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Bulgaria’s Preferential Tax Regimes and Double Taxation Conventions
In a move to strengthen its economic ties with other nations, Bulgaria has been actively negotiating and concluding double taxation conventions (DTCs) with various jurisdictions. These agreements aim to prevent double taxation and fiscal evasion, while also promoting economic cooperation and investment.
Positive Statements from Ministries
The Ministry of Economy and Industry and the Ministry of Foreign Affairs have both expressed their support for Bulgaria’s DTC policy. The Ministry of Economy and Industry noted that the DTCs will contribute to the country’s economic growth by attracting foreign investment and promoting trade. The Ministry of Foreign Affairs stated that the agreements will enhance Bulgaria’s reputation as a stable and attractive business destination.
Offshore Jurisdiction Status
Bulgaria has been classified as an “offshore” jurisdiction by some organizations, citing its preferential tax regimes and lack of exchange of information with other countries. However, the country has made significant efforts in recent years to improve its transparency and cooperation with international authorities.
Tax Treaty Network
Bulgaria’s tax treaty network consists of over 60 agreements with various jurisdictions, including OECD member states and non-OECD countries. The country is a signatory to the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (BEPS) and the Convention on Mutual Administrative Assistance in Tax Matters.
DTC Clauses
Bulgaria’s DTCs typically include clauses such as:
- A “tie-breaker rule” for persons other than individuals, which uses the criterion of “place of incorporation”
- A provision limiting the application of tax relief to dividends if such income is classified as a “hidden distribution of profits”
- Minimum rates for taxation at source on royalties
- Payments of any kind for the use of, or the right to use, industrial, commercial or scientific equipment
Annual Operational Plan
The National Revenue Agency prepares an annual operational plan outlining specific actions under priority policy areas. The plan includes activities such as negotiating new DTCs, updating existing agreements, and implementing measures to prevent tax evasion.
Conclusion
Bulgaria’s DTC policy is designed to promote economic cooperation and investment while preventing double taxation and fiscal evasion. The country’s efforts to improve its transparency and cooperation with international authorities have been recognized by the OECD and other organizations. The annual operational plan ensures that the policy is implemented effectively, contributing to Bulgaria’s long-term economic growth and development.
Sources:
[1] National Revenue Agency [2] Ministry of Economy and Industry [3] Ministry of Foreign Affairs [4] OECD/ G20 Inclusive Framework