The Bulgarian Corporate Income Tax Act amendments will take into effect on January 1, 2014. No tax at source will be deducted on interest from bonds or other debt instruments issued by a Bulgarian entity and traded on an EU regulated market, regardless of the income recipient’s residency. If the lender is an EU tax resident and the funds are increased by issuing bonds that are traded on an EU regulated market then the withholding tax will not be due on interest from loans.
Because of transitional period for implementing the EU Interest and Royalties Directive, Bulgaria enforces 5% withholding tax on interest and royalty payments to EU residents.These deducted rates also apply in cases where the two-year holding requirement has not yet been completed. Payments to be made after January 1, 2015 should no longer be subject to withholding provided that certain requirements are satisfied. In accordance with Bulgarian Corporate Income Tax Act, 20% tax imposed on the amount of distributed deemed dividend will no longer apply whether the taxpayer addresses the distribution in its annual tax return. The law fails to identify whether the deemed dividend reported in the return may refer to previous financial years.
The new Double Tax Treaty between Bulgaria and Switzerland has come into force on October 18, 2013 and will be applicable from January 1, 2014. Taxpayers currently taking benefits from the old treaty. It will require checking the new set of rules and re-applying for relief under the new treaty.
