register kept according to Bulgarian legislation.
(Last Amendment – SG No. 94/2010, in force as of 30.11.2010) “Vessels operation activities” shall be:

(a) the effecting of carriage by sea by means of vessels of a net tonnage exceeding 100 tons, the chartering of any such vessels, as well as the sale of vessels subject to tonnage taxation, which have been acquired not less than five years prior to the sale thereof;

(b) carriage by land, related to the carriage by sea, administrative and insurance services and other services provided to customers in connection with the effecting of the carriage by sea;

(c) financial operations and value adjustments resulting from exchange rate fluctuation, related to the management of the working capital used for the vessels operation;

(d) extraordinary activities related to the vessels operation, which do not come within the scope of Litterae (a) to (c) and which generate a turnover which does not exceed 0.25 per cent of the turnover generated by the activities referred to in Litterae (a) and (b).

e) (New – SG No. 94/2010, in force as of 11.2010) activities related to mastering vessels on the grounds of management contracts under Art. 225a pts. 1- 7, 9 and 10 of the Maritime Merchant Shipping Code.
“Days of service” shall be the days on which the vessel is engaged in carriage and/or performs any activities related to carriage. The days of service shall exclude the time for repairs or in a port, as well as the time during which the vessel is not engaged in carriage and/or does not perform any activities related to carriage due to detention or force majeure.
“Net tonnage” shall be the measure, in tons, of the useful deadweight (cargo carrying capacity) of a vessel as certified by a tonnage certificate of the vessel.
“Repeated violation” shall be any violation which is committed within one year after the entry into effect of a penalty decree whereby the offender was penalized for a violation of the same kind.
(New – SG No. 110/2007,in force as of 01.01.2007) “Agricultural products”, “processing of agricultural products” and “marketing of agricultural products” shall have the meaning given to these terms by Article 2 [sic, must be Article 1, paragraph 2 – Translator’s Note] of Commission Regulation (EC) No 1998/2006 on the application of Articles 87 and 88 of the Treaty to de minimis aid.
(New – SG No. 110/2007,in force as of 01.01.2007) “Eligible expenditure on material assets” for the purposes of Items 29 and 48 shall be land, buildings, machinery and plant/equipment. The initial investments shall furthermore include the machinery and plant/equipment acquired under a financial lease contract where the contract contains an obligation to purchase the asset at the expiry of the term of the contract.
(New – SG No. 110/2007, in force as of 01.01.2007) “Eligible expenditure on immaterial assets” for the purposes of Items 29 and 48 shall be assets obtained as a result of transfer of technology by the acquisition of patent rights, licences, know-how or unpatented technical knowledge.
(New – SG No. 110/2007, in force as of 01.01.2007) “Large investment project” shall be an initial investment which includes eligible expenditure on material and immaterial assets combined in an economically indivisible way, where the eligible expenditure exceeds the lev equivalent of EUR 50 million, determined according to the official exchange rate of the lev against the euro. The initial investment related to a large investment project must be undertaken within a period of three years. A large investment project may not be divided into sub-projects or stages, if this would lead to circumvention of the provisions in this Act.
(New -SG No. 110/2007, in force as of 01.01.2007) “Net turnover” shall have the meaning given to this term by the Accountancy Act.
(New – SG No. 110/2007, in force as of 01.01.2007) “Equity method” shall have the meaning given to this term by accounting legislation.
(New – SG No. 110/2007, in force as of 01.01.2007) “Proportionate consolidation method” shall have the meaning given to this term by accounting legislation.
(New -SG No. 110/2007, in force as of 01.01.2007) “Jointly controlled entity” shall have the meaning given to this term by accounting legislation.
(New – SG No. 106/2008, in force as of 01.01.2009) “Additional voluntary social security” shall be social security under the meaning of § 1, Subpar. 21 of the supplementary provisions of the Physical Persons Income Tax Act.
(New – SG No. 106/2008, in force as of 01.01.2009) “Voluntary medical security” shall be medical security under the meaning of § 1, Subpar. 13 of the supplementary provisions of the Physical Persons Income Tax Act.
(New – SG No. 106/2008, in force as of 01.01.2009) “Life Insurance” shall be insurance under the meaning of § 1, Subpar. 14 of the supplementary provisions of the Physical Persons Income Tax Act.
(New – SG No. 95/2009, in force as of 01.01.2010) ’’Annual activity report’’ is the report under Art. 20, par. 4 of the Statistics Act.
(New – SG No. 95/2009, in force as of 01.01.2010) ’’Accounting income, accounting expenditure, accounting financial result, assets and liabilities and equity of the foreign legal entity of a member state of the European Union or another state which is a party to the European Economic Area agreement, carrying out commercial activities in the Republic of Bulgaria through a permanent establishment only in compliance with the conditions for the freedom of providing services’’ are these within the meaning of the international accounting standards which are applied in the state for the respective year.
(New – SG No. 95/2009, in force as of 01.01.2010) ’’Accounting income, accounting expenditure, accounting financial result, assets and liabilities and equity of the foreign legal entity of a member state of the European Union or another state which is a party to the European Economic Area agreement’’ for purposes of calculation of the corporate income tax under Art. 202a, par. 2 are these within the meaning of the international accounting standards which are applied in the state for the respective year.
(New – SG No. 95/2009, in force as of 01.01.2010) Disposal of a permanent establishment propertyis available in the cases of transfer of a permanent establishment separately or together with the whole company.

