Amendments to the Corporate Income Taxation Act effective from 1 January 2024 with exceptions
Amendments to the Corporate Income Taxation Act effective from 1 January 2024 with exceptions
Global minimum tax
By means of the adopted amendments to the corporate Income Taxation Act (CITA) - the new Part V “a” thereof, Bulgaria has fulfilled its obligation to transpose the provisions of Council Directive (EU) 2022/2523 of 14 December 2022 on ensuring a global minimum level of taxation for multinational enterprise groups and large-scale domestic groups in the Union (Directive (EU) 2022/2523) with consolidated revenue of not less than EUR 750 million for at least two of four tax periods before the current one.
Besides the Income Inclusion Rule (IIR) and the Undertaxed Profits Rule (UTPR) for imposing top-up tax in case of taxation at an effective tax rate below 15% in a given jurisdiction, Bulgaria has elected to introduce qualified domestic top-up tax.
The domestic top-up tax and IIR shall be effective as from 1 January 2024. The UTPR will be applicable as from 1 January 2025, except in case of taxation at a low effective tax rate in an EU member state that has elected to delay application of the rules for a period of 6 years.
Amendments to CITA related to the adoption of new scheme for State aid provided to agricultural farmers in the form of corporate income tax waiver
A new scheme is introduced for State aid intended for agricultural farmers (micro-macro and medium enterprises) performing activities in the primary agricultural production, which will be effective during the period 2023-2029. By means of the amended provisions of CITA, the opportunity is preserved for agricultural farmers to continue applying the tax relief in the form of corporate income tax waiver (up to 60% of the annual corporate income tax due is not subject to effective payment) but under the conditions of the new Commission Regulation (EU) 2022/2472 of 14 December 2022 declaring certain categories of aid in the agricultural and forestry sectors and in rural areas compatible with the internal market in application of Articles 107 and 108 of the Treaty on the Functioning of the European Union.
The new scheme of State aid enters into force from obtaining the final registration number of the aid in the State Aid Register of the European Commission. The tax relief for waived corporate income tax can be applied for year 2023 in case the number from the State Register of the European Commission is received before 30 June 2024, including.
No preliminary control or permission is required from the Bulgarian authorities to apply the new State aid scheme. The requirement existing in CITA until now is preserved, for investing the waived corporate income tax in new buildings and new agricultural machinery which are necessary for the performance of the activity of primary agricultural production, within two years from the year in which the tax is waived.
New tax liable persons for lump-sum tax
The amendments of CITA regulate the taxation of the activity of food and entertainment establishments of tax resident and non-resident legal entities which perform business activity in Bulgaria through a permanent establishment, by a lump-sum tax under the conditions of the Local Taxes and Charges Act (LTCA). For all other activities the entities will be taxed by applying the general provisions of CITA. Until now the taxation by lump-sum tax was applicable only for individuals and sole traders performing any of the business activities stated in Appendix No 4 of LTCA.
The amendments to CITA will enter into force from 1 January of the year following the year the European Commission proclaims the measure is not State aid or is a compatible State aid (i. e. at earliest from 1 January 2025).
Statutory term of limitation for imposition of fine/ penalty sanction in the case of hidden distribution of profit
By means of the Law on the Amendment and Supplementation of CITA, an important change in the Law on the Administrative Violations and Penalties is adopted, regulating a 5-year statutory term of limitation for the establishment of violations of the tax law by the authorities of the National Revenue Agency qualifying as hidden distribution of profit (before the change the statutory term of limitation was 2 years). The change enters into force from 1 January 2024.
The material herein is only of informative matter and does not represent consultation or advice. Should you wish to receive more information or assistance you may send us your inquiry through our Contact form below.
By means of the adopted amendments to the corporate Income Taxation Act (CITA) - the new Part V “a” thereof, Bulgaria has fulfilled its obligation to transpose the provisions of Council Directive (EU) 2022/2523 of 14 December 2022 on ensuring a global minimum level of taxation for multinational enterprise groups and large-scale domestic groups in the Union (Directive (EU) 2022/2523) with consolidated revenue of not less than EUR 750 million for at least two of four tax periods before the current one.
Besides the Income Inclusion Rule (IIR) and the Undertaxed Profits Rule (UTPR) for imposing top-up tax in case of taxation at an effective tax rate below 15% in a given jurisdiction, Bulgaria has elected to introduce qualified domestic top-up tax.
The domestic top-up tax and IIR shall be effective as from 1 January 2024. The UTPR will be applicable as from 1 January 2025, except in case of taxation at a low effective tax rate in an EU member state that has elected to delay application of the rules for a period of 6 years.
Amendments to CITA related to the adoption of new scheme for State aid provided to agricultural farmers in the form of corporate income tax waiver
A new scheme is introduced for State aid intended for agricultural farmers (micro-macro and medium enterprises) performing activities in the primary agricultural production, which will be effective during the period 2023-2029. By means of the amended provisions of CITA, the opportunity is preserved for agricultural farmers to continue applying the tax relief in the form of corporate income tax waiver (up to 60% of the annual corporate income tax due is not subject to effective payment) but under the conditions of the new Commission Regulation (EU) 2022/2472 of 14 December 2022 declaring certain categories of aid in the agricultural and forestry sectors and in rural areas compatible with the internal market in application of Articles 107 and 108 of the Treaty on the Functioning of the European Union.
The new scheme of State aid enters into force from obtaining the final registration number of the aid in the State Aid Register of the European Commission. The tax relief for waived corporate income tax can be applied for year 2023 in case the number from the State Register of the European Commission is received before 30 June 2024, including.
No preliminary control or permission is required from the Bulgarian authorities to apply the new State aid scheme. The requirement existing in CITA until now is preserved, for investing the waived corporate income tax in new buildings and new agricultural machinery which are necessary for the performance of the activity of primary agricultural production, within two years from the year in which the tax is waived.
New tax liable persons for lump-sum tax
The amendments of CITA regulate the taxation of the activity of food and entertainment establishments of tax resident and non-resident legal entities which perform business activity in Bulgaria through a permanent establishment, by a lump-sum tax under the conditions of the Local Taxes and Charges Act (LTCA). For all other activities the entities will be taxed by applying the general provisions of CITA. Until now the taxation by lump-sum tax was applicable only for individuals and sole traders performing any of the business activities stated in Appendix No 4 of LTCA.
The amendments to CITA will enter into force from 1 January of the year following the year the European Commission proclaims the measure is not State aid or is a compatible State aid (i. e. at earliest from 1 January 2025).
Statutory term of limitation for imposition of fine/ penalty sanction in the case of hidden distribution of profit
By means of the Law on the Amendment and Supplementation of CITA, an important change in the Law on the Administrative Violations and Penalties is adopted, regulating a 5-year statutory term of limitation for the establishment of violations of the tax law by the authorities of the National Revenue Agency qualifying as hidden distribution of profit (before the change the statutory term of limitation was 2 years). The change enters into force from 1 January 2024.
The material herein is only of informative matter and does not represent consultation or advice. Should you wish to receive more information or assistance you may send us your inquiry through our Contact form below.