Amendments to and Corporate Income Tax Act (CITA) and Income Taxes on Natural Persons Act (ITNPA) for 2019

Corporate Income Tax Act (CITA)

1. A new alternative rule for deduction of interest (in accordance with European regulations) has been introduced. It affects only companies where the cost of loans exceeds BGN 3 million. The rest shall continue to apply the low-rate capitalization rule. Credit institutions are excluded from this rule.

2. The 5-year limitation period for use of temporary tax differences from low-rate capitalization is dropped. This applies to temporary differences that incurred after 2014.

3. A CFC rule on controlled foreign companies is introduced, again in compliance with the requirements of European regulations. It affects companies that have more than 50% participation in foreign companies established in territories where the effective tax rate is lower than the one in Bulgaria by more than 50%. CITA exempts such companies provided that taxation is with an alternative tax (i.e. such as gambling companies). It is not known whether this exemption shall be approved by the EC.

4. CITA regulates the possibility of submitting a declaration in the absence of activity in case there is an obligation for corporate tax or a tax on expenses or if the person wishes to declare other data. For the previous year there was no such option provided under the law, but only in the declaration under CITA.

5. Changes has also been made regarding the declaration of the tax in case of liquidation and deregistration of the entity – the obligation for advance declaration and payment of the tax shall be ceased at the time of announcing the liquidation in the Commercial Register and the tax for the last tax period shall be declared within 30 days from the date of deregistration of the company in the Commercial Register by the liquidator by electronic means. All other declarations due shall be submitted within the same time limit – under 73, 73a of the ITNPA, 55 of the CITA, 142 of the TSSPC.

6. Another change concerns the choice of taxation on the expenses in kind – in case the persons have not been obliged to submit a declaration they declare their choice in the annual tax return for the current year.
7. The template of the food voucher has also been modified – this change only refers to operators of food vouchers.

8. Provisions concerning tax treatment of leasing contracts for lessees under IFRS 16 has been introduced. The substance of the changes is that all costs incurred upon the application of IFRS 16 under operating leases are not recognized for tax purposes. The resulting asset is not included in tax amortization plan (TAP) and at the same time a tax expense equal to the rental price in the operating lease contract is recognized for tax purposes.

 

Income Taxes on Natural Persons Act (ITNPA)

1. Changes in the manners of declaration – the other spouse no longer has the obligation for filing declaration stating that he is not using the tax relief for young families, children and children with disabilities. The change concerns only the manner of declaration.

2. The arguable topic from the last year regarding the annual business report (ABR) is now being clarified. In case of lack of business activity report shall not be filed in the meaning of the Accountancy Act.

3. The deadline period for submitting annual tax return has been amended – from 10.01 to 30.04 of the following year.

4. Discount could be applied in case the declaration is submitted electronically until 31.03 – this is applicable for the declaration for 2019, which shall be submitted in 2020.

5. Self-employed person shall submit annual tax statement electronically only (as well as the declaration under Art. 55 of ITNPA) – refers to the 2019 declaration, which shall be submitted in 2020.

6. Final tax is introduced for the taxable pecuniary and non-pecuniary awards, randomly given in case they are not given by employer and exceed BGN 100.

7. The official notes for paid tax shall now be issued on request only in 14-days term (the request shall be in writing). However, the requirement the official notes to be applied to the annual tax return under art. 50 is now dropped. This refers to incomes paid after 31.12.2018.

8. In the statement under Art. 73, paragraph 1 along with the paid tax, the paid mandatory social security contributions. New statement is introduced – under Art. 73, paragraph 6 related to taxable incomes of employment legal relationships, income taxes and mandatory social security contributions. Both of the statements shall be submitted until 28.02. on the following year electronically only and could be corrected until 30.09. Both of the statements concern the incomes, acquired after 31.12.2018.

9. The statement under Art. 73a, para. 5 of ITNPA for income, acquired after 31.12.2018 shall be submitted electronically only.

10. Final tax on the subsidies of the Non-registered agricultural producers is now being implemented.