Company of Another Member State
Article 100. "Company of another Member State" shall be any company in respect of which the following conditions are simultaneously fulfilled:
1. the company takes a legal form in accordance with Annex 1 hereto;
2. the company is resident for tax purposes in another Member State of the European Community, according to the relevant tax legislation and by virtue of a convention for the avoidance of double taxation with a third State is not considered to be resident for tax purposes in another State outside the European Community;
3. the profits of the company attract a tax covered under Annex 2 hereto or to a similar profits tax and the company has no option or the possibility of being exempt from the levy of such tax.
Resident Parent Company
Article 101. "Resident parent company" shall be any resident commercial corporation or unincorporated association in respect of which the following conditions are simultaneously fulfilled:
1. the profits of the company attract corporation tax;
2. the company has a minimum holding of 15 per cent in the capital of a company of a Member State, inter alia through a permanent established in another Member State of the European Community, for an uninterrupted period of at least two years.
Parent Company of Member State
Article 102. "Parent company of a Member State" shall be any company of another Member State of the European Community which has a minimum holding of 15 per cent in the capital of a resident subsidiary, inter alia through a permanent established in another Member State of the European Community, for an uninterrupted period of at least two years.
Resident Subsidiary
Article 103. "Resident subsidiary" shall be any resident commercial corporation or unincorporated association in respect of which the following conditions are simultaneously fulfilled:
1. the profits of the company attract corporation tax;
2. a parent company of a Member State has a minimum holding of 15 per cent in the capital of the company for an uninterrupted period of at least two years.
Subsidiary of Member State
Article 104. "Subsidiary of a Member State" shall be any company of another Member State of the European Community the capital of which includes a minimum holding of 15 per cent by a resident parent company for an uninterrupted period of at least two years.

Section II
Tax Treatment upon Distribution of Dividends

Dividends Distributed by Subsidiary of Member State
Article 105. (1) Any accounting income charged in a resident parent company as a result of distribution of dividends by a subsidiary of the said company of a Member State shall not be recognized for tax purposes.
(2) The accounting income charged in a permanent establishment in the country as a result of distribution of dividends by non-resident persons shall not be recognized for tax purposes where the following conditions are simultaneously fulfilled:
1. the permanent establishment is of a company of another Member State;
2. the company referred to in Item 1 has, inter alia through the permanent establishment thereof, a minimum holding of 15 per cent in the capital of the non-resident person distributing the dividends for an uninterrupted period of at least two years;
3. the non-resident person distributing the dividends is a company of another Member State.
Non-fulfilment of Condition for Exemption from Taxation
Article 106. (1) Where income from dividends has been charged within a period of up to two years from the time of acquisition of a minimum holding of 15 per cent in the capital of a company of a Member State, the taxable person shall have the right not to recognize the said income for tax purposes.
(2) In case the company ceases to have a minimum holding of 15 per cent in the capital before the lapse of the two years, the unrecognized income from dividends referred to in Paragraph (1) shall be considered as being recognized for tax purposes for the year of accounting for the said income. The tax financial result and the corporation tax due for the year of accounting for the dividends shall be adjusted in a way as if the income from dividends were recognized for tax purposes. Default interest shall be due according to the standard procedure for the period commencing on the date on which the corporation tax was to be remitted and ending on the date of remittance of the said tax.
Unrecognized Expenses Related to Unrecognized Income from Dividends
Article 107. (Repealed, SG No. 110/2007).
Dividends Distributed by Resident Subsidiary in Favour of Parent Company
of Member State
Article 108. (1) Any dividends charged by a resident subsidiary in favour of a parent company of a Member State shall not be subject to levy of a withholding tax.
(2) Any dividends charged by resident legal persons in favour of a permanent establishment in another Member State shall not be subject to levy of a withholding tax according to the procedure established by Part Three herein where the following conditions are simultaneously fulfilled:
1. a tax under Annex 2 hereto or a similar profits tax is levied on the profits from a permanent establishment and the permanent establishment has no option or the possibility of being exempt from the levy of such tax;
2. the permanent establishment is of another resident person or of a company of another Member State;
3. the resident person/company referred to in Item 2 has, inter alia through the permanent establishment, a minimum holding of 15 per cent in the capital of the resident person distributing the dividends for an uninterrupted period of at least two years;
4. the resident persons referred to in Items 2 and 3 are commercial corporations or unincorporated associations and the profits thereof attract corporation tax.
