On 18 October 2018, the parliament approved at the first reading amendments to tax legislation suggested by the Ministry of Finance. For details on the initial proposals, see http://www.diacrongroup.com/en/tax-news/proposed-amendments-to-tax-legislation-public-consultations-launched-summary/.
After the public consultation, the following main changes were introduced to the initial proposals:
- in relation to the implementation of the European Union Anti-Tax Avoidance Directive 2016/1164 (2016), known as the ATAD Directive, and more specifically regarding the new interest limitation rule, as part of the amendments to the Corporate Income Tax Act it was approved that taxpayers will be allowed to deduct exceeding borrowing costs up to EUR 3,000,000. In the initial proposal this threshold was BGN 500,000 (approximately EUR 256,000). For previous reporting, see Bulgaria-1151, News 3 September 2018;
- the proposal for abolishing the thin capitalization rules in the Corporate Income Tax Act was excluded from the amendments approved by the parliament. Now it is envisaged that these rules will remain the same but with a possibility to carry forward interest costs without limitation (currently this is possible only up to 5 years); and
- the initial proposal for amendments to the VAT Act envisaged repealing the requirement for issuing and reporting protocols for self-assessment of VAT in the case of intra-Community acquisitions and receiving cross-border services subject to reverse charge by the recipient in Bulgaria. However, in the version voted on at the first reading by parliament, this proposal was excluded.
Following the first reading of the draft legislation, it will be voted on at the second (final) reading by parliament. Further developments will be reported when they occur.