site.btaMultinational Enterprise Groups and Large Domestic Groups Required to Pay Additional Top-Up Tax

Multinational enterprise groups and large-scale domestic groups will be required to pay an additional top-up tax and/or a national additional top-up tax, the National Assembly resolved on first reading on Friday.

The MPs approved amendments to the Corporate Income Tax Act aligning it with the provisions of Council Directive (EU) 2022/2523 on ensuring a global minimum level of taxation for multinational enterprise groups and large-scale domestic groups in the Union. Along with that, the amendments introduce a national additional top-up tax which will be imposed on multinational enterprise groups' constituent entities in Bulgaria and on large-scale domestic groups in keeping with the possibility provided for in the EU directive.

The effective minimum level of taxation will apply to companies with a turnover of at least EUR 750 million, or its equivalent in leva. The rate equals the positive difference between 15% and the effective tax rate.

"We are introducing a national additional top-up tax of 5%. The corporate income tax is 10%," said Lyudmila Petkova, Head of the Tax Policy Directorate at the Ministry of Finance. She explained that if a parent company in France has a subsidiary in Bulgaria, but Bulgaria has postponed the implementation of the EU directive, France will collect an additional 5% tax on the profit of the subsidiary in Bulgaria. This means that Bulgaria will lose public revenues if it postpones the implementation of the directive.

Furthermore, the amendments are aimed to align the Corporate Income Tax Act with changes in the Local Taxes and Fees Act by introducing a license tax for legal entities which run eating and entertainment establishments. They introduce a new state aid scheme in the shape of a corporate income tax deduction for micro, small and medium enterprises operating in primary farming to encourage them to invest the deduced amount in the same line of activity.

The National Assembly decided that proposals on the amendments to the Corporate Income Tax Act and the Value Added Tax Act may be submitted until November 27.