List of Legislations >LAW FOR THE CORPORATE INCOME TAX LEVYING

LAW FOR THE CORPORATE INCOME TAX LEVYING

Art. 7. (1) The profits and income of local legal persons and local unincorporated partnerships shall be deemed to be from sources in the country, unless otherwise provided by law.

(2) The profits and income shall be from sources in the country whenever those originate from business
activity through:
a permanent establishment or through a base on the territory of the country; a procurator, an sales representative or other dependent representative.

(3) The profits and income derived from capital invested on the territory of Bulgaria shall be from a source
in the country, regardless of the origin of that capital.

(4) The profits and income from sales, export or other type of realisation of goods, services and rights on
and from the territory of Bulgaria shall be from sources in the country. Whenever foreign persons purchase
in the country and import and export goods or services without having a permanent establishment, the
profits and income shall not be considered to be from a source in the country.

(5) (Amended SG No 153/98) Regardless of the provisions of para 4 the following incomes paid by
local person or from the place of the economic activity to foreign person in the country shall be
considered that are with source in the country:

1. (amend., SG I 19/02) the remunerations for persons working free lance - under the condition that the sum of the remuneration at re-calculating the income of the payer or could be subtracted if the payer is not exempted from corporate tax or from income tax;

2- Remunerations different from salary paid to an employee or member of a management or control body of a Bulgarian corporate body, a branch of a foreign person, employee of a commercial representation of foreign person or of another person, implemented identical or similar functions;

3. dividends or liquidation shares from participation in commercial and unpersonofied companies;

4. interests;

5. (amend. SG 110/01) incomes from use of chattels or immovable properties, remunerations from
contracts for leasing, franchising and factoring;

6. author's and license remunerations;

7. Remunerations for technical services.

8. (new, SG 1 19/02) remuneration under management contracts.
(6) Income from agriculture and forestry, income from use of immovable property and positive differences
from sales of immovable property located on the territory of the country, shall be from sources in the
country.
(7) For the purposes of para 6 "immovable property" shall include ownership of a quota or limited real
rights on immovable property.
(8) Income from transactions with interests in local companies, as well as transactions with securities under
para 9, shall be from sources in the country.
(9) Income from securities issued by the state, municipalities or by iocal legal persons shall be from a
source in Bulgaria.

Art. 12. (1) (Supplemented - SG 153/98 r.) Base for taxation of the incomes from dividends and liquidation shares calculated (personified) in favour of local and foreign persons except the distributed profit under the form of shares and stocks in the sense of Art. 12, para 1, items 13 and 14 of the Law for levying the incomes of physical persons.

(2) Tax base for levying the incomes calculated (personified) in favour of foreign physical and
corporate bodies as well as of the foreign unpersonified companies except the incomes of para 1 shall
be the gross extent of the incomes from:
1. interests, including also interests contained in the payments for financial leasing;
2. royalties and license remunerations;
3. remunerations for technical services;
4. (amend. SG 110/01) incomes use of chattels and immovable property, remunerations for contracts
for exploitation leasing, franchising and factoring from sources in the Republic of Bulgaria.
5. (new, SG 119/02) remuneration under management contracts;
6. (new, SG 119/02) remuneration received as members of managing and control bodies of Bulgarian
corporate bodies.

(3) (amend. SG 105/00, suppl. SG 110/01) Base for levying the incomes of the foreign persons from sales
share holding, securities and financial assets by the positive difference between their sale price,
respectively the market price of the consideration and the documentary proven acquisition price.

(4) (amend., SG 105/00) For tax purposes the payments for financial leasing shall include interest
equal to the legal interest rate. The provision shall be applied when the contract for financial leasing
does not determine explicitly the interest.

(5) (amend., SG 105/00) Base for levying the incomes of the foreign persons from transfer of immovable
property shall be the positive difference between the sale price and the updated acquisition price. As price
of acquisition shall be accepted the higher price between the price determined by the order of Art. 46 of the
Law for the local taxes and fees and the actually paid price increased with the inflation.

Art. 26. (amend. SG 110/01) (1) (amend., SG 119/02, amend. SG 109/03) At determining the leviable profit the maximum amount of the expenses for interests for loans from traders, partners and other persons, as well as for financial leasing and bank loans, decreased by all the revenue from interests (except the interests of art. 23, para 3, item 8), cannot exceed 75 percent of the accounting profit, without the influence of all expenses and revenues for interests. The expenses for interest on financial leasing and bank loans shall be regulated only in the cases when the lessee, respectively the receiver of the credit, and the lessor, respectively the creditor are related persons. When the financial result, without the influence of all expenses and revenues for interests, is negative value, the whole amount of the compensated expense for interests shall be regulated.

(2) Para 1 shall not be applied for the banks and the holding companies under the conditions of Art. 280 of
the Commercial law.

(3) (amend, and suppl., SG 119/02) The expenses for interests, with which is increased the financial result
at its tax transformation, shall be subject to deduction from the leviable profit during the next three tax
years up to the amount of the decrease of para 1. As regards the expenses for interest incurred during the
next there tax years shall apply the provisions of art. 26, taking into account their order of occurrence. For
each case of weak capitalisation the three-year period shall begin at the moment of their occurrence.

(4) Para 1 and 2 shall not be applied, when for the respective tax period the amount of the attracted capital
is equal to or less than of the double amount of the own capital.
(5) (new, SG 119/02) When the contract for financial leasing does not explicitly determine the size of the interest it shall be determined according to art. 12, para 4.

Art. 30. (amend., SG 119/02) For the purposes of taxation the criteria for classification of the leasing contracts shall be determined in compliance with the accountancy legislation.

Art. 31. (amend., SG 119/02) (1) In the cases where, in the form of a contract for exploitation leasing is hidden a contract for financial leasing the concluded contract shall be considered a financial leasing contract.

(2) In the cases where, in the form of a contract for financial leasing is hidden a contract for exploitation leasing the concluded contract shall be considered an exploitation leasing contract.
Additional provisions

§ 1. For the purposes of this law:

29. (new, SG 105/00) "Legal interest" is the basic interest rate of the Bulgarian National Bank plus 10 points. When the creditor, the lessor is a foreign person and has no place of economic activity on the territory of the country, legal interest in the context of this law shall be considered a 6-month LIBOR plus 5 points for the respective currency.