Bulgarian Government To Offer Tax Breaks To Major Investors

by Ulrika Lomas, for LawAndTax-News.com, Brussels

05 December 2008

Bulgaria’s Parliament voted on Tuesday night to amend corporate tax law to allow major investors to take advantage of tax holidays. However, lawmakers voted to keep the rate of value-added tax on hold.

The corporation tax changes mean that companies who invest over BGN10m (EUR5.1m) in one year, or more than BGN50m over five years in the Bulgarian economy, would be entitled to postpone their payment of corporate tax for a five-year period.

The decision affects those in high-tech, manufacturing, infrastructure development, processing and agricultural industries. Parliament also opted to retain Bulgaria’s 10% flat-rate corporation tax.

A vote was also taken on the proposed reduction of the value-added tax rate. However, the proposal, which was put forward by Bulgaria’s right wing political party, was rejected by the ruling socialist-led tripartite coalition. The proposal would have reduced Bulgaria’s current VAT rate of 20% to 18% including a reduction of between 5-7% on medicines, textbooks, printed media and food.

Lawmakers also voted on accounting convergence policies on VAT invoices, but they ultimately decided to reject a requirement which specified that all VAT invoices would require hand-written signatures. The existing legislation is therefore still in place – requiring just a name and surname.

Finally, Parliament reached a consensus on a vote regarding young families with mortgage loans. Under the proposed changes, married couples below the age of 35 years who own only one house or apartment will be entitled to a reduction in taxation equal to the amount of annual interest on their mortgage. To be eligible for the discount, which would currently equate to 10%, at least one spouse must be younger than 35 with a mortgage with the value of less than BGN100,000.

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