February 2022 / Bulgaria

Bulgaria has promulgated amendments to the Corporate Income Tax Act in the State Gazette as follows:

• implementation of the rules for reverse hybrid mismatches provided in article 9a of the Anti-Tax Avoidance Directive (2016/1164) (ATAD);
• extension of the scope of application of the provisions for controlled foreign companies (CFCs) which will be applied to all Bulgarian taxable persons that are subject to corporate income tax in the country and have CFCs regardless of their form of taxation; and
• clarification of the tax aspects of lease buy-back agreements, which are classified as operating leases under the International Accounting Standards.

Bulgaria has promulgated amendments to the Value Added Tax Act in the State Gazette as follows:

• extension of the scope of application of the reduced 9% VAT rate by including also specialized milk formulas (with partially hydrolysed protein and formulas for children with allergies) and dietary foods for special medical purposes intended for infants (falling within EU code 2106 90 92 and EU code 2106 90 98);
• implementation of Council Directive (EU) 2021/1159 of 13 July 2021 amending VAT Directive (2006/112), in response to the COVID-19 pandemic as well as Council Directive (EU) 2019/2235 of 16 December 2019 amending VAT Directive (2006/112) and Excise Directive (2008/118);
• inclusion of food vouchers in the scope of application of the special VAT rules for vouchers (currently, they are explicitly excluded from this scope);
• introduction of rules for adjustments of incorrectly issued invoices even when a tax audit assessment notice has entered into force; and
• various clarifications concerning the new VAT rules for e-commerce applicable as of 1 July 2021 and the supplies of goods between Bulgaria and Northern Ireland;

The full text of the law, published in Official Gazette No. 14 on 18 February 2022, is available here (in Bulgarian only).

The Bulgarian parliament has approved at second and final reading the amendment to the Corporate Income Tax (CIT) Act which provides that the tax on expenses related to personal use of business assets will be decreased from 10% to 3% as of 1 January 2023.

As a next step, the President should issue a decree for promulgation of the amendment in the State Gazette.

The full text of the amendment, issued on 22 February 2022, is available here (in Bulgarian only).