Bulgaria has signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (“Multilateral Instrument” or “MLI”). More than 68 countries, including Bulgaria, signed the Convention on 7 June 2017 at Paris.
The Convention is a key outcome of the OECD/G20 Base Erosion and Profit Shifting (BEPS) project, which aims to offers concrete solutions for governments to close the gaps in existing international tax rules by transposing results from the OECD/G20 BEPS Project into bilateral tax treaties worldwide.
The Convention enables all signatories, inter alia, to meet treaty-related minimum standards that were agreed as part of the Final BEPS package, including the minimum standard for the prevention of treaty abuse under Action 6.
The Convention will enter into force after signatories have completed their domestic requirements and deposited their instruments of ratification with the OECD.
The Government on 17 May 2017, approved the signing by Bulgaria of the Multilateral Instrument (MLI) to implement into bilateral tax treaties the tax treaty-related measures arising from the OECD / G20 BEPS Project to tackle base erosion and profit shifting. A signing ceremony is scheduled to be held on 7th of June 2017 in Paris.
The BEPS recommendations combat tax planning strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations where there is little or no economic activity, resulting in little or no overall corporate tax being paid. The multilateral instrument will enable countries to adjust their bilateral tax treaties to include BEPS treaty-related recommendations without having to renegotiate each bilateral treaty.
On 26th of April 2017, Pakistan and Bulgaria signed an Agreement on Avoidance of Double Taxation (DTA) and prevention of fiscal evasion with regard to taxes on Income after the conclusion of second round of negotiations in Islamabad. It will also provide certainty of tax treatment in each country so that the investors feel free from any fear or apprehension. Moreover, through the exchange of information mechanism, information could be obtained on request basis for the administration or enforcement of the domestic laws which will help minimize the possibility of tax evasion.
The Finance Ministry has published a revised draft bill on 21st March 2017 that amends the Tax and Social Security Procedure Code (TSSPC) with regard to the new country-by-country (CbC) reporting requirements. It is proposed that the amendments will enter into force on 1st July 2017. The bill specifies that the deadline for companies to submit a notification to the National Revenue Agency regarding the group entity that will file the CbC report for the financial year 2016 will be extended to 30th September 2017. Primarily, the proposed deadline was 30th June 2017. Failure to submit CbC reports would be charged an amount between BGN 100,000 and BGN 200,000 and for more violations this charge would be from BGN 200,000 to BGN 300,000. Due to report misleading information, the charge would be between BGN 50,000 and BGN 150,000 and for more violations, it would be within BGN 100,000 to BGN 250,000. Another penalty will be charged in case of fail to notify the tax authorities of the ultimate parent’s refusal to provide CbC reporting information. In this situation, the charging amount would be BGN 10,000. A penalty of BGN 15,000 would be charged for subsequent violations.
The amendments in the regulations for the application of the Excise Duties and Tax Warehouses Act have been published on 7th February 2017 in the State Gazette. The major amendments have been effective from the same day of its publication and the rest of the changes will enter into force on 1st June 2017 and 1st August 2017 respectively.
Following the adoption of various VAT amendments, the Revenue Agency has published a notification on 11th January 2017 regarding the obligation for non-legal entities to register for VAT if at least one partner is registered under Bulgarian law. Non-legal entities have to register within 14 days from the date of the agreement setting up the non-legal entity. Non-legal entities established before 1st January 2017 that have a VAT-registered partner but are not registered for VAT purposes themselves must apply for VAT registration by 31st January 2017. The VAT registration date of those non-legal entities will be the date of receipt of their registration.