Find out on the most important tax changes in Bulgaria in 2019.
1. VAT changes in Bulgaria 2019
New rules for place of performance of telecom, broadcasting, TV and electronically supplied services
Related to transposing of EU Directive 2017/2455, Bulgaria has implemented a new VAT rule allowing the suppliers of telecom, broadcasting, TV and electronically supplied services to apply local VAT on their supplies up to a total turnover threshold of EUR 10,000. The rule relates only to the services provided to individual customers residing in the EU and it is subject to certain preconditions.
The rule aims to simplify the VAT compliance of suppliers of this kind of services with a relatively low turnover in other EU states by treating the supplies below the above stated threshold with place of performance in the residence state of the supplier. An option for VAT registration of the supplier is available in the state where the services are effectively consumed without considering the above stated threshold. In this case the National Revenue Agency shall be notified in 7 days term for the VAT number issued to this supplier in the EU state of residence of the individual customer.
2. Corporate Income Tax Act – thin capitalization
With the aim of transposing Art.4 of EU Directive 2016/1164 a new rule for regulation of the thin capitalization has been implemented as of January 1st, 2019. This new rule comes in addition to the existing regulation for limitation of the excess of tax deductible interest expenses over the taxable interest incomes up to 75 % of the EBIT.
The new rule provides for a broader definition of “interest payments” and imposes a limit of the yearly excess of the interest expenses over the interest incomes up to 30 % of the EBITDA. The non-recognized interest can be fully deducted in the following tax periods without limitation of the term, provided that the realized EBITDA allows such deduction. However, this new rule is limited to a yearly excess of the interest expenses of over EUR 3 million. It is expected that the rule will affect a relatively small number of tax payers in Bulgaria.
3. Local Taxes and Fees Act
A new formula for the calculation of the tax on vehicles has been implemented as of 01.01.2019. In addition to the currently applicable “property component” (the year of production) the new formula implements an “environmental” component related to the ecological category of the vehicle (EURO). The amended law provides only for ranges of taxes for the different categories of vehicles and each municipality shall determine the local rate within the range. Therefore, currently the exact effects on the owners cannot be easily summarized. Although, it is expected that the tax on older vehicles with lower EURO certification to be increased with around 30 % in comparison to the current levels.
4. Minimum salary and maximum social insurance base
As of january 1st, 2019 the minimum statutory limit of the monthly salary shall be BGN 560 (EUR 286).
The maximum social insurance base of the income has been increased from BGN 2,600 to BGN 3000 (EUR 1,533)