In a letter sent by KRIB today to Acad. Nikolay Denkov is caretaker Minister of Education and Science in the cabinet of Ognyan Gerdzhikov. With the Prime Minister of the Republic of Bulgaria, an urgent meeting is made in connection with the introduction of a minimum additional tax in Bulgaria with a bill amending and supplementing the Corporate Income Tax Act No 49-302-01-68, submitted on 7.11.2023. by the Council of Ministers, the press center of KRIB announced.

The request for an emergency meeting is on the occasion of a discussion of the rules envisaged for voting for the introduction of additional taxation with a minimum effective tax of 15% in Bulgaria.

Given the importance of the proposed changes in the country's tax framework, from 2024, we must express to you the insistence of the business for the introduction of an exemption for substantial economic activity under Directive (EU) 2022/2523 and in accordance with the approach of all other EU Member States.

Below are presented the arguments of the business, presented in the framework of the public discussion of the bill and the work of the Committee on Budget and Finance at the National Assembly.

All business opinions contain two main messages. The first is that businesses support the introduction of a global minimum tax in accordance with the Directive. The second message – the business insists that the tax reliefs provided for in the Directive be introduced in Bulgaria as well. At present, there is no other EU Member State that has not introduced the tax benefits under the Directive.

The Bill prepared by the Ministry of Finance and submitted by the Council of Ministers does not provide for the introduction of the exception for substantial economic activity with all the consequences of such a fiscal approach, namely:

MEPs adopted at second reading the amendments to the tax laws

Risk of deterioration of the investment environment

Bulgaria's main advantage in attracting foreign investments is its competitive tax regime. The proposed restrictive provisions in the Bill will significantly disrupt this competitiveness.

The introduction of the global minimum tax mechanism will lead to an additional tax burden for members of large foreign and national groups, which will operate in a less favorable tax environment than their competitors from smaller groups.

The introduction of additional burdens appears excessive and with expected adverse effects on the business environment as a whole.

In recent years, our country has reported a chronic deficit of foreign investments compared to other markets in the CEE region. The consistent tax policy to apply a more competitive rate of taxation of corporate profits is one of the key advantages in choosing the Bulgarian economy as an investment location.

The introduction of a global minimum tax of 15% takes this effect for large groups by equalizing the level of taxation with that in a number of other countries with which we are in a direct competition to attract investment. One of the few tools that can partially preserve this advantage in our interest is precisely the introduction of a relief for investments in real business. Conversely, the refusal to do so will be interpreted as a clear signal for a change in the policy to stimulate investment growth.

Bulgaria will be an exception to the provision of relief in the EU

The relief for real substantial business activity is provided for in the Directive to allow Member States such as Bulgaria to maintain their attractiveness as investment destinations in relation to those companies that will finance the construction of tangible fixed assets and the development of local staff.

All other EU Member States have provided for tax relief for essential business activities in the drafted bills transposing Directive (EU) 2022/2523 into their national legislation.

It is economically inexpedient for Bulgaria to introduce norms that differ from the practices in the OECD and EU member states, as this could lead to expected negative consequences for the investment climate.

In view of the above considerations, the business insists that the exception for substantial economic activity provided for in Directive (EU) 2022/2523 be introduced in the Corporate Income Tax Act. This would not significantly reduce the expected budget revenues and at the same time maintain Bulgaria's competitive position as an attractive investment destination.

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Nikolay Denkov



New tax

Budget 2024