(New – SG No. 95/2009, in force as of 01.01.2010) ’’Agricultural equipment’’ for the purposes of Art. 189b are the automotives, towed machines, the equipment, installations and the apparatuses used at the carrying out of the agricultural activities.
(New – SG No. 94/2010, in force as of 01.01.2011) „Total annual quota for food vouchers” is the total nominal value of the food vouchers for the respective year, which operators may allocate under Art. 209.

(New – SG No. 94/2010, in force as of 01.01.2011) „Individual food voucher quota” is the nominal value of the food vouchers that an operator may allocate to employers under this quota.

(New – SG No. 94/2010, in force as of 01.01.2011) “Maximum permissible annual rates of tax depreciation” for the purposes of Art. 75 (4) are the maximum amounts of the annual tax depreciation norms under Art. 55 or the maximum amounts of the depreciation norms under Art. 22 of the repealed Corporative Income Tax Act, for the years preceding 2007.

(New – SG No. 94/2010, in force as of 01.01.2011) „Jurisdictions with preferential fiscal arrangements” are:

US Virgin Islands; Principality of Andorra, Anguilla (British); Channel Islands (British); Antigua and Barbuda; Aruba (Netherlands); The Commonwealth of the Bahamas; Barbados; Belize; Bermuda Islands (British); British Virgin Islands; Republic of Vanuatu; Gibraltar (British); Grenada; Guam (US); Cooperative Republic of Guyana; Dominican Republic; Cayman Islands (British); Christmas Island (British); Republic of Liberia; Principality of Liechtenstein; Republic of Maldives; Republic of Mauritius; Principality of Monaco; Montserrat (British); Republic of Nauru; Niue (New Zealand); Republic of Palau; Cook Islands (New Zealand); Isle of Man (British); Saint Lucia; Federation of Saint Kitts and Nevis; Turks and Caicos Islands (British); Republic of Fiji; Republic of Panama; Independent State of Samoa; Republic of San Marino; Republic of Seychelles; Solomon Islands ; Saint Vincent and Grenadines; Kingdom of Tonga; Republic of Trinidad and Tobago; Tuvalu; Falkland Islands (British); Netherlands Antilles (Netherlands); Hong Kong (China), or

states/territories, with which the Republic of Bulgaria does not have double taxation avoidance agreement in force and where the income or corporate tax due, or the substituting taxes on incomes, under Art. 12 (9) or Art. 8 (11) of the Income Taxes on Natural Persons Act, which a foreign person has generated or will generate are more than 60% lower of the corporative or income tax on these incomes in the Republic of Bulgaria.

(New – SG No. 94/2012, in force as of 01.01.2013)) „Bribe” for purposes of Art. 26 item 12 shall include the crimes under Arts. 301 – 307 of the Penal Code.

(New – SG No. 94/2012, in force as of 01.01.2013) „Official” and „foreign official” shall be those persons referred to in Art. 93, items 1 and 15 of the Penal Code.

(New – SG No. 94/2012, in force as of 01.01.2013) „Date of Cessation of Activity by Organizer of Gambling Games” for tax purposes shall be the date on which the tax liable person has submitted the certificate for issued license thereof to the State Commission on Gambling.

(New – SG No. 94/2012, in force as of 01.01.2013) „ Date of Renewal of Activity by Organizer of Gambling Games” for tax purposes shall be the date subsequent to the date on which the tax liable person has received the certificate for issued license thereof by the State Commission on Gambling.

(New – SG No. 94/2012, in force as of 01.01.2013) „Gaming Session” shall be the one referred to in § 1, item 24 of the supplementary provision of the Gambling Act.

2. (Last Amendment – SG No. 40/2012, in force as of 01.07.2012) This act introduces the regulations of Council Directive 2001/86/EC supplementing the Statute for a European company with regard to the involvement of employees, of Council Directive 2003/72/EC supplementing the Statute for a European Cooperative Society with regard to the involvement of employees, of Council Directive 2003/49/EC of 3 June 2003 on a common system of taxation applicable to interest and royalty payments made between associated companies of different Member States and of Council Directive 2011/96/EU of 30 November 2011 on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States (OJ, 345/8 of 29 December 2011).

