Amendments in the Value Added Tax Act (VATA)
This year the changes in the Bulgarian Value Added Tax Act (VATA) are due to the transposition of Council Directive 2008/8/EC of 12 February 2008 amending Directive 2006/112/EC as regards the place of supply of services, according to which, as from 01.01.2015 the supply of telecommunications, broadcasting and electronic services by a taxable person to non-taxable persons – the place where the non-taxable person is established, resides or has his permanent address shall be considered the place of supply, called also Member State of supply.
This change has brought up the need to establish two new types of schemes for applying the VAT regulations with respect to where the supplier has his establishment. The scheme will be applied with the help with the newly designed MOSS (Mini-One-Stop-Shop) system, also called “one counter-system”. The Member State, in which the supplier should register, is that of his establishment (for Bulgarian suppliers that would be Bulgaria), is called a “Member State of Identification” and it will be considered as the place of supply for the purposes of all special schemes for filing VAT-Returns and for the payment of the VAT-taxes due for supplies for all Member States, where services to non-taxable persons are provided.
The first special scheme is the so-called Union scheme which is available to taxable persons who are established in the EU, but the non-taxable consumer is established in another Member State. The Union scheme is a new one, according to which the Identification Member State is the Member State of establishment or the service provider or has a fixed establishment in it.
The second special scheme is the non-Union scheme – it is applicable for businesses, which are established in third countries outside the EU. The non-Union scheme is not newly invented and has been already applied as stipulated in chapter XVIII if the Bulgarian VATA. The change that has been implemented with the Directive is that the range of services, for which this scheme apples, has been broadened, now including telecommunication services and radio and television broadcasting services. The tax period for both the Union and non-Union schemes is quarterly and is the same as the calendar quarterly period. The taxable person shall submit a VAT return for each calendar quarter within 20 days following the end of the tax period covered by the return via electronic means to the Member State of identification and the latter should then re-distribute the VAT tax to the Member States of consumption.
The latest changes in the VATA introduce new conditions for the de minimis aid as stipulated in Commission Regulation (EU) No 1407/2013 of 18 December 2013. The persons registered under the VATA, who undertake an investment project and have file a demand with the Ministry of Finance for application of the special scheme for VAT taxation, applicable for importation or a demand for VAT Return in a 30-day period after July 1 2014 should declare the de minimis aid received personally or by persons, falling under the definition of “Single undertaking” as stipulated by Art. 2 para. 2. of Regulation 1407/2013, so that the de minimis aid can be calculated for the purposes of the gross amount. The total amount of de minimis aid, irrespective of the form of the grant or the objective pursued or whether the aid was granted by internal or union financing, should not exceed the BGN equivalent of € 200,000 for the period of the last three tax years, following the approval of the grant.
Amendments in the Corporate Income Tax Act (“CITA”/Bulg. ЗКПО)
The main changes in the Corporate Income Tax Act (“CITA”) coming into force on 01.01.2015 concern the following:
- The provisions of Chapter XXII regarding the corporate tax retention. Most of the changes come into force retrospectively from 1 January 2014 as the relevant European acts and regulations about the state subsidies for the period 2014-2020 were introduced in the beginning and in the middle of 2014. These new rules are to be observed in cases of corporate tax retention according to Chapter XXII, section IV for the financial result from 2014 only if the European commission delivers a positive decision until 31 March 2015. In this case the application form with regard to Art. 189 of CITA shall be submitted together with the annual tax declaration for 2014.
- Introducing exemptions from withholding tax for interest and royalties accrued to eligible related parties from European Union (“EU”) or European Economic Area (“EEA”) Member States in accordance with Directive 2003/49/EC from 3th June 2003. If the foreign company is domiciled in a country with which Bulgaria has concluded a double taxation agreement (DBA), the provisions of it shall be observed as well when determining the taxation of a particular income as the DBA applies with priority over other statutory provisions of the Bulgarian law.
- Exemption from withholding tax of interest on bonds, issued by the state or by municipalities, admitted for trading at an EU or EEA regulated market, as well as of interest on loans where the borrower is the state or a municipality even if no bonds are issued.
- a one-off tax on the additional expenses of the Bulgarian Members of Parliament is introduced coming into force on 1 January 2015. The taxable person is the Parliament. This tax is to be paid before 31 December of the relevant year and amount to 10 %.
Amendments in the Income taxes on natural persons act
The main amendments in the Income taxes on natural persons act, in force from 01.01.2015 are:
- More precision in art. 48, para. 6 from the act, regarding the re-assignment of corporate tax for a sole entrepreneur . The reassignment is done on the basis of all regulations in chapter 22 of the Corporate income tax act and not only on the grounds of art. 189b of the same act, as it was until now. There is also a new definition of the term “enterprise with difficulties” (point 60 of para 1 from the additional regulations of the law). The correction enters into fore with back date from 01.01.2014. The time period for this tax relief, if approved by the European commission is until the year 2020.
- Interest in bank accounts. From 01.01.015 the income in all accounts, including checking, saving and deposit is subject to taxation. The tax is fixed as of 01.01.2005 to 8 %.
