The Council of Ministers has approved the bill for amendments to tax laws for 2016 and submitted the draft on 13th October 2015 to the parliament for consideration. The major improvements are as follows:

Dividend withholding tax:

Implementation of the updated changes to the European Union Parent-Subsidiary Directive (2011). The changes in this area aim to restrict the tax exemption on profit distributions received from a subsidiary to profits that are not tax deductible in the subsidiary. Dividend distributions resulting in tax avoidance are covered by general domestic anti-avoidance rules.

State aid:

Implementation of EU Commission guidelines for Regional State Aid 2014-2020. When tax authorities apply for advance approval for a measure such as tax relief for a specific sector, the EU Commission considers eligibility of the measure under the rules and may approve the measure. State aid will not be available to entities in the transportation, energy, and production sectors, or for processing and marketing of agricultural products.

Preferential tax regimes:

The OECD has proposed tax avoidance measures for transactions with jurisdictions with preferential tax regimes. A new definition covering jurisdictions that have no provision for information exchange and have tax rates lower than 60% of the domestic corporate income tax rate will be adopted by the European Commission and the G20. The list of jurisdictions will be compiled by the Finance Ministry.

VAT:

  • Input tax credit regarding cars and aircraft used for both business and non-business purposes will be limited to 70% of the total input.
  • Under Directive 2013/43/EC, the reverse charge mechanism will be extended to 31st December 2018.

Real estate tax:

All land plots within the construction boundaries of cities and other settlements will be subject to real estate tax regardless of the underlying status of the land – agricultural, construction, etc.

Personal income tax

Installments of advance income tax deriving from indemnities and payments for damages, prize money and income, and interest income will be introduced.

Limitation of cash transactions

Cash payments for transactions (a single transaction or a series of transactions related to one and the same transaction) exceeding an amount of BGN 10,000 will not be permitted (the previous threshold being BGN 15,000).