Collateral Security
Article 109. (1) Where the provisions of Article 108 herein are applied and the two-year period for having a minimum holding of 15 per cent in the capital has not lapsed at the date of making a decision on distribution of dividend, a tax shall not be withheld at source according to the procedure established by Part Three herein but collateral security shall be furnished to the revenue authority.
(2) Any such collateral security must cover the full amount of the withholding tax due.
(3) Any such collateral security may be created solely by means of a money deposit or a bank guarantee. The said collateral security shall be accepted in Bulgarian leva and no interest shall be payable thereon.
(4) The collateral security shall be released upon fulfilment of the condition referred to in Paragraph (1).
Cooperatives
Article 110. The provisions of this Chapter shall furthermore apply, mutatis mutandis, in respect of the cooperatives, the cooperative unions and the enterprises thereof.
Tax Evasion
Article 111. The provisions of this Chapter shall not apply in all cases of tax evasion or tax avoidance, inter alia in the cases of hidden profit distribution.

Chapter Nineteen
TRANSFORMATION OF COMPANIES AND COOPERATIVES AND TRANSFER OF ENTERPRISE
Section I
General Dispositions

Applicability
Article 112. The provisions of this Chapter shall apply upon transformation of any companies and cooperatives and upon transfer of an enterprise.
Date of Transformation
Article 113. The date of transformation for tax purposes shall be the date of entry of the transformation in the Commercial Register.
Last Tax Period upon cessation of transferring company
Article 114. Last Tax Period upon cessation of transferring company shall be the period from the beginning of the year to the date of transformation. For transferring companies which are newly established during the year of transformation, Last Tax Period shall be the period from the date of establishment to the date of transformation.
Taxation for Last Tax Period
Article 115. (1) The transferring companies and the permanent establishments of non-resident persons shall be subject to corporation tax for the last tax period according to the standard procedure established by this Act. The taxation shall be final.
(2) For tax purposes, the assets and liabilities available at the date of transformation shall be considered as having been sold at market prices and shall be written off.
(3) Upon determination of the tax financial result, the accounting financial result shall be credited with the profit and shall be debited with the loss arrived at as a difference between the market price of the asset or liability and the accounting value thereof at the date of transformation. Any temporary tax differences related to the asset or liability shall be recognized during the last tax period according to the standard procedure established by this Act. Article 66 (1) and (2) herein shall apply upon determination of the tax financial result.
(4) Paragraphs (2) and (3) shall not apply upon transformation under the terms and according to the procedure established by Sections II and III herein.
Tax Treatment of Transformation through Change of Legal Form
Article 116. (1) Articles 115 and 117 herein shall not apply in the cases of transformation through change of the legal form under Article 264 of the Commerce Act. The newly formed company shall assume all obligations for determination of the tax financial result and remittance of the corporation tax due for the full year of transformation.
(2) For tax purposes, all rights and obligations arising from any acts performed by the transferring company for the current and prior periods, including the adjustments of the tax financial results, shall be considered as having been performed by the newly formed company.
Tax Treatment of Transformation by Transfer of Property to Sole Owner
Article 116a. (New, SG No. 110/2007) (1) Upon transformation by transfer of property to the sole owner under Article 265 of the Commerce Act, all rights and obligations arising from steps performed by the transforming corporation for the current and prior periods, including the adjustments of the tax financial result, shall be considered as having been performed by the sole trader.
(2) The sole trader shall submit a tax return on corporation tax for the last tax period of the transferring company according to the procedure established by Article 117 (1) herein and shall remit the said tax within the time limit under Article 117 (2) herein.
(3) After the transformation, the sole trader shall make quarterly tax prepayments in the year of transformation.
(4) The sole trader may not carry forward any tax losses formed by the transferring company.
(5) The sole trader may not recognize for tax purposes any unrecognized expenses on interest payments in the transferring company resulting from application of the thin capitalization regime.
(6) The transferring company shall not apply Article 115 (2) and (3) herein.
