THE GOVERNMENT APPROVES THE CHANGES IN THE TAX LAWS FOR 2022

A draft law amending the Value Added Tax Act was approved

With its decision, the government approved a draft law amending the Value Added Tax Act (VAT). The provisions of Council Directive (EU) 2021/1159 of 13 July 2021 amending Directive 2006/112 / EC as regards temporary exemptions on imports and certain supplies in response to the COVID-19 pandemic are being transposed into national tax law. (EU Directive 2021/1159) and Council Directive 2019/2235 of 16 December 2019 amending Directive 2006/112 / EC on the common system of value added tax and Directive 2008/118 / EC on the common system of value added tax excise duty on defense activities within the Union (Directive (EU) 2019/2235).

Exemption from VAT is provided for the purchase of goods and services intended for donation by the European Commission or by an agency or body established under European Union law, in the performance of tasks to deal with the consequences of the COVID-19 pandemic. A VAT exemption is also provided for, which covers the supply of goods or services intended either for use by the armed forces of an EU Member State or by accompanying civilian personnel, or for the supply of their dining rooms or canteens when those forces are involved in defense activities aimed at implementing the Union's activities in the framework of the common security and defense policy outside its Member State.

The bill also proposes changes as a result of inconsistencies with the provisions of Council Directive 2006/112 / EC of 28 November 2006 on the common system of value added tax. In this regard, it is proposed to remove the provision by which food vouchers are excluded from the scope of specific vouchers and multi-purpose vouchers.

Due to the need to align VAT legislation with the rulings of the Court of Justice of the European Union (CJEU) in order to ensure the principles of legal certainty and VAT neutrality, the draft law provides for provisions that allow for corrections in case of incorrect tax treatment of supplies, in the presence of an effective audit act.

The draft law also made proposals for changes related to the clarification of provisions related to the application of the regime outside and in the Union, as well as the regime for distance selling of goods imported from third countries or territories.

The draft law also contains proposals for editing provisions in connection with difficulties encountered in the practical application of the law.

In order to deal with the consequences of the COVID-19 pandemic, the bill proposes an extension of the deadline to apply the reduced rate of 9 percent for some goods and services until the end of the declared emergency epidemic situation in the country related to the epidemic of COVID -19.

The Council of Ministers approved amendments to the Corporate Income Tax Act

The Council of Ministers approved a draft law amending the Corporate Income Tax Act. In connection with the need to transpose the provision of Art. 9a of Council Directive (EU) 2016/1164 of 12 July 2016 laying down rules against tax avoidance practices which directly affect the functioning of the internal market, as amended by Directive (EU) 2017/952 of 29 May 2017 amending Directive (EU) 2016/1164 as regards non-compliance with hybrid entities and instruments involving third countries (Directive (EU) 2016/1164) is proposed in the case of hybrid entities established or established in the country which are not taxable persons within the meaning of the Corporate Income Tax Act, the same to be equated to taxable persons, provided that one or more foreign entities that are related companies and together directly or indirectly hold 50 percent or more of the voting rights, the share capital or the right to share in the profit of the hybrid entity is in a jurisdiction or jurisdictions that consider the hybrid entity to be a taxable person for the purposes of the law. These rules do not apply to a collective investment scheme, which is an investment fund or a scheme that simultaneously meets the conditions to have multiple owners, to have a diversified portfolio of securities and to be subject to investor protection regulations.

It is proposed to explicitly clarify the tax treatment of the outcome of leaseback contracts classified as operating in cases where International Accounting Standards apply.

In order to eliminate inconsistency of the transposition in the Bulgarian national legislation of Directive (EU) 2016/1164 and in particular inconsistency with Art. 1 and Art. 7, para. 1 of the Directive, it is proposed to repeal the provision of CITA, which exempts from the application of the regime of controlled foreign companies those taxable persons whose controlled foreign companies in their jurisdiction to establish or establish are taxed with alternative forms of corporate tax taxation.

The transitional and final provisions of the bill propose changes in the Personal Income Tax Act, according to which it is possible for reports on income paid during the year and for withholding tax and compulsory social security contributions to be filed by the heirs of by law or by will, as well as by the testators or their legal representatives of sole traders or self-insured persons who died during the tax year, who were employers or payers of income. In this connection, a transitional regime is envisaged, according to which the change can be applied to the reports for which the obligation to submit arises after 31 December 2021.

Amendments to the Law on Excise Duties and Tax Warehouses have been approved

With its decision, the government approved a bill amending the Law on Excise Duties and Tax Warehouses and proposed to the National Assembly to adopt it. The changes are due to the need to transpose into national law the requirements of Council Directive (EU) 2020/262 of 19 December 2019 laying down the general arrangements for excise duty, of Council Directive (EU) 2020/1151 of 29 July 2020 amending Directive 92/83 / EEC on the harmonization of the structures of excise duties on alcohol and alcoholic beverages; They are also related to the implementation of the provisions of Council Directive (EU) 2019/2235 of 16 December 2019 amending Directive 2006/112 / EC on the common system of value added tax and Directive 2008/118 / EC on the common system of value added tax, excise duty on defense activities within the Union. Amendments are proposed due to the introduction of the principles and requirements of Council Directive 2020/262 / EC of 19 December 2019 on the general arrangements for excise duty and repealing Directive 2008/118 / EC.

The changes are aimed at strengthening the fight against tax fraud and removing certain tax obstacles to the free movement of excise goods between Member States. It is envisaged to expand the functionality of the computer system, which has so far been used for the movement of excise goods under the "deferred excise duty" regime, by including the possibility of covering the movement of excise goods released for consumption in one Member State move to the territory of another Member State in order to be delivered there for commercial purposes. This will simplify the monitoring of these movements and ensure the proper functioning of the internal market. With a view to the introduction of the new regimes, new concepts and legal entities are introduced.

The amendments concerning the implementation of Council Directive (EU) 2020/1151 of 29 July 2020 amending Directive 92/83 / EEC on the harmonization of the structures of excise duties on alcohol and alcoholic beverages are linked to the clarification of the provisions on the measurement of plateau degrees, beer and in particular the provisions relating to the measurement of Plateau degrees of sweetened or flavored beer. It is also proposed to update the definitions related to the references of the Combined Nomenclature codes used to describe alcoholic products.

In order to increase legal certainty for economic operators, the provisions related to the denatured alcohol exemption regime are clarified.

With the proposed changes related to the implementation of the provisions of Council Directive (EU) 2019/2235 of 16 December 2019 amending Directive 2006/112 / EC on the common system of value added tax and Directive 2008/118 / EC on the common excise duty regime in respect of defense activities within the Union provides for the exemption from excise duty of the armed forces of any Member State other than the Member State in which the excise duty is due, for the use of those forces for the needs of civilian personnel accompanying them, or for the supply of their dining rooms or canteens, where those forces take part in defense activities aimed at carrying out Union activities in the framework of the common security and defense policy.