Recent Trends in Taxation of Corporate Tax and VAT

Seminar оn the “Recent trends in taxation of corporate tax and VAT” was held on 30.09.2015 by Deloitte Bulgaria and the German-Bulgarian Chamber of Commerce.

The aim of the seminar has been to inform the participants about the BEPS Project (Base Erosion and Profit Shifting) of the Organization for Economic Cooperation and Development of G-20. The new elements in tax practice and tax treatment of dividends in the EU has also been presented.

BEPS Project:

BEPS Project contains 15 points related to basic tax issues as mechanisms for solving disputes, actions against a vicious tax practice. BEPS refers mainly to cases of double non-taxation or reduced taxation. On October 5, 2015 will be published the final set of reports and next steps in the project will also be presented.

The project is expected to have an impact on the Bulgarian legislation. For example, there is a proposal to amend the definition of “dividend”, namely: “It is not a dividend the distribution which is recognized by the distributing person for tax purposes or which reduces the tax base for taxation, except the hidden distribution profit”. The main purpose is to avoid the double taxation that is result from the differences in the tax treatment of distributed profits in different Member States. "A distribution which is recognised as an expense for tax purposes by the person making the distribution or by which the taxable amount is reduced shall not be a dividend, except in the case of a disguised distribution of profits." The main objective is to avoid double non-taxation arising from differences in the tax treatment of distributed profits in different Member States.

Development of the practice of National Revenue Agency and the national courts:

Specific cases of charging and deducting VAT.

Charging and deducting VAT has been analyzed in cases of: Lease contract, purchase and exploitation of vehicles; building elements of the public infrastructure; re-invoicing of expenses; revenues and expenses of a branch, operating in favour of the Central office.

The lecturers have discussed the actual case law of the National courts and the Court of European Union regarding requirements for real delivery of goods and service; treatment of Intra-Community deliveries; taxation in the case of issuing vouchers and discount cards.

Proposals for changes in Value Added Tax Act:

The main discussed subject has been “Self-charge of VAT in the case of personal use of goods and services over BGN 700”. It refers to goods, purchased for a business purpose but used completely or mostly for personal goals. The envisaged changes of VAT Act shall establish an obligation for the taxpayers to declare a specific methodology of formation the tax base. It introduces a presumption that the goods and services are used for personal needs in case the taxpayer has not submitted a declaration or has not used the methodology declared. The term for submitting a declaration existing relations is 29.02.2016.