The Council of Ministers approved a draft bill on October 10, 2018 and it have issued by the Finance Minister, Vladislav Goranov, on the Bulgarian Council of Ministers approved the draft bill issued by the Minister of Finance on 30 August 2018. The bill provides for several amendments to the Corporate Income Tax regime and contains measures for the implementation of the EU Anti-tax Avoidance Directive (ATAD). The draft bill has been submitted for further review and approval by the National Assembly.

In accordance with the bill, the restriction rule on interest deduction will be introduced under ATAD from January 1, 2019. This earnings before interest, taxes, depreciation and amortization rule (EBITDA rule) will be applicable for net deriving costs more than €3m per year and limit their deduction at 30% of the taxable EBITDA. Taxpayers that are lower than the threshold will follow a modified version of the existing thin capitalization regime which restricts tax deduction of interest expense to 75% of the book EBIT. On the other hand, taxpayers that are both thinly capitalized and have net borrowing costs exceed €3m would have to apply both tests and restrict their deduction to the outcome which is more restrictive.

The draft bill also announced the controlled foreign company (CFC) rules aiming to deter accumulation of profits shifted to jurisdictions with low effective tax rates while having no substantial business activities. A CFC is defined as any nonresident enterprise or PE whose profits are not subject to tax or are exempt from tax in Bulgaria where a taxable person alone or together in Bulgaria with related parties holds more than 50% of shares, profits or voting rights; and the effectively paid corporate income tax is lower than half of the corporate tax payable of such profits.