Effective as of January 1 2016, the amended VAT Act introduced instructions regarding the process of declaring the 'weekend-tax' whereby companies registered for VAT should submit – along with their tax return – a special list of assets that were used for personal activities. In 2016, the deadline for submission of this asset list was February 14.
Where new assets are purchased, two options are available: (i) applying for a full VAT-refund or (ii) taking advantage of the VAT refund in proportion to the relation of the use for business purposes and the personal use of the asset.
For the purposes of the VAT Act, supplies of goods and services for personal use or use by the owner, the company's employees or for any purpose other than the economic activity of the taxable person caused by extreme necessity or force majeure are not considered a supply subject to VAT.
The place of supply of goods in cases when goods are transported under Article 14 of the Act is the territory of the member state where the transport ends when the goods are dispatched or transported by or on behalf of the supplier out of the country. The place of supply of goods in distance selling is the country where the transport ends on the territory of the country.
The refund of overpaid tax as per the VAT return for the application of a special regime (according to Article 159e, paragraph 4), tax overpaid by a person registered pursuant to Art. 154 (special registration) or for the application of the regime within or outside the EU in another member state shall be refunded to a bank account in a bank other than a Bulgarian bank or a Bulgarian branch of a foreign bank, such that all bank fees in connection with the tax refund and exchange rate are borne by the taxable person.
Corporate income tax due under Article 159 of the corporate income tax law is to be declared and paid within 30 days from the date of entry of the termination. The corporate income tax at termination is deducted from the annual corporate income tax for the year of termination, or the corporate income tax due for the latest tax period, where the date of filing the request for deletion in case of liquidation, respectively the date of deletion in case of bankruptcy is in the same year as the date of termination.
The cash payments limit has been reduced from BGN 15,000 ($8,700) to BGN 10,000.
All companies should submit their annual financial statement (AFS) to the trade register by June 30 of the year following the reporting year. Up to now, the deadline for joint-stock companies was July 31, so the audits of these entities' financial statements will need to be completed earlier.
Small enterprises which are not subject to statutory independent financial audit are not required to publish their income statements and management reports (they still need to file/publish their financial statements, but have the right not to publicly disclose all content).
There is a substantial change in the way the penalty for not publishing the AFS will be calculated. Rather than a fixed penalty, enterprises will be penalised with a pecuniary sanction ranging from 0.1% to 0.5% of the net sales revenue for the reporting period. This may result in excessive fines if the company's net sales revenue is high. For companies with low net sales, the change can be considered positive, as the penalty imposed might decrease compared to previous years.
Petar Varbanov (firstname.lastname@example.org), legal and tax adviser, Eurofast SofiaDirect tel: +359 2 988 69 75
In the years after the 2008 financial crisis there was an increase in the amount of tax litigation in Bulgaria, as the Bulgarian Exchequer attempted to claw back lost revenue. However, during the last couple of years this trend has reversed. The type of work that is now undertaken by advisers in the jurisdiction is more balanced, with a growth in consultancy work and tax structuring, according to Veselina Petkova at Delchev & Partners.
"During the last year we had less tax litigation than the years before, the year was mostly focused on consulting. This is a positive trend, and the authorities are not denying an assessment on just any grounds. Meaning that there is not as much 'meaningless litigation'. The situation is more on track now," said Petkova.
This does not mean, however, that the Bulgarian National Revenue Agency (NRA) has adopted a co-operative model of tax collection, with advisers saying there is still a long way to go in this regard. The prevailing style of operations remains adversarial and is characterised by an 'us versus them' mentality. The NRA's focus remains on collecting taxes and fighting tax evasion, rather than creating an environment in which taxpayers and tax collectors cooperate.
The administrative burden on businesses arising from their tax responsibilities is also increasing. This year new rules were introduced forcing companies to calculate the private use of their business assets (such as company cars). Companies must report on this each month, and a tax liability will arise for the private use of the assets. The main issue here is the administrative burden that this places on businesses. Advisers do not believe the authorities gave much consideration to this when developing their rules.
One example of burdensome new regulations is that, as of 2016, businesses in the petroleum sector have been required to deposit a guarantee with the tax authorities in order to even be eligible for VAT refunds. It is not all doom and gloom, however; there have also been some positive developments for taxpayers. Certain administrative sanctions have been reduced in cases of oversight, including for not filing a tax return on time, or for not settling a VAT bill on time. In the past these fines had been up to 100% of the money owed but this has been amended to a system where the sanction increases from a much lower base to reflect the severity of the infraction.
When it comes to differentiating between small and large taxpayers, little attention is paid to the relative size of the taxpayer, although there are some specialist tax collectors who deal with larger companies and subsidiaries of multinational enterprises, who have specialist knowledge and a better understanding of the kinds of business models these companies employ. However, some advisers believe the authorities have a lack of experience in assessing the kinds of transactions larger organisations are involved in. The tendency is to treat every taxable entity in the same way, which could put larger taxpayers at a disadvantage in their dealings with the authority.
Bennett Jones is home to more than 380 lawyers and business advisors and over 500 staff in nine offices – Calgary, Toronto, Edmonton, Ottawa, Vancouver, Doha, Washington D.C., Bermuda and Beijing.
