Summer update on tax rules in Bulgaria

Proposed penalty for late application of double tax treaty relief

A draft change to the Bulgarian Tax and Social Security Procedures Code proposes administrative penalty for taxpayers who apply double tax treaty relief without completion of the relevant requirements in this regard. The proposed penalty is 5% of the withholding tax for which relief was applied unduly, capped at BGN 15,000. In case of a repeated violation, the penalty may reach 10% of the tax amount but not more than BGN 30,000. The administrative penalty proposed should replace the default interest which may be imposed under the current regime but was declared in contradiction with EU law.

Currently, the proposal of the Ministry of Finance is subject to public consultation. Apart from the introduction of administrative penalty for late application of a double tax treaty relief, the draft law contains a number of other provisions, which aim to improve the legislation regulating the administrative proceedings, including such related to fiscal control on movement of goods with high fiscal risk.

The stakeholders may share their views on the current proposal by 10 September 2020.

Extended deadlines for reporting under DAC

In line with the amendments to the Directive on administrative cooperation in the area of taxation (“DAC”) adopted by the Council of the European Union in June 2020, Bulgaria has extended the deadlines for filing of information on financial accounts and reportable cross-border tax planning arrangements.
According to the latest amendments to the Tax and Social Security Procedures Code which were promulgated in August, the new deadlines for filing of information by intermediaries and taxpayers are as follows:

• Reportable arrangements implemented between 25 June 2018 and 30 June 2020 should be disclosed by 28 February 2021;
• Reportable arrangements which have taken place between 1 July 2020 and 31 December 2020 should be disclosed within a 30-day period starting from 1 January 2021;

Tax schemes with standardized content should be disclosed by 30 April 2021