Tax changes related to the OECDBase Erosion and Profit Shifting (BEPS) Action Plan
On March 30 2016, the Bulgarian Government took decision to join the OECD Base Erosion and Profit Shifting (BEPS) Action Plan measures. Further to this decision, in September 2016, the Ministry of Finance made public draft changes to the Bulgarian Tax Insurance Procedure Code implementing Action 13 of this Plan, which changes relate to the automatic exchange of information between the tax administrations as well as to the obligations of filing a County-by-Country report.
The new reporting obligations concern the transactions of Multinational Enterprises and are expected to be applied as of 01.01.2017.
The CbC reporting applies to the Ultimate Group parent company if:
– the Ultimate Group parent company is a taxable person in Bulgaria – for Group turnover of over EUR 50 m.
– the Ultimate Group parent is not a taxable person in Bulgaria – for Group turnover of over EUR 750 m.
Under certain conditions the reporting obligations can be shifted to the local subsidiary of a Group with an Ultimate Group parent established for tax purposes in jurisdiction outside Bulgaria.
Tax changes to the Corporate Income Tax Act related to the personal use of company assets
In addition to the already implemented changes of the Bulgarian VAT Act applying restrictions for VAT refund on goods and services acquired by the companies although assigned partially or fully for personal use of employees or managers, the Bulgarian Parliament passed a bill for similar changes in the Corporate Income Tax Act. These amendments provide for differentiation and treatment of the expenses related to personal use of company’s assets, e.g. cars, offices or other. The aim is these expenses to be considered taxable with 10% tax. The company would have the following options to choose the way of taxation of these expenses:
– To be treated taxable with 10% tax on the accrued expenses for the account of the company
– To be treated as taxable income of the persons (employees) who are beneficiaries of these expenses, respectively included in their payroll calculations.
The tax base of these expenses shall be calculated based the ratio of the kilometers, hours of use or square meters (for real estate) for personal use and the total of these parameters. An option for defining a fixed ratio of 50/50 personal vs. company use would applicable for the use of vehicles which aims to simplify the calculation of the tax base in such cases.
Please do not hesitate to contact us if you need more detailed information on these topics.
