Updates to Bulgaria’s tax legislation have implemented FATCA, CRS and EU directives. By Kristina Spasova, Relationship Manager, GSS Bulgaria
The latest amendments to the Tax Insurance Procedure Code introduced the provisions of EU Directive 2014/107/EU, which affect the mandatory automatic exchange of information in the field of taxation, the Common Reporting Standards (CRS) as well as provisions for the implementation of the Foreign Account Tax Compliance Act (FATCA) Agreement.
A new chapter called “Automatic exchange of information in the field of taxation” was introduced to the Tax Insurance Procedure Code (TIPC). It establishes a procedure for information collection by Bulgarian financial institutions (FIs) and subsequent submission to the National Revenue Agency (NRA), which conveys the information to the competent authority in the respective EU member state or country-party to the Multilateral Agreement for Automatic Exchange of Information among Competent Authorities.
The changes introduce provisions that regulate the following:
- Scope, timeframes and the way tax information is to be exchanged and the obligations of FIs and the NRA in the exchange process: Reporting FIs are required to provide information on any account that qualifies for reporting to the NRA, including account number, name, address, jurisdiction, tax number and account balance as of the reporting date; for custody accounts, details of the total amount of interest, dividends and other income related to assets held in such custody accounts. The information shall be reported by electronic means on a yearly basis by 30 June of the year following the reporting period;
- Procedures for the identification of clients of FIs to determine if tax information should be reported for them: Reporting FIs are required to perform a due diligence review of all newly opened “financial accounts” starting as of 1 January 2016 to be identified as accounts to be reported/not to be reported. The due diligence review and reporting is not mandatory for existing accounts with total balance of above the BGN equivalent of USD 250,000 determined as of 31 December 2015. For FATCA reporting purposes, the balance shall be determined as of 30 June 2014. The due diligence review should be performed by reporting FIs by 31 December 2017 and, only for FATCA purposes, should the review be completed by 30 June 2016;
- Confidentiality of information and personal data protection;
- Sanctions and penalties for non-compliance with tax information exchange provisions.
The Additional Provisions of the TIPC include a wide ranging list of verbal definitions, depicting the scope of the new regulations.
The Transitional and Final Provisions introduce amendments to a number of other laws including the Credit Institutions Act (CIA). The changes to CIA, which will enter in force as of 1 January 2017, require the Bulgarian National Bank (BNB) to establish and maintain an electronic system which will serve as a register of all bank accounts containing information on account numbers, names of title holders, and a list of persons authorised to dispose of those accounts. Banks will be required to report the necessary data on new accounts to the BNB on a monthly basis. The records will be retained for a period of 5 years.
The changes to TIPC came into force as of 1 January 2016. Investors will be required to complete declarations and provide supporting documents confirming the information as part of the mandatory due diligence review of qualified financial accounts.