TRANSITIONAL AND FINAL PROVISIONS

3. This Act shall supersede the Corporate Income Tax Act (promulgated in the State Gazette No. 115 of 1997; corrected in No. 19 of 1998; amended in Nos. 21 and 153 of 1998, Nos. 12, 50, 51, 64, 81, 103, 110 and 111 of 1999, Nos. 105 and 108 of 2000, Nos. 34 and 110 of 2001, Nos. 45, 61, 62 and 119 of 2002, Nos. 42 and 109 of 2003, Nos. 18, 53 and 107 of 2004, Nos. 39, 88, 91, 102, 103 and 105 of 2005, Nos. 30, 34, 59 and 63 of 2006).

4. The adjustments of the financial result (accounting profit/loss) for tax purposes consequent to the application of Article 23 of the Corporate Income Tax Act as superseded until the 31st day of December 2006 shall be considered to be adjustments of the accounting financial result upon determination of the tax financial result according to the procedure and according to the relevant provision of this Act.

5. The accounting income and expenses from subsequent valuations (revaluations and impairments) of depreciable assets, which are charged until the 31st day of December 2003 and which are not recognized for tax purposes until the 31st day of December 2006 according to the procedure established by Article 23 of the Corporate Income Tax Act as superseded, shall be recognized for tax purposes in the year of write-off the relevant asset in the tax depreciation schedule, with the exception of the cases of shrinkage.

6. (1) The depreciable assets available in the tax depreciation schedule as at the 31st day of December 2006, with the exception of such specified in Paragraph (2), shall be considered to be taxable depreciable assets within the meaning given by Article 48 herein.

(2) The following assets available in the tax depreciation schedule shall be written off therein as at the 1st day of January 2007:

the positive goodwill;
the assets which are not used in any activity in respect of which a tax financial result is formed;
the assets which are not classified as held for sale or are part of a group for exemption classified as held for sale;
the assets where the taxable person has been dissolved through liquidation or has been dissolved through adjudication in bankruptcy.

(3) (Amended, SG No. 110/2007, effective 1.01.2007) Article 66 herein shall not apply in the cases of write-off of any assets under Item 1 and 2 of Paragraph (2).

7. (1) The tax depreciable value of any tax depreciable asset available as at the 1st day of January 2007 shall be the depreciable value of the said asset as at the 31st day of December 2006 under the Corporate Income Tax Act as superseded.

(2) The tax depreciation charged of any tax depreciable asset available as at the 1st day of January 2007 shall be the tax-recognized amount of the expenses on depreciations for the relevant asset as at the 31st day of December 2006 under the Corporate Income Tax Act as superseded.

(3) The tax value of any tax depreciable asset available as at the 1st day of January 2007 shall be the tax carrying value of the said asset as at the 31st day of December 2006 under the Corporate Income Tax Act as superseded.

8. The values of the tax depreciable assets available in the tax depreciation schedule as at the 1st day of January 2007 shall remain unchanged compared to the said values as at the 31st day of December 2006.

9. (1) The revaluation reserve in the tax depreciation schedule shall be written off therein as at the 1st day of January 2007. The said write-off shall follow the procedure and manner specified in § 10 or 11 herein. The taxable person shall opt for the application of § 10 or 11 herein.

(2) The “revaluation reserve,” within the meaning given by Paragraph (1), shall be the revaluation reserve (the subsequent valuations reserve) which is included in the tax depreciation schedule as at the 31st day of December 2006.

(3) Where a revaluation reserve (subsequent valuations reserve) other than the one which should have been included according to Article 22 of the Corporate Income Tax Act as superseded is included in the tax depreciation schedule as at the 31st day of December 2006, the said reserve shall be adjusted for the purposes of Paragraph (1).

(4) Sole traders shall write off the revaluation reserve according to a procedure and in a manner applicable to the taxable persons under this Act.

10. (1) The taxable persons shall adjust on a single occasion the values of the depreciable assets in the tax depreciation schedule as at the 1st day of January 2007 as a result of the write-off of the revaluation reserve.

(2) The tax-recognized amount of the expenses on depreciations for a specific depreciable asset as at the 31st day of December 2006 shall be credited with the written off revaluation reserve for the relevant asset, as a result of which the tax depreciation of the said asset charged as at the 1st day of January 2007 shall be increased and the tax value of the asset as at the 1st day of January 2007 shall be decreased. After the increase, the tax depreciation charged for the relevant asset may not exceed the tax depreciable value of the asset as at the 1st day of January 2007.