Declaring and Remittance of Tax for Last Tax Period
Article 117. (1) (Amended and supplemented, SG No. 110/2007) In the cases of dissolution of transferring companies, the newly formed companies or the acquiring companies shall submit a tax return on the corporation tax for the last tax period of the transferring company within thirty days after the date of transformation. The tax return shall be submitted to the National Revenue Agency territorial directorate exercising competence over the place of registration of the newly formed company or the acquiring company. Upon transformation through division, the tax return shall be submitted by one of the newly formed or acquiring companies.
(2) The corporation tax for the last tax period shall be remitted by the newly formed companies or the acquiring companies within thirty days after the date of transformation after deduction of the tax prepayments made.
(3) (New, SG No. 110/2007) Paragraphs (1) and (2) shall furthermore apply in the cases of dissolution of a transferring company under Section II of this Chapter.
Tax Prepayments by Acquiring Companies or Newly Formed Companies
Article 118. (1) After the transformation, the acquiring companies or the newly formed companies shall make quarterly tax prepayments in the year of transformation.
(2) Upon transformation through change of the legal form under Article 264 of the Commerce Act, the newly formed company shall make monthly or quarterly tax prepayments according to the standard procedure established by this Act on the basis of the tax financial result of the transferring company.
Carry-Forward of Tax Loss upon Transformation and Transfer
of Enterprise
Article 119. (1) Upon transformation under the Commerce Act, the acquiring companies or newly formed companies may not carry forward any tax losses formed by the transferring companies.
(2) Upon sale of an enterprise under Article 15 of the Commerce Act, the transferee may not carry forward any tax losses formed by the transferor.
(3) Paragraph (1) shall not apply upon transformation through change of the legal form under Article 264 of the Commerce Act.
Regulation of Thin Capitalization
Article 120. (1) Upon transformation under the Commerce Act, the acquiring companies or newly formed companies may not recognize for tax purposes any unrecognized expenses on interest payments in the transferring companies resulting from application of the thin capitalization regime.
(2) Upon sale of an enterprise under Article 15 of the Commerce Act, the transferee may not recognize for tax purposes any unrecognized expenses on interest payments at the transferor resulting from application of the thin capitalization regime.
(3) Paragraph (1) shall not apply upon transformation through change of the legal form under Article 264 of the Commerce Act.
Expenses on Conduct of Transformation
Article 121. (1) The accounting expenses incurred in connection with the transformation shall not be recognized for tax purposes at the transferring company. The unrecognized expenses shall be recognized for tax purposes upon determination of the tax financial result of the acquiring company or the newly formed company in the year during which the transformation was implemented.
(2) Where any circumstances occur determining that the transformation will not be implemented, the expenses referred to in Paragraph (1) shall be recognized for tax purposes at the transferring companies in the year of occurrence of the said circumstances, if the requirements of this Act are complied with.
Tax Treatment upon Opting for Earlier Date of Transformation for
Accounting Purposes
Article 122. (1) (Amended and supplemented, SG No. 110/2007) Upon opting for an earlier date of transformation for accounting purposes according to the procedure established by Article 263g (2) of the Commerce Act, all steps performed by the transferring companies for the account of the newly formed companies or acquiring companies as from the said date and until the date of transformation for tax purposes shall be considered as having been performed for tax purposes by the transferring companies.
(2) (Supplemented, SG No. 110/2007) In the cases referred to in Paragraph (1), all accounting income and expenses, profits and losses, accounted for by the newly formed companies or acquiring companies shall be recognized for tax purposes at the transferring company. The said income and expenses, profits and losses shall not be recognized for tax purposes at the newly formed companies or acquiring companies. The accounting income and expenses, profits and losses for the purposes of sentences one and two shall be those as would have been accounted for by the transferring company without providing for the earlier date for accounting purposes according to the procedure established by Article 263g (2) of the Commerce Act.
(3) The adjustments upon determination of the tax financial result, resulting from any acts referred to in Paragraph (1), shall be performed by the transferring companies.
Cooperative Organizations and State-Owned Enterprises
Article 123. The provisions of this Chapter in respect of the transformation of commercial corporations shall furthermore apply in the cases of:
1. restructuring of cooperative organizations;
2. dissolution, closure or formation of state-owned enterprises within the meaning given by Article 62 (3) of the Commerce Act under conditions of universal succession.
Liability upon Transformation and Restructuring
Article 124. (1) Upon transformation of commercial corporations or upon restructuring of cooperative organizations, the newly formed or acquiring companies/cooperative organizations shall incur solidary liability for the tax liabilities of the transferring companies or cooperative organizations up to the extent of the rights received.
