Withholding
tax deducted pursuant to the Corporate Income Tax Act (CITA)
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Withholding tax is levied on:
Dividends
and liquidation shares, distributed by resident legal persons to:
Non-resident
legal persons, except for the cases when dividends are realized by the
non-resident legal person by means of a permanent establishment in the country;
Resident
legal persons who are not traders.
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Withholding tax is not levied on dividends and liquidation shares when they are
distributed to:
A local
legal person participating in the company’s capital as a representative of the
State;
A
contractual fund;
A
non-resident legal person that for tax purposes is a resident person of a
Member State of the European Union or a State party to the Agreement on the
European Economic Area.
Withholding
tax is also levied on the following types of income of non-resident legal
persons, when these types of income have not been realized by means of a
permanent establishment in the country:
Income
from financial assets and from transactions with financial assets, issued by
resident legal persons, the State, and municipalities.
Interest,
including interest, which is part of the payments under financial leasing.
Income
from rent or other granting of movable property for usage;
Royalties.
Remuneration
for technical services.
Remuneration
under franchise and factoring contracts.
Remuneration
for management or control of a Bulgarian legal person.
Income
from rent or other granting of immovable property, located in the country, for
usage.
Income
from disposal of immovable property, located in the country.
Remuneration
of non-resident legal persons established in jurisdictions with preferential
tax regime for services or rights, except in the cases when these services or
rights have indeed been provided.
Penalties
and damages of any kind, charged to the benefit of non-resident legal persons
established in jurisdictions with preferential tax regime except for the
damages under insurance contracts.
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Withholding tax is not levied on income from disposal of financial assets
pursuant to § 1, Item 21 of CITA’s additional provisions.
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Tax base for the withholding tax:
The tax
base for assessment of the tax on income from dividends shall be the gross
amount of the distributed dividends.
The tax
base for assessment of the tax on income from liquidation shares shall be the
difference between the market price of the amount due to be received by the
respective shareholder or partner, and the documentarily evidenced acquisition
price of his shares or stock.
The tax
base for assessment of the withholding tax deducted from income from interest
under financial leasing contracts in the cases when the contracts don’t specify
the interest rate shall be the market rate.
The tax
base for assessment of the withholding tax deducted from income of non-resident
persons from disposal of financial assets shall be the positive difference
between their sale price and their documentarily evidenced acquisition price.
The tax
base for assessment of the withholding tax deducted from income of non-resident
persons from disposal with immovable property shall be the positive difference
between the sale price and the documentarily evidenced acquisition price of the
said property.
The tax
base for the withholding tax deducted from income of non-resident persons in
all other cases shall be the gross amount of the income.
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Tax rates:
The tax
rate for the tax on income as per Art.194 of CITA /dividends and liquidation
shares/ shall be 5 per cent.
The tax
rate for the tax on income from rent, interest and royalties shall be 5 per
cent, when the following conditions have been fulfilled simultaneously:
§ owner of the income is a non-resident legal
person from a Member State of the European Union, or a permanent establishment
in a Member State of the European Union, of a non-resident legal person from a
Member State of the European Union;
§ the resident legal person – payer of the
income, or the person whose permanent establishment in the Republic of Bulgaria
is the payer of the income, is a person connected to the non-resident legal
person – owner of the income, or to the person whose permanent establishment is
owner of the income.
3. The tax rate for the tax on all other
types of income as per Art.195 of CITA shall be 10 per cent.
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Declaring the tax:
The
persons liable to deduct and pay withholding tax under Art. 194 and 195 shall
declare the tax due for the quarter by means of a tax return as per template,
by the end of the month following the quarter. The return shall be submitted to
the Territorial Directorate of the National Revenue Agency where the income
payer is registered or should be registered.
When the
income payer is not subject to registration, the tax return shall be submitted
to the Sofia Territorial Directorate of the National Revenue Agency.
In the
cases when the income payer is a person not liable to deduct and pay tax, the
tax return shall be submitted by the income recipient.
At the
request of the interested person, for the tax paid pursuant to this Act for the
income of non-resident legal persons a certificate as per template shall be
issued. The certificate shall be issued by the Territorial Directorate of the
National Revenue Agency where the tax return is submitted or should be
submitted.
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Download tax return:
Tax return
as per template under Art. 55, Para. 1 of the Personal Income Tax Act (PITA)
and Art. 201, Para. 1 of CITA for taxes due
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Deadlines for payment of the tax
The
income payers deducting withholding tax pursuant to Art. 194 are obliged to pay
the taxes due within the end of the month following the quarter when the
decision to distribute dividends or liquidation shares was taken.
The
income payers deducting withholding tax pursuant to Art.195 are obliged to pay
the taxes due within the end of the month following the quarter when the income
was charged.
The tax
due shall be paid to the respective Territorial Directorate of the National
Revenue Agency where the income payer is registered or where he is subject to
registration.
When the
income payer (for income pursuant to Art.195 of CITA) is not a taxable person
and for income pursuant to Art. 12 Para 3 and Art. 8 Item 2 of the same Act the
tax shall be paid by the income recipient within the abovementioned deadline,
and the income shall be considered as charged from the date of its receipt by
the non-resident legal person.
The tax
due shall be paid to the respective Territorial Directorate of the National
Revenue Agency where the income payer is registered or where he is subject to
registration. When the income payer is not subject to registration, the tax
shall be paid to the Sofia Territorial Directorate of the National Revenue
Agency.
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Adjustment of withholding tax (Art. 202а of CITA)
A
non-resident legal person, who for tax purposes is a resident person of a
Member State of the European Union, or another State party to the Agreement on
the European Economic Area, is entitled to choosing to adjust the withholding
tax for income pursuant to Art.12, Para. 2, 3, 5 и 8. When the non-resident legal person chooses
to adjust the withholding tax, the adjustment shall be made for all the income
the person has realized pursuant to Art.12, Para. 2, 3, 5 and 8 during the
year.
When the
non-resident person chooses to adjust the withholding tax for the income he has
realized the adjusted tax shall be equal to the corporate tax which would be
due for this income if the said income was realized by a resident legal person.
When the non-resident legal person has realized expenditures related to the
income laid down in the first sentence for which tax would be due on the
expenditures if they were realized by a resident legal person then this tax
would be added to the amount of the adjusted tax.
When the
amount of the paid withholding tax pursuant to Art. 195, Para. 1 exceeds the
amount of the adjusted tax, the difference is subject to refunding up to the
amount of the withholding tax pursuant to Art. 195, Para. 1 which the
non-resident person cannot deduct from the tax due in the country where he is a
resident person.
The
choice to adjust the withholding tax shall be exercised by means of submitting
the annual tax return as per template. The tax return shall be submitted by the
non-resident person to the Sofia Territorial Directorate of the National
Revenue Agency by 31 December of the year following the year of charging the
income.