(3) Where the revaluation reserve for a specific asset exceeds the tax carrying value of the said asset as at the 31st day of December 2006, the said asset shall be written off in the tax depreciation schedule as at the 1st day of January 2007, with the tax-recognized amount of the expenses on depreciations of other assets of the same category, determined within the meaning given by Article 22 of the Corporate Income Tax Act as superseded, being credited with the amount of the excess. Where the values of the assets of the said category are insufficient to fulfil the requirement of sentence one, the tax-recognized amount of the expenses on depreciations of assets of the other categories shall be increased.

(4) After the write-off of the revaluation reserve, the total amount of the tax values of all assets available in the tax depreciation schedule as at the 1st day of January 2007 must equal the total amount of the tax carrying values of all assets as at the 31st day of December 2006, debited with the revaluation reserve as written off.

(5) Paragraphs (1) to (4) shall not apply were the total amount of the revaluation reserve as written off exceeds the total amount of the tax carrying values of all assets available in the tax depreciation schedule as at the 31st day of December 2006. The taxable persons shall write off all assets available in the tax depreciation schedule as at the 31st day of December 2006 in the said schedule as at the 1st day of January 2007. The accounting financial result shall be credited with the difference between the total amount of the revaluation reserve and the total amount of the tax carrying values of all assets as at the 31st day of December 2006 upon determination of the tax financial result, inter alia upon determination of the quarterly prepayments according to the procedure established by § 11 herein.

11. (1) Upon determination of the tax financial results, inter alia upon determination of the quarterly prepayments, the accounting financial result shall be credited with the revaluation reserve as written off as follows:

for 2007: with one-third of the revaluation reserve as written off;
for 2008: with one-third of the revaluation reserve as written off;
for 2009: with one-third of the revaluation reserve as written off.

(2) Upon dissolution of any taxable person, with the exception of the cases of dissolution upon transformation through change of the legal form under Article 264 of the Commerce Act, upon determination of the tax financial result for the year of dissolution the accounting financial result shall be credited with the portion of the revaluation result as written off whereby the accounting financial result has not been credited according to the procedure established by Paragraph (1).

(3) The taxable person may credit the accounting financial result thereof with the revaluation reserve as written off on a single occasion upon determination of the tax financial result thereof for 2007, inter alia upon determination of the quarterly prepayments. In this case Paragraphs (1) and (2) shall not apply.

12. The provision of Item 6 of Article 55 (1) herein shall apply to any tax tangible fixed assets acquired after the 31st day of December 2006.

13. For the purposes of Article 55 herein, the depreciable asset referred to in Item 55 (f) of § 1 of the Supplementary Provisions of the Corporate Income Tax Act as superseded shall be allocated to Category V.

14. For the purposes of Article 55 herein, the depreciable asset, formed according to the Corporate Income Tax Act as superseded as a result of the tax-unrecognized portion of the excess of the sum total of the accounting depreciation quotas over the tax-recognized amount of the depreciations of the assets as a whole for the period commencing on the 1st day of January 1998 and ending on the 31st day of December 2002, shall be allocated to Category VII.

15. (Amended, SG No. 110/2007, effective 1.01.2007) The provision of Article 59 herein shall not apply to any tax depreciable asset for which the charging of tax depreciations was discontinued at the 31st day of December 2006 according to the Corporate Income Tax Act as superseded by reason of withdrawal from use of the said asset. The charging of tax depreciations for the asset referred to in sentence one shall be resumed as from the beginning of the month of re-commissioning of the said asset.

16. The provision of Article 63 herein shall apply to any subsequent expenses completed after the 31st day of December 2006.

17. For the purposes of Article 66 (1) herein, where the residual value is not included in the depreciable value of the asset within the meaning given by the Corporate Income Tax Act as superseded, the accounting carrying value of the asset shall be debited with the residual value thereof upon determination of the tax financial result.

18. Article 68 herein shall apply to any assets acquired after the 31st day of December 2005.

19. Article 45 herein shall not apply in the cases where the financial result for tax purposes has been credited with the subsequent valuation reserve (revaluation reserve) according to the procedure established by Article 23 of the Corporate Income Tax Act as superseded.

20. Any unrecognized expenses on interest payments after the 1st day of January 2004 according to Article 26 of the Corporate Income Tax Act as superseded, subject to deduction and not deducted until the 31st day of December 2006, shall be deducted according to the procedure established by Article 43 herein until the lapse of five years since the year of non-recognition of the said expenses for tax purposes.

