On 13 August 2019, amendments to the Corporate Income Tax Act (CITA) were published in State Gazette. The main amendments are that the controlled foreign company (CFC) rules, introduced in Bulgaria as of 1 January 2019, will not be applicable to:
- taxable persons subject to alternative taxes (i.e. different from corporate income tax) under part V of the CITA; and
- CFCs that are subject to an alternative form of taxation in the countries of which they are tax residents.
The above amendments are in force as of 13 August 2019.
Note: The amendment is necessary because the previous rules had erroneously transposed the ATAD. The previous rules provided that the CFC rules were not applicable to entities that were not subject to corporate income tax in the countries of which they were tax residents, which was manifestly incorrect. However, because the amendment does not specify the required actual tax paid by the CFC, it may still be possible that low-tax situations are excluded from the application of the CFC rules, which is not intended by the Directive.