The corporation tax regime is regulated in the Corporate Income Tax Law.
Scope of taxation
Corporation tax is levied on:
- the profit accruing to resident legal persons;
- the profit accruing to resident legal persons which are not merchants, including the organizations of the religious denominations, from any transactions covered under Article 1 of the Commerce Law , as well as from letting movable and immovable property;
- the profit accruing to non-resident legal persons from a permanent establishment in the Republic of Bulgaria.
- the profit from the activity of certain organizers of games of chance.
The following persons shall be taxable for corporation tax:
- any resident legal person - commercial corporation;
- resident legal persons which are not merchants - for their profit from any transactions covered under Article 1 of the Commerce Law, as well as from letting movable and immovable property;
- any resident unincorporated association and any social insurance fund established in pursuance of Article 8 of the Social Insurance Code;
- any non-resident legal person, where carrying out economic activity within Bulgaria through a permanent establishment;
- any non-resident unincorporated association, where carrying out economic activity within Bulgaria through a permanent establishment;
The taxable amount for assessment of the corporation tax shall be the tax profit.
Rate of tax
The rate of corporation tax shall be 10 per cent.
The tax period for assessment of the corporation tax shall be the calendar year. In respect of any newly incorporated taxable persons, the tax period shall cover the period from the date of incorporation thereof until the end of the year.
Declaring the tax
The taxable persons shall submit an annual tax return in a standard form regarding the tax financial result and the annual corporation tax due.
The annual tax return shall be submitted on or before the 31st day of March of the next succeeding year at the National Revenue Agency territorial directorate exercising competence over the place of registration of the taxable person.
An annual activity report shall be submitted together with the annual tax return. An annual activity report shall not be submitted by the taxable persons which simultaneously fulfil the following conditions:
1. the said persons did not carry out activity during the year;
2. the said persons did not account for income or expenses for the year according to accounting legislation.
Under the provision of Article 92(5) of CITL a rate rebate of 1 per cent of the annual corporation tax due but not more than BGN 1,000 shall be enjoyable by any taxable person which submits an annual tax return and an annual activity report on or before the 31st day of March of the next succeeding year by electronic means and which remits the corporation tax on or before the same date.
- Tax prepayments
Any taxable person shall make monthly or quarterly prepayments of corporation tax based on the projected tax profit for the current year.
Under the provision of Article 83(2) of CITL prepayments shall not be made by:
1. any taxable persons whose net turnover for the last preceding year does not exceed BGN 300,000;
2. any newly incorporated taxable persons, for the year of the incorporation thereof, with the exception of any such persons newly incorporated as a result of a transformation under the Commerce Law. They may make quarterly prepayments in accordance with this Chapter Fourteen and in this case Article 89 shall not apply
Monthly Tax Prepayments - shall be made by any taxable person whose net sales revenue for the last preceding year exceeds BGN 3,000,000. Monthly tax prepayments shall be determined using the formula set out in Article 86 of CITL.
Monthly tax prepayments shall be remitted as follows:
- for January, February and March: by 15 April of the current calendar year;
- for the months from April until December: by the 15th day of the month to which the said prepayments apply.
Quarterly tax prepayments - shall be made by any taxable person who is under no obligation to make monthly tax prepayments. Monthly tax prepayments shall be determined using the formula set out in Article 87 of CITL.
Quarterly tax prepayments shall be remitted on or before the 15th day of the month next succeeding the quarter to which the said prepayments apply and for the third quarter: not later than 15 December. No quarterly tax prepayment shall be made for the fourth quarter.
Under the provision of Article 88 of CITL the taxable persons may submit a declaration in a standard form on reduction or increase of tax prepayments when the said persons assume that the said prepayments will differ from the annual corporation tax due. The reduction or increase of tax prepayments shall be enjoyable after submission of the declaration.
The tax prepayments for the current calendar year determined in accordance with Article 86 and Article 87 shall be declared in the annual tax return for the previous calendar year.
Any taxable person which is allowed to retain corporation tax for the current year shall furthermore be allowed to retain the relevant portion of the tax prepayments determined in proportion to the amount of the retention.
- Tax Remittance
Any taxable person shall remit the corporation tax for the relevant year on or before the 31st day of March of the next succeeding year after deduction of the tax prepayments remitted for the relevant year.