21. The portion of the provisions for claims taxed for tax purposes (under the accounting legislation effective until the 31st day of December 2001) in the non-financial enterprises, whereby the financial result has not been debited according to the procedure established by Article 23 (3) of the Corporate Income Tax Act as superseded during succeeding years, shall be treated as unrecognized expense on subsequent valuation of a claim according to the procedure established by Article 34 of this Act.

22. Any losses formed after the 1st day of January 2002 and subject to carry-forward, which have not been deducted until the 31st day of December 2006 according to the procedure established by Chapter Four of the Corporate Income Tax Act as superseded, shall be deducted according to the procedure established by Chapter Eleven herein.

23. Article 95 herein shall not apply to any income and expenses originating as a result of any income and expenses, accounted for prior to the 1st day of January 2007, in respect of which there existed a difference between the amount as accounted for according to the accounting policies and the amount as determined by a regulatory authority according to a statutory instrument.

24. The right to enjoy the reduction referred to in Article 60 (1) or the retention referred to in Articles 61d or 61e of the Corporate Income Tax Act as superseded in respect of the corporation tax due for 2006 shall furthermore vest in any taxable person which has not submitted a notification to the competent National Revenue Agency territorial directorate according to Article 51a of the Corporate Income Tax Act as superseded, subject to the condition that the said person fulfil all requirements provided for in the Act for the relevant corporation tax reduction or retention.

25. Corporation tax retention shall be allowed according to the procedure established by Article 187 herein until the 31st day of December 2010.

26. (Repealed, SG No. 110/2007, effective 1.01.2007).

27. The annual taxable profit (loss), the annual corporation tax due, all alternative taxes, the taxes on expenses and the withholding taxes for 2006, which are declarable according to the procedure established by the Corporate Income Tax Act as superseded, shall be declared by means of submission of the relevant tax returns and within the time limits under the said Act.

28. (1) The taxes due for 2006 under the Corporate Income Tax Act as superseded shall be remitted within the time limits and according to the procedure established by the said Act.

(2) The right referred to in Article 92 (5) herein shall be enjoyable by the taxable persons even upon declaring the corporation tax for 2006.

29. The standard forms of annual tax returns for 2006 under the Corporate Income Tax Act as superseded shall be endorsed not later than the 10th day of January 2007 by an order of the Minister of Finance, which shall be promulgated in the State Gazette.

30. (Amended, SG No. 110/2007, effective 1.01.2007) Any provisions, which are included in the historical cost of a tax depreciable asset but are not included in the depreciable value of the said asset according to the Corporate Income Tax Act as superseded, shall be considered as provisions which are not included in the tax depreciable value of the asset according to Article 53 (1) herein.

31. (Repealed, SG No. 110/2007, new, SG No. 69/2008) Any collateral security provided as per the procedure of the repealed Article 109 shall be released.

32. The Tax and Social-Insurance Procedure Code (promulgated in the State Gazette No. 105 of 2005; amended in Nos. 30, 33, 34, 59, 63, 73 and 82 of 2006) shall be amended and supplemented as follows:

In Article 141:

(a) in Paragraph (1), the words “thirty days” shall be replaced by “sixty days”;

(b) in Paragraph (2):

(aa) in sentence one at the end, there shall be added “and has not eliminated the deficiencies within fifteen days after the date of request by the revenue authority”;

(bb) in sentence two, the words “there are no” shall be replaced by “there are”;

(c) in Paragraph (3), after the words “application of the CADT” there shall be inserted “or failure to rule within the period under Paragraph (1)”;

(d) Paragraphs (4) and (5) shall be amended to read as follows:

“(4) Any opinion on lack of grounds for application of the CADT shall be appealable by the recipient of the income or by the payer, if authorized to do so by the recipient of the income. Any such appeal shall follow the procedure for appeal of audit acts, and the appeal shall be lodged care of the territorial directorate whereto the request has been submitted.

(5) If there is an opinion on application of the CADT under Paragraph (1) or (2), the tax liabilities for the relevant income may be revised solely if there are grounds under Article 133 (2).”

In Article 142 (1) and (2), the figure “25,000” shall be replaced by “50,000”.

33. This Act shall enter into force on the 1st day of January 2007.

This Act was adopted by the 40th National Assembly on the 14th day of December 2006 and the Official Seal of the National Assembly has been affixed thereto.

Annex 1 to Item 1 of Article 100

(R epeal – SG No. 69/2008, in force as of 01.01.2009)

Annex 2 to Item 3 of Article 100 and Item 1 of Article 108 (2)

(Repeal – SG No. 69/2008, in force as of 01.01.2009 )

Annex 3 to Item 1 of Article 137

(Supplemented, SG No. 108/2007, effective 1.01.2007)

List of Companies in the Member States of the European Union Referred to in Item 1 of Article 137 Herein

(a) companies incorporated under Council Regulation (EC) No 2157/2001 on the Statute for a European company (SE) and Council Directive 2001/86/EC supplementing the Statute for a European company with regard to the involvement of employees, included under Council Regulation (EC) No 1435/2003 on the Statute for a European Cooperative Society (SCE) and Council Directive 2003/72/EC supplementing the Statute for a European Cooperative Society with regard to the involvement of employees;

(b) companies under Belgian law known as “ société anonyme”/”naamloze vennootschap”, “ société en commandite par actions”/”commanditaire vennootschap op aandelen”, “ société privée à responsabilité limitée”/”besloten vennootschap met beperkte aansprakelijkheid”, “ société cooperative à responsabilité limitée”/”cooperative vennootschap met beperkte aansprakelijkheid”, “ société en nom collectif”/”vennootschap onder firma”, “ société en commandite simple”/”gewone commanditaire vennootschap”, public undertakings which have adopted one of the above-mentioned legal forms, as well as other companies constituted under Belgian law and subject to the Belgian Corporate Tax;

(d) companies under Danish law known as “aktieselskab” and “anpartsselskab”; other companies subject to tax under the Corporation Tax Act, in so far as their taxable income is calculated and taxed in accordance with the general tax legislation rules applicable to “aktieselskaber”;

(e) companies under German law known as: “Aktiengesellschaft”, “Kommanditgesellschaft auf Aktien”, “Gesellschaft mit beschränkter Haftung”, “Versicherungsverein auf Gegenseitigkeit”, “Erwerbs- und Wirtschaftsgenossenschaft”, “Betriebe gewerblicher Art von juristischen Personen des uffentlichen Rechts”, as well as other companies constituted under German law and subject to German corporate tax;

(f) companies under Estonian law known as: “tдisьhing”, “usaldusьhing”, “osaьhing”, “aktsiaselts”, “tulundusьhistu”;

(g) companies under Greek law known as: “ανώνυμη εταιρία”, “εταιρία περιορισμένης ευθύνης” (E.П.E);

(h) companies under Spanish law known as: “sociedad anónima”, “sociedad comanditaria por acciones”, “sociedad de resposabilidad limitada”, as well as those public law bodies which operate under private law;

(i) companies under French law known as “société anonyme”, “société en commandite par actions”, “société à responsabilité limitée”, “société par actions simplifiée”, “société d’assurances mutuelles”, “caisses d’épargne et de prévoyance”, “sociétés civiles”, which are automatically subject to corporation tax, “coopératives”, “unions de coopératives”, industrial and commercial public establishments and undertakings, as well as other companies constituted under French law which are subject to the French Corporate Tax;

(j) companies incorporated or existing under Irish laws, bodies registered under the Industrial and Provident Societies Act, building societies incorporated under the Building Societies Acts and trustee savings banks within the meaning of the Trustee Savings Banks Act, 1989;

(k) companies under Italian law known as: “società per azioni”, “società in accomandita per azioni”, “società a responsabilità limitata”, “società ccoperativa”, “società di mutual assicurazione”, as well as private and public entities whose activity is wholly or principally commercial;

(l) under Cypriot law: “εταιρειες”, as defined in the Income Tax laws;

(m) companies under Latvian law known as: “akciju sabiedriba”, “sabiedriba ar ierobe~otu atbildibu”;

(n) companies incorporated under the law of Lithuania;

(o) companies under Luxembourg law known as: “société anonyme”, “société en commandite par actions”, “société à responsabilité limitée”, “ société coopйrative”, “ société coopérative organisée comme une société anonyme”, “association d’assurances mutuelles”, “association d’épargne-pension”, “enterprise de natura commerciale, industrielle ou miniére de l’état, des communes, des syndicats de communes, des établissements publics et des autres personnes marales de droit public”, as well as other companies constituted under Luxembourg law which are subject to the Luxembourg Corporate Tax;

(p) companies under Hungarian law known as: “kцzkereseti tбrsasбg”, “berйti tбrsasбg”, “kцzцs vбllat”, “korlбtolt felelцssйgь tбrsasбg”, “rйszvйnytбrsasбg”, “egyesьlйs”, “kцzhasznъ tбrsasбg”, “szцvetkezet”;

(q) companies under Maltese law known as: “Kumpaniji ta’ Responsabilita Limitata”, “Sojetajiet en commandite li l-kapital taghhom maqsum fazzjonijiet”;

(r) companies under Dutch law known as: “naamloze vennootschap”, “besloten vennootschap met beperkte aansprakelijkheid”, “Open commanditaire vennootschap”, “Coöperatie”, “onderlinge waarborgmaatschappij”, “Fonds voor gemene rekening”, “vereniging op cooperative grondslag” and “vereniging welke op onderlinge grondslag als verzekeraar of kredietinstelling optreedt”, as well as other companies constituted under Dutch law which are subject to the Dutch Corporate Tax;