(2) Upon transfer of an enterprise under Article 15 of the Commerce Act, the transferee shall incur solidary liability for the tax liabilities of the transferor up to the extent of the rights received.
(3) The rights received shall be valued at market prices.

Section II
Specific Regime of Taxation upon Transformation

Applicability
Article 125. (1) This Section shall apply upon merger by acquisition, merger by the formation of a new company, division, partial division, transfer of assets and exchange of shares or interests within the meaning given by Articles 126 to 131 herein, concerning resident companies and/or companies from another Member State of the European Community.
(2) This Section shall furthermore apply, mutatis mutandis, in the cases of restructuring of cooperative organizations, including such of other Member States of the European Community, where the conditions specified therein exist.
Merger by Acquisition
Article 126. (1) "Merger by acquisition" shall be any transformation in respect of which the following conditions are simultaneously fulfilled:
1. all assets and liabilities of one or more transferring companies are transferred to another existing acquiring company, the transferring companies being dissolved without going into liquidation;
2. the shareholders or members of the transferring companies are issued shares or interests in the acquiring company.
(2) "Merger by acquisition" shall furthermore be any transformation whereupon all assets and liabilities of a transferring company are transferred to an acquiring company holding all shares or interests in the transferring company, and the transferring company is dissolved without going into liquidation.
Merger by Formation of New Company
Article 127. "Merger by the formation of a new company" shall be any transformation in respect of which the following conditions are simultaneously fulfilled:
1. all assets and liabilities of two or more transferring companies are transferred to a newly formed company, the transferring companies being dissolved without going into liquidation;
2. the shareholders or members of the transferring companies are issued shares or interests in the newly formed company.
Division
Article 128. "Division" shall be any transformation in respect of which the following conditions are simultaneously fulfilled:
1. (supplemented, SG No. 110/2007) all assets and liabilities of a transferring company are transferred to two or more existing (acquiring) or newly formed companies, the transferring company being dissolved without going into liquidation;
2. the shareholders or members of the transferring company are issued shares or interests in each of the existing or newly formed companies, in proportion to the shares or interests held by the shareholders or members in the transferring company.
Partial Division
Article 129. "Partial division" shall be any transformation in respect of which the following conditions are simultaneously fulfilled:
1. (supplemented, SG No. 110/2007) one or more branches of activity of a transferring company is transferred to one or more existing (acquiring) or newly formed companies, without the transferring company being dissolved and leaving therein at least one branch of activity;
2. the shareholders or members of the transferring company are issued shares or interests in the existing or newly formed companies in proportion to the shares or interests held thereby in the transferring company.
Transfer of Assets
Article 130. (Supplemented, SG No. 110/2007) "Transfer of assets" shall be a transformation whereupon one, more or all branches of activity of a transferring company are transferred to one or more existing (acquiring) or newly formed companies in exchange for shares or interests issued by the existing or newly formed companies in favour of the transferring company, without the transferring company being dissolved.
Exchange of Shares or Interests
Article 131. "Exchange of shares or interests" shall be any transformation in respect of which the following conditions are simultaneously fulfilled:
1. as a result of the transformation, the acquiring company holds more than one-half of the voting shares or of the interests in the acquired company or, if already having such holding in the capital, acquires a further holding in the shares or interests;
2. the shareholders or members of the acquired company exchange the shares or interests thereof for the issue of shares or interests in the acquiring company.
Additional Cash Payments and Non-Issue of Shares or Interests
Article 132. (1) In the cases of merger by acquisition, merger by the formation of a new company, division, partial division, transfer of assets and exchange of shares or interests, for the purpose of achieving a parity of exchange, cash payments not exceeding 10 per cent of the nominal value of the shares or interests issued as a result of the transformation may be effected to the shareholders or members of the transferring companies or acquired companies.
(2) (Amended, SG No. 110/2007) In the cases of merger by acquisition, division and partial division, shares or interests need not be issued where this is admissible by the Commerce Act.
Issue of Shares or Interests
Article 133. Within the meaning given by this Chapter, issue of shares or interests shall be in place where newly issued or held own shares or interests are provided by a newly formed, receiving or acquiring company.
