Bulgaria introduces new temporary obligation for solidarity contribution

• The solidarity contribution is introduced as a one-off temporary measure, due by all market participants (with minor exceptions) and which would be payable in parallel with the corporate tax.
  
  
• The proposed contribution is 33% on surplus profits.
  
  
• If enacted, persons subject to the contribution shall declare it within the due timelines for filing the 2023 annual tax return.

The Bulgarian Ministry of Finance has published for public discussion a draft of an Act for amending and supplementing the Tax and social securities procedures code. A number of amendments of the tax laws are proposed, however, the most significant proposal is the introduction of solidarity contribution of 33%.

The solidarity contribution is introduced as a one-off temporary measure, due by all market participants (with minor exceptions) and which would be payable in parallel with the corporate tax.

The contribution shall be due for surplus profits of entities, carrying out business activity, derived in the second half of 2023, i.e., from 1 July 2023 to 31 December 2023.

The contribution's rate is proposed at 33%. The basis for its assessment shall be the so-called surplus profits defined as the positive difference between the tax profit for the second half of 2023 and 50% of the average tax profits for the years 2018, 2019, 2020 and 2021, increased by 20%. Alternative methods for determining the tax profit for 2023 have been proposed.

It is envisaged that persons subject to the contribution shall declare it within the due timelines for filing the 2023 annual tax return. However, liable persons shall declare advance contributions by 15 July 2023 and pay them by the 15th of the respective month.

It should be noted that the incorrect calculation of the solidarity contribution or of the advance contributions in a smaller amount is subject to penalty of up to BGN30,000 (approx. €15,340) and interest for late payment.

It is intended that the solidarity contribution shall not be deductible for corporate tax purposes.

If the said measure is adopted, the following shall be observed:

• Preliminary assessment of the existence of a contribution liability
  
  
• Determination of advance contributions' amount
  
  
• Declaration and timely submission of advance contributions
  
  
• Final recalculation of solidarity contributions in accordance with the different possible approaches and their effect on corporate income tax

Future Alerts will report on developments regarding the solidarity contribution.

For additional information with respect to this Alert, please contact the following:

Ernst & Young Bulgaria EOOD, Sofia

• Milen R Raikov
  
  
• Viktoriya Mancheva

For a full listing of contacts and email addresses, please click on the Tax News Update: Global Edition (GTNU) version of this Alert.

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor