If an obliged person fails to fulfill the obligation, for each individual violation sanctions of up to BGN 5000 for individuals and BGN 10000 for legal entities and sole traders have been imposed

1. Introduction

This article outlines the main highlights of the implemented amendments in the Tax-Insurance Procedural Code (TIPC) adopted on 31st December 2019, which introduce the rules for disclosure of cross-border tax arrangements to the revenue administration. Thus, in the Bulgarian tax legislation Council Directive (EU) 2018/822 of 25th of May 2018 (the “Directive”) as regards mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements is implemented. The aim is to act against situations in which corporate groups take advantage of differences in national tax systems to reduce their overall tax obligations.

The provisions shall enter into force on 1st July 2020. Since they enter retrospectively into force, it is required to be disclosed each cross-border tax arrangement (‘CTA’), the first step of which took place between 25th June 2018 and 30th June 2020. The deadline for this is 31st August 2020.

2. Characteristics of CTA

The concept of “tax arrangement” shall be understood in its broadest sense. The notion may include any “arrangement, agreement, deal, consent, statement, scheme, plan, transaction, etc., as well as a range of such ones. The tax arrangement may consist of several parts or stages of execution.” It should meet certain characteristics and have a cross-border element (participants in it are taxable persons in two or more jurisdictions). These characteristics are divided into 2 large groups:

  • tax arrangements designed to reduce the tax burden for a person through transfer of assets and profits to other jurisdictions with lower or zero tax rates
  • tax arrangements designed to circumvent automatic exchange of information rules, disclosure of the beneficial owner or involving the use of unilateral safe harbor rules.

The arrangement is not necessarily an illegal act, nor does it constitute a crime. In case it contains one of the listed features, it will be subject to reporting pursuant to TIPC. The bill explicitly stipulates that even where the tax administration has not taken measures regarding a particular arrangement, such an arrangement is not confirmed to be a legal one.

There is a list of the data that shall be provided to the revenue administration. The scope of the new legislation does not include VAT, duties, excise duties, compulsory social security contributions, contractual claims, including remuneration under public service contracts. Thus, the main focus is on cross-border tax arrangements related to corporate taxation

3. Liable persons

The consultant and, in some cases, the tax liable persons themselves, (who are participants in the arrangement) are obliged to provide the information.

According to the law, “consultants” are all persons who designs, markets, organizes or manages the implementation of a CTA. Partial participants, who are providing assistance, are also included, if it could be assumed that they possess the necessary knowledge and qualifications. The consultants provide information that is known, owned, or controlled by them. Such clarification is absent with respect to tax liable persons due to the fact that they are supposed to have all the necessary information about the arrangement.

The information is submitted to the Executive Director of the National Revenue Agency (NRA) when the person has a relevant connection with Bulgaria.

4. Relief from obligation

The consultant shall be relieved from the obligation to disclose information when there is an evidence that another consultant has disclosed the same CTA information or that he has disclosed the information in another Member State. The consultant is also relieved when legally bound to keep that information as a professional secret except in cases when the tax liable person has expressed consent for its disclosure (e.g. lawyers). In this case, the obligation lies with the tax liable person. The consultant is obliged to remind the person concerned of this obligation, as well as to provide information on the identity of the person to the NRA.

The tax liable person shall be deemed relieved from an obligation to disclose information about a CTA when it has disclosed the information to another Member State provided that the respective conditions are at hand or another tax liable person has disclosed the same information.

5. Terms

The information shall be disclosed by the persons in the term of 30 calendar days as from the earliest date of the day after the reportable cross-border arrangement is made available, ready to an extent, or the first step in the implementation of the reportable cross-border arrangement has been made.

The consultants under a tax arrangement with standardized contents disclose every quarter updated information which has come to the consultants’ knowledge after the previous disclosure of information.

The control over the compliance with the established rules is exercised by the NRA.

This article is for informational purposes only and does not provide a comprehensive overview of the topic concerned. In case you need a consultation, do not hesitate to contact our representative.

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