October 2018 / Bulgaria

On 10 October 2018, the Council of Ministers approved amendments to tax legislation suggested by the Ministry of Finance. On 11 October 2018, the draft legislation was submitted to parliament where it will be voted on during two readings. For previous reporting, see http://www.diacrongroup.com/en/tax-news/proposed-amendments-to-tax-legislation-public-consultations-launched-summary/. Further developments will be reported as they occur.

On 11 October 2018, the National Revenue Agency (NRA) announced that amendments to the procedure for certification of documents issued by the tax administration and intended to be presented in other countries will be effective as from 15 October 2018. Before legalization at the Ministry of Foreign Affairs, such documents will be subject to certification by the competent regional structure of the NRA. Currently, such documents are certified at the NRA's headquarters.

On 12 October 2018, the National Statistical Institute announced the following Intrastat thresholds for 2019. Thresholds for Intrastat reporting:

• for dispatches - BGN 280,000 (currently, BGN 260,000); and
• for arrivals - BGN 460,000 (currently, BGN 430,000)

Thresholds for declaring statistical value:

• for dispatches - BGN 14,400,000 (currently, 12,800,000); and
• for arrivals - BGN 7,400,000 (currently, BGN 6,300,000)

The threshold for simplified reporting of single low-value transactions will remain as it is, i.e. BGN 390.

The National Revenue Agency announced that it has launched eight new e-services as of 15 October 2018. These services, amongst other things, include the submission of applications for issuing tax resident certificates, various notifications under Tax and Social Security Procedure Code and the Value Added Tax Act.

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.

On 22 October 2018, the Ministry of Finance published a proposal for the State Budget Act for 2019 and an updated mid-term budget forecast for the period 2019 - 2021. The Budget proposal includes the proposal to increase the minimum salary, released by the Ministry of Finance of 5 April 2018.

On 24 October 2018, a proposal to amend the Corporate Income Tax Act was submitted to the parliament. The main proposed change concerns the tax treatment of income/expenses of a lessee under operating lease agreements to which the rules of IFRS 16 Leases will be applicable from 1 January 2019. It is proposed that such income/expenses are not recognized for corporate income tax purposes and instead, the income/expenses determined as per the National Accounting Standard 17 Leases applied to these agreements should be recognized for corporate income tax purposes. In addition, a right to use assets in relation to operating lease agreements under IFRS 16 Leases will not be recognized as tax depreciable assets of the lessee. As a next step, the above proposal will be voted on by the parliament. Further developments will be reported when they occur.

On 24 October 2018, a proposal to amend the Value Added Tax Act was submitted to the parliament. The proposal concerns the new VAT rules applicable to vouchers from 1 January 2019. Details are summarized below. The proposal provides that no supplies are made for VAT purposes in the case of unused multi-purpose vouchers following their expiration, or where no goods or services are provided. Furthermore, if a taxable person sells vouchers on behalf of other persons for a fee, a service is deemed to be performed by such intermediary. In addition, the proposal recommends that the special VAT rules for vouchers not be applied to the following:

• instruments that entitle the owner to receive a discount when receiving goods or services;
• vouchers for travelling, cinema, museums, etc., as well as postal stamps; and
• food vouchers issued by a person having been authorized to do so by the Minister of Finance.

After approval by the Council of Ministers, the following draft acts were submitted to the parliament on 29 October 2018 where they will be voted on during two readings.

Draft State Budget Act for 2019

The draft act proposes an increase of the minimum salary to BGN 560 (currently BGN 510) from 1 January 2019. For previous reporting, see http://www.diacrongroup.com/en/tax-news/state-budget-for-2019-increase-of-minimum-salary-proposed/.

Draft Act on the Budget of the State Social Security for 2019

The draft act indicates that the social security rates will remain unchanged in 2019. It is proposed, however, to increase the maximum monthly social security base from BGN 2,600 to BGN 3,000 from 1 January 2019.

Draft Act on the Budget of the National Health Insurance Fund

The document provides that the health insurance contribution rate will remain the same in 2019, i.e. 8%. Further developments will be reported when they occur.