BULGARIA

Source: IMF, International Financial Statistics, July 2021.

• The Bulgarian central bank is the Bulgarian National Bank (BNB – www.bnb.bg)
• The BNB is a member of the European System of Central Banks (ESCB).

• Credit transfers are used by the government and companies to pay salaries and suppliers, and to make tax and treasury payments.
• High-value and urgent EUR-denominated (within the euro zone) credit transfers can be settled in real time via TARGET2-BNB.
• All payments in BGN can be settled in real time via RINGS.
• All payments in BGN can be settled in real time via RINGS.
• Low-value (less than EUR 50,000) EUR-denominated credit transfers can be settled via BISERA7-EUR.
• SEPA credit transfers can be settled via STEP2 or correspondent banking networks. Twenty-five banks in Bulgaria participate in the SEPA credit transfer scheme.
• Some Bulgarian banks participate in STEP2.
• Cross-border credit transfers in domestic and other currencies can be processed via SWIFT, correspondent banking and bank branch networks.
• The European Payment Council’s SCT Inst scheme (a pan-European 24/7 instant payment scheme for SEPA credit transfers) enables the transfer of funds (the maximum threshold value is EUR 100,000) to another account in less than ten seconds. There are three SCT Inst participants.
• EBA Clearing and Italy’s SIA Group have developed and implemented a pan-European platform for instant EUR payments called RT1. It is fully compliant with the SCT Insts scheme and is in line with the ISO 20022 global messaging standards for instant payments.
• EBA Clearing has launched a pan-European request to pay (R2P) infrastructure solution with the support of 27 payment service providers from 11 countries. The new 24/7 service is compatible with the SCT and SCT Inst schemes and allows payees to take the initiative to request a specific payment from the payer.
• TIPS is a pan-European service for the settlement of instant payments in central bank money. The service enables payment service providers and ACHs with access to TARGET2 to offer fund transfers 24/7, 365 days a year. TIPS is aligned with SCT Insts. It is primarily focused on EUR payments but is technically capable of settling payments denominated in other currencies.

• Direct debits are mainly used for regular payments, such as utility bills.
• Direct debits are settled on a same-day basis via BISERA.
• SEPA direct debit schemes are available in Bulgaria and can be settled on a same-day basis via STEP2. There are two participants of the Core SDD scheme and one of the B2B SDD scheme.

• Cheques are not widely used in Bulgaria.
• Cheques are cleared bilaterally between banks.

• Card payments are increasingly popular, especially for retail transactions.
• There were 6.2 million debit cards and 1.2 million credit cards in circulation at the end of 2019.
• Visa and MasterCard-branded cards are the most widely issued. American Express and Diners Club credit cards are also available. The Bcard is the country’s national payment card; it has 20 participants. Contactless payment cards are available.
• All cards issued are SEPA-compliant with EMV chips.
• Credit and debit card payments are processed by Borica.

• There were 5,561 ATMs in Bulgaria at the end of 2019.
• There were 173,938 POS terminals in Bulgaria at the end of 2019.
• All ATMs and POS terminals are EMV-compliant.
• All payments are processed via Borica.

• There are eight electronic money institutions in Bulgaria.
• There are approximately 91,517 electronic money terminals in Bulgaria.
• At the end of 2019, there were 403,000 cards with an e-money function in circulation.
• The widespread adoption of POS terminals has led to a significant increase in the use of mobile payments. Mobile wallet schemes, such as A1 Wallet, MOBI-B and Phyre are available and widely used.
• Apple Pay and Google Pay also available.

• With more than 20 years' presence in Bulgaria, BNP Paribas is a leading international bank in Bulgaria for trade finance, recognised for the quality of its solutions and services, and depth of expertise. The trade centre in Sofia has been in operation since 2002 including one senior trade manager, supported by a centralised back office that covers Global Trade Solutions (GTS) operations across Romania, Hungary, Czech Republic & Bulgaria.

• The EU has trade agreements in place with over 30 countries.
• The EU is currently in free trade negotiations with a number of countries, including the Association of Southeast Asian Nations (ASEAN), Australia, Indonesia, Mercosur (the Southern Common Market), Uruguay, and the USA. The EU and the UK are discussing their future trading relationship, following the UK’s departure from the EU.
• Bulgaria has FTAs in place with China, Turkey, Macedonia, Israel, Albania, Serbia and Montenegro and Bosnia and Herzegovina.

Source: IMF, International Financial Statistics, July 2021.

• Import licences are required for specific items subject to international controls and for certain agricultural products.
• Import licences with quotas are required for certain steel products from Kazakhstan and for textiles from Belarus and North Korea.

• Tariffs are set according to the EU customs code for all imports from outside the EU, with higher tariffs for agricultural imports than for non-agricultural imports.

• None 

• None 

• Bulgaria prohibits importing of certain items in line with EU regulations and UN Security Council resolutions.
• Specific imports are prohibited in order to protect fauna and flora, for health and safety or moral reasons, and/or for national security.

• Licences are required for the export of cultural items, certain agricultural products, as well as for dual use items and technology.

• None 

• None 

• Bulgaria has implemented the EU directive on export credit insurance.
• The Bulgarian Export Insurance Agency (BAEZ), Bulgaria’s national export credit agency, provides state-supported export credit insurance.
• Export credit insurance is also available from private insurance companies.
• Export financing is available from commercial banks.

• Bulgaria prohibits the export of certain items in line with EU regulations and UN Security Council resolutions.

