Tax and Legal Environment for Doing Business in Bulgaria. Bulgarian Investment Forum Brussels 20 March 2013

Transcription

1 Tax and Legal Environment for Doing Business in Bulgaria Bulgarian Investment Forum Brussels 20 March 2013

2 General overview of the Bulgarian tax system Tax rates in Bulgaria: Tax Rate (%) Corporate income tax 10 Personal income tax 10 Capital gains tax 10 Withholding tax 5/10 (i) Value Added Tax 20 Tax on expenses (fringe benefits, representative expenses) Real estate property tax Real estate transfer tax Social security contribution to 0.45 (ii) 0.1 to 3 (iii) 17.4 e/er 12.9 e/ee (iv) (i) (ii) (iii) (iv) Withholding tax might be fully relieved if applicable under the relevant Double Tax Treaty Tax base is the book value or the tax value established by local municipality, whichever is higher Tax base is the sale price or the tax value established by local municipality, whichever is higher Base is capped at BGN 2200 (EUR 1125). 0.4 % % added for professional sickness fund Page 2

3 Setting up a company The following company structures are most commonly used: Limited liability company (LLC) The minimum registered capital is BGN 2 (EUR 1) Can be sole owned The shareholder bears limited liability up to the value of its shares Joint-stock company (JSC) The minimum registered capital is BGN 50,000 (EUR 25,565) The liability of the shareholder(s) is limited to the amount of the capital contribution Can have a single shareholder Page 3

4 Financing of the activities in Bulgaria Debt financing Thin cap restrictions apply Possibility for financing of LLC through additional cash contributions Treated as debt, not equity May not be interest bearing Temporary need of working capital is a pre-requisite Subject to return Possibilities for distribution of free capital (where the relevant statutory conditions are met) Distributions of dividends; interim dividend is not possible Decrease of registered capital Extending loan facility to the parent company Page 4

5 Tax incentives (1) Corporate income tax (CIT) relief for manufacturing activities in underdeveloped areas 100% of the CIT may be relieved for investments in regions with unemployment of at least 35% higher than the average level, (where EU state aid requirements are met). The relieved tax should be used as part of the initial investment in new assets that need to be completed in the following four years. Double Tax Treaties Treaty relief of Bulgarian-source income may be obtained under sixtyeight Double Tax Treaties signed by Bulgaria. However, treaty relief is not applied automatically and a formal clearance procedure should be completed before the tax authorities for income exceeding BGN 500k per annum. Page 5

6 Tax incentives (2) Value Added Tax (VAT) incentives Shorter 30-day refund period for exporters. Investors are allowed to self-assess VAT (to a certain amount) on import instead of effectively paying it and enjoy a shorter 30-day refund period under certain conditions. For raw materials imported for processing and re-export, placed under the inward processing customs procedure no import customs duties and VAT are due if certain conditions are met. VAT exemption is available for importers of goods, performing a subsequent intra-community supply. Foreign residents, traders of CO2 emission quotas, are exempt from VAT. Page 6

7 Tax incentives (3) Withholding tax exemption for dividends Dividends distributed to companies which are tax resident in EU/EEA countries are exempt from the 5% withholding tax. Capital gains relief Capital gains derived from the sale of shares through the Bulgarian stock market or any stock exchange in an EU/EEA country are exempt from tax. Respectively, losses from the sale of shares through such stock exchanges are not tax deductible. Tax relief for investments enhancing energy efficiency Machines and manufacturing equipment are allowed to be depreciated at accelerated rate of 50%, if the assets are new and aimed at enhancing energy efficiency (certain conditions must be satisfied). Page 7

8 Employment and training incentives Reimbursement up to one year of minimum salary and social security and health insurance contributions for employing people through the Employment Agency in the following categories: Unemployed up to 29 years of age without time of service Unemployed up to 29 years with reduced capacity Young people from social institutions who have completed their education Single parents with children up to 3 years of age People over 50 years of age Hired on partial working time Hired for over a 12-month period Unemployed on training An employer providing improvement of the qualification of hired workers can apply for reimbursement of part of the expenses for training of one person Page 8

9 EU funding opportunities EU grants may be available for business in Bulgaria under the following operational programs (OP): Development of the Competitiveness of the Bulgarian Economy: improving energy efficiency, effective use of waste products, production of recyclable products, energy management systems; technological modernization; R&D activities, etc. Human Resources Development: training, safety equipment, travel expenses, etc. Page 9

10 Our services (1) Tax services: Advice on all aspects of Bulgarian taxation: corporate tax, value added tax, personal income tax, customs, excise duties and all other taxes Tax compliance assistance Tax risk management: performance of regular or occasional tax reviews or health checks; tax management function improvement; tax cash flow improvement Tax structuring of inward investment projects Tax due diligence and acquisition structuring Tax dispute resolution including supporting tax litigation International tax advice, application of double tax treaties Transfer pricing advice and reviews; assistance with transfer pricing documentation requirements Tax structuring for outbound international investments Restructuring of domestic groups to improve their tax efficiency Page 10

11 Our services (2) Legal services Transactions, including legal due diligence Corporate law, including the establishment, reorganization and dissolution of entities Employment law Contract drafting Compliance and reporting Grants and incentives Advice and assistance with application procedures Human Capital Support of internationally mobile personnel, including assistance with personal tax, social security and other regulatory matters Design of compensation programs and equity incentives Page 11

12 Contacts Marcel Schwab Partner Public Auditor and Certified Tax Advisor Mobile: Mitko Stoykov Manager Mobile: Ernst & Young Bulgaria Polygraphia Office Center 47А, Tsarigradsko Shose Blvd, fl Sofia Phone: Fax: Page 12