Bennett Jones' taxation practice has been consistently ranked among the top Canadian law firms by tax industry directories. Members of this group have significant experience in resource taxation, corporate reorganisations, acquisitions and divestitures, corporate finance and equipment leasing, international tax planning for foreign investors, transfer pricing, cross-border business arrangements, planning involving partnerships, trusts and joint ventures and real estate transactions. The group also regularly advises high net worth individuals and families on domestic and international tax issues and appears on behalf of clients in tax controversy matters before all levels of Canadian administrative and judicial bodies.
Thomas A. Bauer
Tel: +1 416 777 6540
Darcy D. Moch
Tel: +1 403 298 3390
Delchev & Partners Law Firm
8 Tsar Kaloyan str., 2nd floor
Sofia 1000, Bulgaria
Office phone: +359 2 933 09 79
Office fax: +359 2 981 81 34
Contact: Veselina Petkova
Contact: Galina Slavova
Ernst & Young Bulgaria EOOD
47A Tsarigradsko Shose Blvd.
Polygraphia Office Center, floor 4
Tel: +359 2 817 7100
Country Tax Leader
Tel: +359 2 817 7130
Business Tax Services
Tel: +359 2 817 7155
Global Compliance and Reporting
Tel: +359 2 817 7175
People Advisory Services
Tel: +359 2 8177146
Tel: +359 2 817 7155
International Tax Services
Tel: +359 2 817 7343
Tel: +359 2 817 7143
Tel: +359 2 817 7343
Tel: +359 2 8177155
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The team at Baker Tilly Klitou provides advice and assistance to multinational and local corporate groups in tax planning to maximise tax benefits in accordance with the requirements of the Bulgarian tax legislation.
The service offering includes corporate tax, audit services, tax controversy management and litigation services, as well as transfer pricing advice and international tax structuring.
Gentscho Pavlov is the managing partner at CMS Reich-Rohrwig Hainz, taking over the role from the outgoing Valentin Savov in May 2016. Pavlov specialises in banking and finance, M&A, corporate tax and real estate.
Services that the firm offers include tax and transfer pricing audits, tax structuring advice and tax litigation and dispute resolution services
A key contact at Delchev & Partners is Veselina Petkova, head of the tax team at the firm. The team offers a full tax service to its clients, with two professionals working in indirect tax, one working in corporate tax and two working in tax disputes.
Delchev & Partners is one of the few Bulgarian law firms that provides monthly VAT filing and compliance services. The firm is the VAT agent for a range of high-calibre multinationals active in Bulgaria.
The firm is well spoken of by peers and clients in the Bulgaria.
A key contact at Deloitte is Pietr Wessel, who is the tax and legal partner in charge at the firm in Bulgaria. He heads a team of 53 tax professionals, of which nine are concerned with indirect tax, nine work in corporate tax, five work in tax disputes and 32 work in tax compliance and accounting.
The firm provides services in audits, consulting, financial advisory, risk management, tax and legal services to local companies as well as to multinationals across a wide range of industries.
EY in Bulgaria is led by tax leader and partner Piotr Wielinski. He specialises in M&A, real estate, tax, tax due diligence and risk management. The firm is one of the largest in Bulgaria by headcount.
The firm's clientele includes local and multinational groups, and it represents companies across a broad range of industries.
Filipov & Partners offers consultancy, auditing and accounting services to taxpayers in Bulgaria. The team comprises economists, accountants and legal professionals and aims to offer its clients a full tax service.
Grant Thornton in Bulgaria advises clients in the jurisdiction on a range of tax and transfer pricing issues including VAT, personal and corporate income tax, double tax treaty advice, dispute resolution and litigation services.
The services Gugushev & Partners offers in Bulgaria include the drafting of legal opinions, design and implementation of effective tax optimisation schemes and advisory services covering the effective application of double taxation treaty benefits.
It also offers advice on the effects of all applicable direct and indirect taxes, and specialises in advising on the tax implications of M&A transactions.
KPMG in Bulgaria offers integrated tax, audit, dispute resolution and accountancy services. The firm represents local and international companies and multinational groups across a broad spectrum of industries. A key contact at the firm is partner Kalin Hajidimov, head of tax and legal.
PwC's tax and legal services leader is Irina Tsvetkova. She leads a team with a strong focus on corporate tax services, cross-border transactions, tax due diligence and international tax structuring.
PwC supports clients during audits performed by the Bulgarian revenue authorities and also assists in appeal procedures.
Spasov & Bratanov offers a range of tax services to Bulgarian and international companies and multinational groups. Services it provides include litigation representation, dispute resolution, tax structuring and treaty application across a range of industries.
Wolf Theiss's tax practice in Bulgaria is led by Anna Rizova, who leads a team of three people covering tax disputes, two respectively covering indirect tax and two covering corporate tax. The firm has a number of high profile clients in the financial services sector.
Aside from financial services clients, the firm also represents clients in the energy and utilities, IT, technology, media and telecommunications (TMT) and manufacturing sectors, among others. The firm is well spoken of by peers in Bulgaria and other jurisdiction.
From its offices in Sofia, Yordanova, Rizova & Partners offers a broad range of tax advisory services including dispute resolution, tax authority negotiation services and defence during litigation. It provides a full range of legal and tax advisory services to Bulgarian corporate clients, international businesses and multinational groups.