• There are no foreign exchange controls, although reporting requirements apply in some instances.
• According to the Currency Law, persons making cross-border transfers and payments abroad to a third country (i.e. a country outside the EU or the EEA) in foreign or local currency exceeding BGN 30,000 or the equivalent must present documentation to the payment services providers.
• Copy of registration form as per respective regulation shall be provided in case of payment by a resident entity to own non-resident account abroad  or in case of payment by resident to non-resident entity under a finance loan.

• Bulgaria has no tax rules specific to different types of financial instruments.

• Interest expenses which are regarded as ‘hidden profit distribution’ (broadly, interest paid or accrued on balances unrelated to the business activity or amounts exceeding customary market levels, or interest under certain types of loans involving equity elements) are non-deductible for corporate income tax purposes. Hidden profit distributions also suffer a 5% Bulgarian withholding tax if payable to a foreign tax resident. In addition, a non-deductible penalty of 20% of the amount of the hidden profit distribution may be imposed.

• Bulgarian tax legislation explicitly provides that gains or losses from revaluation of foreign exchange differences are taxable/deductible. There are no specific tax rules that deal with currency exchange conversions. Based on instructions issued by the Bulgarian revenue authorities, the annual corporate income tax return must be completed in local currency (BGN).

• The Bulgarian tax authorities may issue rulings on tax issues at the request of the taxpayer. Generally, these advance rulings are not binding on either the tax authorities or the taxpayer.

• Capital gains and losses are not taxed separately. They are included within the corporate tax basis as income or an expense.
• Upon the disposal of capital assets, the effective corporate income tax rate applies and capital losses can be offset against income from other activities.
• Gains and losses on the disposal of shares listed on the Bulgarian and EU/EEA regulated stock exchanges are exempt. As of 2021, gains and losses derived from the sale of shares listed on stock exchanges in third countries (outside the EU/ EEA) that are considered as equivalent to regulated stock exchanges are exempt.

• Bulgaria has concluded approximately 70 tax treaties.
• Bulgaria, as part of the OECD/G20 Base Erosion and Profit Shift (BEPS) initiative, is a signatory of a multilateral co-operation agreement (the MCAA). Under this multilateral agreement, information will be exchanged between tax administrations, giving them a single, global picture on some key indicators of economic activity within multinational enterprises (MNE).
• With country-by-country reporting, tax administrations of jurisdictions where a company operates will have aggregate information annually relating to the global allocation of income and taxes paid, together with other indicators of the location of economic activity within the MNE group. It will also cover information about which entities do business in a particular jurisdiction and the business activities each entity engages in. The information will be collected by the country of residence of the MNE group, and will then be exchanged through exchange of information supported by such agreements as the MCAA. First exchanges under the MCAA started in 2017–18 on 2016 information.

• Thin capitalisation rules apply in both domestic and cross-border situations where the liabilities of a company exceed three times its equity (i.e. a 3:1 debt to equity ratio). In such cases, the amount of net interest expense exceeding EBIT (earnings before interest and tax) is non-deductible. The thin capitalisation rules do not apply in certain cases (e.g. financial leases or bank loans, unless provided or secured by a related party). As from 1 January 2020, where a loan is secured simultaneously by the borrower and its related party, the interest expense corresponding to the part of the collateral provided by the borrower is not subject to the thin capitalisation rules. If the market price of the collateral provided by the borrower exceeds the principal of the loan, the interest expense under the loan is fully excluded from the thin capitalisation rules.
• Bulgaria has implemented the interest deduction limitation requirements of the EU anti-tax avoidance directive, which apply alongside the country’s thin capitalisation rules. The interest limitation rules apply if net borrowing costs exceed EUR 3 million for the year. Net borrowing costs are restricted to the extent they exceed 30% of tax-based EBITDA (earnings before interest, tax, depreciation and amortisation). Unlike the thin capitalisation rules, the interest limitation rules apply to interest expense on bank loans and finance leases that are not guaranteed by a related party.
• Neither the thin capitalisation rules nor the interest limitation rules apply to credit institutions. Disallowed deductions under both sets of rules may be carried forward indefinitely.

• Mandatory transfer pricing documentation rules apply.
• Bulgarian companies, non-residents that have a Bulgarian permanent establishment (PE) and sole traders generally are required to prepare a local file, but are exempt from the obligation where at least two of the following thresholds are not exceeded for the year prior to the reporting period: BGN 38 million in asset net book value; BGN 76 million in net sales revenue; and an average number of 250 personnel for the reporting period.
• Entities that carry out only domestic controlled transactions are also exempt from the obligation to prepare a local file. Regardless of whether an entity is required to prepare the mandatory transfer pricing documentation, the general requirement that the taxpayer be able to prove the market nature of its transactions with related parties during tax checks and audits applies.
• The local file must be prepared for transactions that exceed the following annual monetary thresholds: sales of goods – BGN 400,000; loans – principal over BGN 1 million or interest and other revenue and expenses related to the loan of over BGN 50,000; and all other transactions – BGN 200,000.
• Entities that are required to prepare a local file and that are part of a multinational group also must have a master file prepared by the group’s ultimate parent entity or another group entity.
• The local file must be prepared by 30 June of the year following the reporting year, and the master file must be available by 30 June of the second year following the reporting year.

• No stamp duty is levied on loan agreements.

• There are no tax rules specific to cash-pooling arrangements.

• There are no tax rules specific to financial transactions or banking services.
• Insurance contracts covering risks in Bulgaria are subject to a 2% tax on the insurance premiums. An exemption applies for certain premiums, including those under: reinsurance contracts, life insurance contracts and permanent health insurance.

All tax information supplied by Deloitte Touche Tohmatsu and Deloitte Highlight 2021 (www.deloitte.com).