Withholding
tax levied pursuant to the Corporate Income Tax Act (CITA)
With
withholding tax are levied the dividends and liquidation quotas, which are
distributed by local legal entities in favor of:
· Foreign legal entities, except for the
cases when the dividends are realized by a foreign legal entity through
permanent establishment in Bulgaria;
· Local legal entities that are not traders.
No
withholding tax is levied on dividends and liquidation quotas when they are
distributed in favor of:
Local legal
entity that participates in company’s capital as state representative;
Mutual
fund;
Foreign
legal entity, which is treated as local entity for taxation purposes of a EU
member state or other state that is party under the European Economic Area
(EEA) Agreement.
With
withholding tax is also levied the following income of foreign legal entities
when this income is not realized through a permanent establishment in Bulgaria:
1. Income from financial assets and
transactions with financial assets issued by local legal entities, state and
municipalities.
2. Interests, including interests that are
contained in financial leasing installments.
3. Income from rent or other consignment of
movables for use;
4. Author and license fees.
5. Remunerations for technical services.
6. Remunerations under franchising and
factoring contracts.
7. Remunerations for managing and
controlling a Bulgarian legal entity.
8. Income from rent or other form of
granting the right to use a real estate located in Bulgaria.
9. Income from disposal with real estate
located in Bulgaria.
10. Remuneration of foreign legal entities
residing in jurisdictions with preferential tax regime for services or rights,
except for the cases when the services or they rights have been actually
provided.
11. Any kind of penalties and compensations
accrued in favor of foreign legal entities that are residing in jurisdictions
with preferential tax regime, except for compensations pursuant to insurance
contracts.
No
withholding tax is levied on the income from disposing of financial instruments
according to § 1, Item 21 of CITA’s Additional Provisions.
Tax base
for the withholding tax:
1. The tax base for tax assessment of the
income from dividends is the gross amount of the dividends distributed.
2. The tax base for assessing the tax on the
income from liquidation quotas is the difference between the market price of
the sum that the respective shareholder or partner must receive, and the
documentary proved price for acquiring its stocks or shares.
3. The tax base for assessing the
withholding tax on income from interests under financial leasing contracts in
cases when the contract does not stipulate the interest size, is the market
interest.
4. The tax base for assessing the
withholding tax on income of foreign entities from financial assets disposal is
the positive difference between assets’ sale price and their documentary proved
price of acquiring.
5. The tax base for assessing the
withholding tax on income of foreign entities from real estate disposal is the
positive difference between the sale price and the documentary proved price of
acquiring this real estate.
6. The tax base for assessing the
withholding tax on income of foreign entities in all other cases is the gross
amount of the income.
Tax rates:
1. The tax rate of the income tax pursuant
to Art. 194 of the CITA (dividends and liquidation quotas) is 5 per cent.
2. The tax rate of the income tax on
interest, author and license fees is amounting to 5 per cent when all of the
following conditions are met:
- the
beneficiary owner (income recipient) is a foreign legal entity from a EU member
state or a EU-based place of business of a foreign legal entity from a EU
member state;
- the local
legal entity that is paying the income, or the entity, which has place of
business in the Republic of Bulgaria and is paying the income, is related with
the foreign legal entity that is the beneficiary owner or with the entity whose
place of business is the beneficiary owner.
3. The tax rate on the other income pursuant
to Art. 195 of the CITA is 10 per cent.
Declaring
the tax:
The
entities that have withheld and paid the withholding tax and the entities that
have accrued the income pursuant to Art. 12, Para. 3 (from disposal with
financial assets) and Para. 8, Item 2 (from disposal with real estate) declare
these facts at the territorial directorate of the National Revenue Agency where
the entity paying the income is registered or must be registered. This
information is declared using a tax return as per the template.
The tax
return is submitted timely for each quarter by the end of the month which
follows the quarter when the tax was paid. If the payer of the income is an
entity, which is not liable to withhold and pay the tax, the tax return is
submitted by the income recipient.
A
certificate is issued as per the template upon request of the interested entity
for the tax paid on income of foreign legal entities. This certificate is
issued by the territorial directorate of the National Revenue Agency where the
tax must be paid.
Tax return
for downloading:
Tax return
template as per Art. 201 of the CITA
Deadlines
for paying the tax:
The
entities who withhold the withholding tax for income on dividends and
liquidation quotas must pay the taxes due as follows:
1. Within
three months from the beginning of the month which follows the month when a
decision was taken to distribute dividends or liquidation quotas – in the cases
when the beneficiary owner (income recipient) is a resident of a state which
has concluded with the Republic of Bulgaria an effective tax treaty;
2. in all
other cases - by the end of the month, which follows the month when decision
was taken to distribute dividends or liquidation quotas.
The
entities, who withhold the withholding tax on all other income of foreign
entities, must pay the taxes due as follows:
1. within
three months from the beginning of the month, which follows the month when
income was accrued – in the cases when the income recipient is a resident of a
state which has concluded with the Republic of Bulgaria an effective tax
treaty;
2. in all
other cases - by the end of the month which follows the month when income was
accrued.
Recalculation
of the withholding tax (Art. 202а of the CITA)
A foreign
legal entity which is not a local entity for tax purposes of a European Union
member state or of another country which is a member of the European Economic
Area Agreement, shall be entitled to choose to recalculate the withholding tax
for the income as per Art. 12, Para. 2, 3, 5 and 8. When the foreign entity
chooses to recalculate the withholding tax, the recalculation shall be done for
all the income received by it under Art. 12, Para. 2, 3, 5 and 8 over the year.
When the
foreign entity chooses to recalculate the withholding tax on the income
received by it, the recalculated tax shall be equal to the corporate tax, which
would have been payable for that income provided that they are received by a
local legal entity. Where the foreign entity has incurred expenses related to
the income under sentence one, for which tax on expenses would have been
payable provided that they have been incurred by a local legal entity, the
amount of the recalculated tax shall be increased by this tax.
Where the
amount of the deposited withholding tax under Art. 195, Para. 1 exceeds the
amount of the recalculated tax, the difference shall be refundable up to the
amount of the withholding tax under Art. 195, Para. 1, which the foreign entity
cannot deduct from the tax payable to the state where it is considered a local
entity.
The choice
of recalculating the withholding tax shall be exercised by submitting an annual
tax return as per the template. The tax return shall be submitted by the
foreign entity to the Sofia Territorial Directorate of the National Revenue
Agency not later than 31 December of the year, following the year when the
income was accrued.
Tax return
for downloading:
Annual tax
return template as per Art. 202a of the CITA
ax refund
shall be done according to the provisions of the Tax and Social Security
Procedure Code by the Sofia Territorial Directorate of the National Revenue
Agency.
The
procedure for withholding tax recalculation shall not apply where the foreign
entity is a local entity for tax purposes of a country which is a member of the
European Economic Area Agreement, but is not a European Union member state, and
with which the Republic of Bulgaria:
1. Does not
have an effective tax treaty, or
2. Has got
an effective tax treaty where the following is not provided:
a)
Information exchange, or
b)
Cooperation in collection of taxes.
(bron: http://portal.nap.bg)