- The tax relief for income not exceeding the minimum wage is canceled. The relief however will be used for first and last time for income realized in the year 2014.
- Two new types of tax relief are approved – for children and for children with disabilities. The tax relief for children will be as follows:
- BGN 200 – for one underage child
- BGN 400 – for two underage children
- BGN - 600 leva – for three or more underage children.
Raising a child with 50 % or above disability will receive BGN 2000 deduction from the annual income basis of taxation.
- The order for advance payment of taxes for the fourth quarter for incomes for other activities, rent etc., paid to natural persons or self-employed. The person receiving the income can declare to the payer that the income tax can be withheld from the payment for the last quarter. In this case this tax is paid by the payer by 31.01. of the following year. This tax will not be withheld if there is no written request.
- Amendment regarding the 5 % discount of the declared taxes, which must be paid in the state budget. From 01.01.2015 there is no longer the possibility to receive 5 % discount if the taxes are filed within the 10 of February of the following year. The only possibility to receive this discount is if the tax declaration is filed electronically until 31 march of the following year (not 30 April) and paying the tax until 30 april. The discount is applicable only for persons with no public debt recovery procedures against them.
- Income from activity of natural persons registered as tobacco producers and agricultural producers, including these carrying out activities as sole traders, for the production of non-processed plant and animal products, except for income from the production of decorative plants, paid up in 2014 in the form of state aid, subsidies and other support from the European Agriculture Guarantee Fund, the European rural areas development fund and from the state budget shall not be included in the taxable income under Art. 26 and 29 and shall not be subject to taxation, where they are for 2009 or for previous years. All amendments are in force from 01.01.2015, with the exception of these who carry out activities as sole traders for whom the amendments are in force from 01.01.2014.
Amendments in the local taxes and fees act
The main amendments in the local taxes and fees act this year are:
- Filing the tax declarations online;
- Every municipality must present daily report to the Ministry of Finance;
- Easier way for people who have received property gratuitously to declare it;
- All owners of real estate properties to be notified for the due taxes until March 1 of the respective year;
- The bodies of the Ministry of Internal Affairs shall provide daily electronically to the Ministry of Finance information of the register of road vehicles about the registered, the discarded and the stopped from movement road vehicles, including information on the ecological category;
- Tax exemption for the electric cars, motorcycles and motopeds;
- The new regulation regarding taxes for household waste is postponed for 2016.
Amendments in the Tax and Social Security Procedure Code (“TSSPC”)
There three amendments of the provisions of the Tax and Social Security Procedure Code (“TSSPC”) coming into force on 01.01.2015:
- confidential treatment of any tax and social-security information obtained in connection with proceedings regarding state and minimal aids;
- the new rules introduce the possibility to submit tax declarations with a personal identification code (Bulg. „ПИК”), issued by the National Revenue Agency (“NRA”);
- With effect from 01.01.2015 Art. 169, para 4, 5 and 6 of TSSPC are to be applied regarding the settlement of outstanding public liabilities with a deadline for payment which expired before 1 January 2008 only upon written request from the debtor.
Changes in the Excises and Tax Warehouses Act
The changes in the Excises and Tax Warehouses Act (ETWA) reflect the need of revision of Bulgarian legislation on accord of the inconsistencies with EU-Law in the field of excises, as well as the adaptation of more precise regulations aiming to simplify and ease the practical realization of the latter by the Customs Agency.
The main changes in ETWA are:
- A new definition of the term “Private entertainment flights and sailings”;
- A more understandable and clearer procedure for submitting tobacco raw materials waste for destruction which should ease the regulatory functions of the Customs Agency with regards to the correct tracing of the waste;
- It provides an option for small specialized wine producer to be able to ship the produced goods to an authorized warehouse keeper, established in another Member State;
- Gradual increase of the excise duty on cigarettes (Art. 39, to enter into force on 01.01.2016);
- The conditions for payment of the excise duties on the grounds of an audit act;
- With the changes there is no longer an obligation to present the annual finance report for the last three years when applying for a license for tax warehouse management;
- There is now an option, when applying for a license for tax warehouse management, for a certificate for a registered consignee or within the procedure for obligatory registration, the applicant shall have the option to demand a stay in the procedure when this is necessary to clarify facts and circumstances that are of importance to the licensing/registration procedure. In this way applicants are no longer endangered by a premature denial of their application due to unclarified circumstances;
- A new requirement has been enforced, namely – the “market price” or tobacco products – the price, written on the excise label, the capacity of the package (how many cigarettes can it hold) and the number of packages should be reflected in the tax documents as defined under the regulations of the ETWA. This new requirements enters into force from July 7 2015;
- There is a possibility for persons, that have committed an offense against the provisions of ETWA, in case where the administrative penal proceedings have ended with an agreement with the Customs Agency, that, to still receive a license for conducting trade with tobacco products;
- A new regulation of the appellation procedure against procedural actions of the customs authorities in the administrative penal proceedings for infringement of the law and particularly for holding goods, subject to excise duties, without the needed license.