(s) companies under Austrian law known as: “Aktiengesellschaft”, “Gesellschaft mit beschrдnkter Haftung”, “Erwerbs- and Wirtschaftsgenossenschaften”;

(t) companies under Polish law known as: “spolka akcyjna”, “spolka z ograniczona odpowiedzialnoscia”;

(u) commercial companies or civil law companies having a commercial form, as well as other legal persons carrying on commercial or industrial activities, which are incorporated under Portuguese law;

(v) companies under Slovenian law known as: “delniaka dru~ba”, “komanditna dru~ba”, “dru~ba z omejeno odgovornostjo”;

(w) companies under Slovak law known as: “akciovб spolo nose”, “spolo nose s ru enнm obmedzenэm”, “komanditnб spolo nose ”;

(x) companies under Finnish law known as: “osakeyhtiö”/”aktiebolag”, “osuuskunta”/”andelslag”, “sддstцpankki”/”sparbank” and “vakuutusyhtiц”/”fцrsдkringsbolag”;

(y) companies under Swedish law known as: “aktiebolag”, “fцrsдkringsaktiebolag”, “ekonomiska fцreningar”, “sparbanker”, “цmsesidiga fцrsдkringsbolag”;

(z) companies incorporated under the law of the United Kingdom of Great Britain and Northern Ireland.

(aa) companies under Romanian law known as “sosietci pe acciuni”, sosietci оn comandit pe acciuni”, “sosietci cu rspundere limitat”.

Annex 4 to Item 3 of Article 137

(Supplemented, SG No. 108/2007, effective 1.01.2007)

List of Taxes in the Member States of the European Union

– impфt des sociétés/vennootschapsbelasting in Belgium,

– selskabsskat in Denmark,

– Körperschaftsteuer in the Federal Republic of Germany,

– ЖМБїВ µ№Гїґ®µ±ДїВ Ѕїµ№єОЅ АБїГОАЙЅ єµБґїГєїА№єїН З±Б±єД®Б± in Greece,

– impuesto sobre sociedades in Spain,

– impфt sur les sociétés in France,

– corporation tax in Ireland,

– imposta sul reddito delle societа in Italy,

– impфt sur le revenu des collectivités in Luxembourg,

– venflootschapsbelasting in the Netherlands,

– imposto sobre o rendimento das pessoas colectivas in Portugal,

– corporation tax in the United Kingdom of Great Britain and Northern Ireland,

– Körperschaftsteuer in Austria,

– yhteisцjen tulovero/inkomstskatten fцr samfund in Finland,

– statlig inkomstskatt in Sweden,

– DaH z pYнjmo prбvnickэch osob in the Czech Republic,

– Tulumaks in Estonia,

– ЖМБїВ µ№Гїґ®ј±ДїВ in Cyprus,

– uzFmumu ienkuma nodoklis in Latvia,

– Pelno mokestis in Lithuania,

– Tбrsasбgi adу in Hungary,

– Taxxa fuq l-income in Malta,

– Podatek dochodowy od osуb prawnych in Poland,

– Davek od dobi ka pravnih oseb in Slovenia,

– DaH z pYнjmo prбvnickэch osob in Slovakia,

– impozit pe profit in Romania.

Annex No. 5 to Art. 200a (4), pt. 1 letter “c” and pt. 4, letter “b”

(New – SG No. 94/2010, in force as of 01.01.2011)

List of foreign legal persons in the Member States of the European Union under Art. 200a (4), pt. 1, letter “a”

companies under Belgian law known as:

„naamloze vennootschap/societe anonyme, commanditaire vennootschap op aandelen/societe en commandite par actions, besloten vennootschap met beperkte aansprakelijkheid/societe privee a responsabilite limitee” and those public law bodies that operate under private law;

b) companies under Danish law known as: „aktieselskab” and „anpartsselskab”;

c) companies under German law known as: „Aktiengesellschaft, Kommanditgesellschaft auf Aktien, Gesellschaft mit beschrankter Haftung” и „bergrechtliche Gewerkschaft”;

d) companies under Greek law known as: “ανώνυμη εταιρíα”;

e) companies under Spanish law known as: „sociedad anonima, sociedad comanditaria por acciones, sociedad de responsabilidad limitada” and those public law bodies that operate under private law;

f) companies under French law known as: „societe anonyme, societe en commandite par actions, societe a responsabilite limitee” and industrial and commercial public establishments and undertakings;

