New Tax Exemptions For Non-resident Legal Entities

UniCredit Bulbank AD
Summary: 
Amendments to the Corporate Income Tax Act introduce further exemptions on interest and royalties income received by the non-resident investors.
Wed, 07/01/2015

Amendments to the Corporate Income Tax Act have been promulgated in the State Gazette at the end of 2014. Among others:
1) the changes replace the reduced tax rate of 5% with an exemption on interest and royalties income received by foreign investors meeting the following eligibility criteria:
-  the beneficiary of the income is a legal entity that is a resident in the EU or has a permanent establishment in an EU-member state; -   the local payer of the income is a related party to the beneficiary, i.e. one entity holds at least 25% of the capital of the other for at least 2 consecutive years.
2) further extends the provisions introduced to the Law as of 1 January 2014 related to exemption of tax on interest income from debt securities issued by a resident legal entity and admitted to trading on a regulated market in Bulgaria or in aan EU/EEA country. The new version of the act adds to the list of debt securities issuers also the municipalities and the State. With these changes the exemption is now applicable for listed government, municipal and corporate debt securities.

The amendments enter in force as of 1 January 2015.

Related Newsflashes:

Amendments to the Corporate Income Tax Act

Corporate Income Tax Law Amended

Impact on investors: As of 1 January 2015, non-resident legal entities meeting certain eligibility criteria will enjoy exemption of withholding tax on interest and royalties.