According to the Bulgarian legislation for corporate taxation, no tax is owed when distributing dividends and liquidating dividends of a foreign legal entity from the EU.

 

Conditions when no tax is owed:

1. It must be a foreign legal entity which is a local entity for tax purposes to a European Union member country or another country partner to the European Economic Area agreement.

2. The entity must not meet the criteria for hidden profit distribution.

 

Conditions when it deemed there is hidden distribution of profits:

1. There are sums accounted for which are unrelated to the line of activity of the company or they exceed the normal market levels (prices), levied, paid off, or distributed in any form to the benefit of the shareholders, partners, or people related to the them. Exceptions include income from shares and share participation, including unpersonified companies and from other rights treated as share income.

2. Interest costs (unless the loan conditions are laid down according to a normative act), when there are at least the following three conditions:

2.1 The loan exceeds the income payers own capital as of the 31st December of the previous year.

2.2 The loan or interest pay-off is not time-limited.

2.3 The loan or interest pay-off or the rate of interest depends on the presence or the size of profit of the payer.

2.4 The loan pay-off is related to satisfying other creditors demands or to dividends pay-off.

 

The legal entity perpetrator of the hidden distribution of profits shall be punished with a property sanction to the amount of 20% of the costs representing the hidden distribution of profits, and the costs themselves are not accountable.

 

 

source:evristika.eu

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