g) companies in Irish law known as: „public companies limited by shares or by guarantee, private companies limited by shares or by guarantee”, bodies registered under the Industrial and Provident Societies Act or building societies registered under the Building Societies Acts;

h) companies under Italian law known as: „societa per azioni, societa in accomandita per azioni, societa a responsabilita limitata” limitata’ and public and private entities carrying on industrial and commercial activities;

i) companies under Luxembourg law known as: „societe anonyme”, „societe en commandite par actions” and „societe a responsabilite limitee”;

j) companies under Dutch law known as: „naamloze vennootschap” and „besloten vennootschap met beperkte aansprakelijkheid”;

k) companies under Austrian law known as: „Aktiengesellschaft” and „Gesellschaft mit beschrankter Haftung”;

l) commercial companies or civil law companies having a commercial form, cooperatives and public undertakings incorporated in accordance with Portuguese law;

m) companies under Finnish law known as: „osakeyhtio/aktiebolag, osuuskunta/andelslag, saastopankki/sparbank” and „vakuutusyhtio/forsakringsbolag”;

n) companies under Swedish law known as: „aktiebolag” and „forsakringsaktiebolag”;

o) companies incorporated under the law of the United Kingdom;

р) companies under Czech law known as: „akciova spolecnost”, „spolecnost s rucenim omezenym”, „verejna obchodni spolecnost”, „komanditni spolecnost”, „druzstvo”;

q) companies under Estonian law known as: „taisuhing”, „usaldusuhing”, „osauhing”, „aktsiaselts”, „tulundusuhistu”;

r) companies under the Cyprus law, designated as companies, under the rules of the company law, public bodies, as well as all other organizations considered as companies in accordance with the income tax legislation;

s) companies under Latvian law known as: „akciju sabiedriba”, „sabiedriba ar ierobezotu atbildibu”;

t) companies incorporated under the law of Lithuania;;

u) companies under Hungarian law known as: „kozkereseti tarsasag”, „beteti tarsasag”, „kozos vallalat”, „korlatolt felelossegu tarsasag”, „reszvenytarsasag”, „egyesules”, „kozhasznu tarsasag”, „szovetkezet”;

v) companies under Maltese law known as: „Kumpaniji ta‘ Responsabilita‘ Limitata”, „Socjetajiet in akkomandita li lkapital taghhom maqsum f‘azzjonijiet”;

w) companies under Polish law known as: „spolka akcyjna”, „spolka z ograniczona odpowiedzialnoscia”;

x) companies under Slovenian law known as: „delniska druzba”, „komanditna delniska druzba”, „komanditna druzba”, „druzba z omejeno odgovornostjo”, „druzba z neomejeno odgovornostjo”;

y) companies under Slovak law known as: „akciova spolocnos”, „spolocnost s rucenim obmedzenym”, „komanditna spolocnos”, „verejna obchodna spolocnos”, „druzstvo”;

companies under Romanian law known as:

„

societățipeacțiuni”, “societăți în comandită pe acțiuni”, :societățicurăspundere limitată

“.

Annex No. 6 to Art. 200a (4), pt. 1 letter “a”

(New – SG No. 94/2010, in force as of 01.01.2011)

List of taxes in the Member States of the European Union under Art. 200a (4), pt. 1, letter “c” and pt. 4 letter “b”

— impôt des sociétés/vennootschapsbelasting in Belgium,

– selskabsskat in Denmark,

— Körperschaftsteuer in Germany,

— Φόρος εισοδήματος νομικών προσώπων in Greece,

– impuesto sobre sociedades in Spain,

— impôt sur les sociétés in France,

– corporation tax in Ireland,

– imposta sul reddito delle persone giuridiche in Italy,

— impôt sur le revenu des collectivités in Luxembourg,

– vennootschapsbelasting in the Netherlands,

— Körperschaftsteuer in Austria,

– imposto sobre o rendimento da pessoas colectivas in Portugal,

— yhteisöjen tulovero/inkomstskatten för samfund in Finland,

– statlig inkomstskatt in Sweden,

– corporation tax in the United Kingdom,

— Daň zpříjmů právnických osob in the Czech Republic,

– Tulumaks in Estonia,

— φόρος εισοδήματος in Cyprus,

— Uzņēmumu ienākuma nodoklis in Latvia,

– Pelno mokestis in Lithuania,

— Társasági adó in Hungary,

– Taxxa fuq lincome in Malta,

— Podatek dochodowy od osób prawnych in Poland,

— Davek od dobička pravnih oseb in Slovenia,

— Daň z príjmov právnických osôb in Slovakia,

– impozit pe profit, impozitul pe veniturile obținute din România de nerezidenți in Romania

CHF	=	лв
EUR	=	лв
GBP	=	лв
USD	=	лв