Thursday, 15 December 2016

Bulgaria introduces new reporting obligation for nonresident entities

New rules included in Bulgaria’s corporate income tax act introduce new reporting obligations for nonresident legal entities operating in the country through a permanent establishment (PE). The rules, which were published in the official gazette on 27 September 2016 and apply as from that date, require an entity to disclose the identity of its owners or shareholders in its annual corporate income tax return, as well as the extent of the participation of such owners/shareholders, if it exceeds 10%.
This change in Bulgaria’s law came about as a result of a peer review conducted by the OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes in December 2015, which concluded that the Bulgarian tax authorities generally lack information about the owners of nonresident legal entities operating in the country through a PE.
The benefit of requiring a nonresident entity to provide its ownership information in the annual corporate income tax return is that the tax authorities will have the information at their disposal and will not have to request the information from other institutions and/or registers; the information will be updated annually; and control over the obligation to produce the information will be more effective. Notably, there are no penalties for noncompliance with the new transparency provision.
Because the rules are effective as from 27 September 2016, the FY 2016 corporate tax return will be the first return in which the reporting obligation applies. However, since the Bulgarian tax authorities have not yet published the FY 2016 return, it is not clear exactly how the information must be reported. The return should be published by the end of calendar year 2016.

Source: Deloitte