Where the annual corporation tax due exceeds the sum of the monthly tax prepayments determined for the relevant year by more than 20 per cent, or where 75 per cent of the annual corporation tax due exceeds the sum of the quarterly tax prepayments determined for the relevant year by more than 20 per cent, interest shall be due on the excess over 20 per cent determined under the procedure provided for in Article 89(5).
Reduction, retention and exemption from levy of corporation tax
Reduction, retention and exemption from levy of corporation tax are regulated in Chapter Twenty Two of CITL.
Taxable persons may enjoy tax relief for levy of corporation tax where the requirements of Article 167 of CITL are met.
The CITL regulates the following tax relief for and exemptions from levy of corporation tax:
1. Any collective investment scheme, any national investment funds, special purpose investment companies, the Bulgarian Red Cross and organizers of games of chance for which stamp duty is due under Article 30 (3) of the Gambling Law for this activity, shall be exempt from the levy of corporation tax. (Articles 174-176a of CITL).
2. Exemptions from levy of corporation tax of higher schools, the Bulgarian Academy of Science, the Agricultural Academy and others (Article 96а of Higher Education Law).
3. Tax incentives upon hiring of unemployed persons, upon grant of scholarships and upon hiring people with disabilities. (Articles 177-178 of CITL).
4. Retention of 50% corporation tax by social and health insurance funds (Article 181 of CITL).
5. Retention of up to 100% corporation tax by taxable persons carrying out manufacturing activities solely in municipalities where the rate of unemployment for the year preceding the current year was by 25 per cent or more higher than the national average for the same period (Articles 184-189 of CITL).Given the new programming period 2014-2020 in respect of the application of the State aid legislation the entering into force of the relief is conditional on the observance of certain procedural rules in the State aid field and requires notification of the European Commission. Relevant thereto is provided that the tax relief shall become effective after adoption of a positive decision by the European Commission regarding the accordance of the said relief with the Guidelines on national regional aid for 2014 to 2020 of the European Commission.
6. Retention of up to 60% corporation tax by taxable persons, registered as agricultural producers (Article 189б of CITL).
Under the provision of Article 9 of CITL interest according to the Interest on Taxes, Fees and Other State Receivables Law shall be due on any taxes which are not remitted when due, including any tax prepayments.
In accordance with the provisions of Article 261 of the Corporate Income Tax Law, any taxable person, which fails to submit a tax return under this Law, which fails to submit any such return when due, or which fails to state or misstates any particulars or circumstances leading to underassessment of the tax due or to undue reduction, retention of or exemption from tax, shall be liable to a pecuniary penalty varying between BGN 500 and BGN 3,000. Any repeated violation is punishable by a pecuniary penalty of BGN 1,000 or exceeding this amount but not exceeding BGN 6,000.
Under the provision of Article 262 of CITL any taxable person, which fails to submit any supplement to the annual tax return or which states any untrue particulars or circumstances in any such supplement, shall be liable to a pecuniary penalty of BGN 100 or exceeding this amount but not exceeding BGN 1,000. Any repeated violation shall be punishable by a pecuniary penalty of BGN 200 or exceeding this amount but not exceeding BGN 2,000.
Under the provision of Article 267 of CITL any taxable person, who effects a hidden profit distribution, shall be liable to a pecuniary penalty to the amount of 20 per cent of the expense charged constituting a hidden profit distribution. In the cases where a taxable person states this circumstance in the tax return thereof, the sanction shall not be imposed.
Under the provision of Article 276 of CITL any taxable person, which fails to fulfil the obligations thereof under Article 92 (3) of CITL (submission of annual activity report) shall be liable to a pecuniary penalty of BGN 500 or exceeding this amount but not exceeding BGN 2,000 and, upon a repeated commission of the violation, to a pecuniary penalty of BGN 1,500 or exceeding this amount but not exceeding BGN 5,000.
In accordance with the provisions of Article 278 of the Corporate Income Tax Law, the written statements ascertaining the violations shall be drawn up by the authorities of the National Revenue Agency, and the penalty decrees shall be issued by the Executive Director of the National Revenue Agency or by an official authorized thereby. The ascertainment of violations, the issuing, appeal against and enforcement of the penalty decrees follows the procedure established by the Administrative Violations and Sanctions Act.
For further information: http://www.nap.bg/