Draft Bulgarian tax law reflects EU legislation on mandatory automatic exchange of tax information

At the end of March 2017, the Ministry of Finance called for public discussion on a draft bill (the “Bill”) amending the Bulgarian Tax and Social Insurance Procedural Code (the “Code”). The Bill seeks to improve administrative cooperation in the Bulgarian tax sector.

The first set of amendments relates to the exchange of information regarding “advance cross-border rulings” and “advance pricing arrangements”. The legislator’s goal is to increase the effectiveness of co-operation between tax authorities, through increase in the scope of automatic exchange of information. The measures are in line with a number of European initiatives that aim to battle tax evasion and aggressive tax planning, through increased tax transparency, which will further stimulate competition in the area of taxation. The exchange of information will be done through a standardized form, which will bolster the sharing of experience and best practices of the Bulgarian tax authorities with their counterparties in other Member States.

The second set of changes concerns the need for more transparency regarding multi-national enterprises. The proposed changes will allow the National Revenue Agency to undertake measures against harmful tax practices and to identify enterprises that artificially transfer their profits to jurisdictions with more favorable tax regimes. Under the Bill, country-by-country reporting will include information on the distribution of revenue, income, assets and taxes for each country, where the company operates. Enterprises that do business in Bulgaria, but are not domiciled here, will be obligated to make such reporting if their consolidated revenues amount to circa EUR 750 million; the threshold for enterprises domiciled in Bulgaria is EUR 50 million. Sanctions for non-compliance range from EUR 25,000 to EUR 150,000.

Depending on when a new parliament will be established in Bulgaria, the changes will likely enter into force on 1 July 2017. We will keep you updated on any developments in this regard. Should you need further information, please do not hesitate to contact us.