Branch of Activity
Article 134. "Branch of activity" shall be the totality of assets and liabilities of a company which, from an organizational, functional and financial point of view, constitute an independent business.
Transferring Companies
Article 135. "Transferring companies," within the meaning given by this Section, shall be:
1. a resident transferring company;
2. a transferring company from another Member State of the European Community;
3. a permanent establishment in the country of a transferring company from another Member State of the European Community.
Receiving Companies
Article 136. "Receiving companies," within the meaning given by this Section, shall be:
1. a resident newly formed or receiving company;
2. a newly formed or receiving company from another Member State of the European Community;
3. a permanent establishment in the country of a newly formed or receiving company from another Member State of the European Community.
Company from Another Member State of the European Community
Article 137. "Company from another Member State of the European Community," within the meaning given by this Section, shall be any company which simultaneously fulfils the following conditions:
1. the company takes a legal form in accordance with Annex 3 hereto;
2. the company is resident for tax purposes in another Member State of the European Community, according to the relevant tax legislation and by virtue of a convention for the avoidance of double taxation with a third State is not considered to be resident for tax purposes in another State outside the European Community;
3. the profits of the company are subject to a tax covered under Annex 4 hereto or to a similar profits tax and the company has no option or the possibility of being exempt from the levy of such tax.
Legal Succession
Article 138. For the purposes of this Section, upon transformation all rights and obligations arising from any acts performed by the transferring companies for the current period and the prior periods in respect of the assets and liabilities transferred under Item 1 of Article 139 herein, including the adjustments upon determination of the tax financial result, shall pass to the receiving companies.
Assets and Liabilities Subject to Transformation
Article 139. The assets and liabilities subject to transformation under this Section shall be allocated to the following categories:
1. assets and liabilities whereof the results of exploitation before and after the transformation are involved upon determination of the tax financial result under this Act;
2. assets and liabilities whereof the results of exploitation before the transformation were involved and, as a result of the transformation, cease to be involved upon determination of the tax financial result under this Act;
3. assets and liabilities whereof the results of exploitation before the transformation were not involved and, as a result of the transformation, become involved upon determination of the tax financial result under this Act.
Assets and Liabilities Transferred under Item 1
of Article 139 Herein
Article 140. (1) The accounting profits or losses originating upon write-off of any assets and liabilities referred to in Item 1 of Article 139 herein as a result of the transformation shall not be recognized for tax purposes.
(2) The temporary tax differences related to any assets and liabilities referred to in Item 1 of Article 139 herein, which have originated before the transformation, shall not be recognized for tax purposes at the time of transformation and shall be considered as having originated at the receiving companies.
(3) Where any asset or liability is recognized according to accounting legislation at the receiving company at a value diverging from the pre-transformation value of the said asset or liability, the difference between the two values shall form a temporary tax difference from a subsequent valuation or the temporary tax difference referred to in Paragraph (2) shall be adjusted thereby.
(4) (Supplemented, SG No. 110/2007) The subsequent valuations reserve (revaluation reserve) in respect of any assets referred to in Item 1 of Article 139 herein, which are not tax depreciable assets, shall be transferred by the transferring company and shall be considered as having originated at the receiving company. The transferring company shall not apply Article 45 herein. Where the transferred subsequent valuations reserve (revaluation reserve) referred to in sentence one is not accounted for at the receiving company, the accounting financial result shall be credited with the amount of the reserve where the reserve is a positive quantity or, respectively, the accounting financial result shall be debited with the amount of the reserve where the reserve is a negative quantity, in the year of write-off of the relevant asset whereto the reserve is related.
(5) (Supplemented, SG No. 110/2007) Any tax depreciable assets acquired under Item 1 of Article 139 herein shall be posted in the tax depreciation schedule of the receiving company at values equal to the values of the said assets in the tax depreciation schedule of the transferring company at the time of transformation. A copy of the tax depreciation schedule of the transferring company at the time of transformation shall be delivered to the revenue authority together with the copy of the statement referred to in Paragraph (6).
(6) (Amended, SG No. 110/2007) Upon transformation of each asset or liability referred to in Item 1 of Article 139 herein, a statement shall be prepared according to the procedure established by Article 141 herein.
(7) (New, SG No. 110/2007) Where, as a result of the transformation, the receiving company recognizes according to accounting legislation any assets or liabilities which were not recognized at the transferring company, the post-transformation income and expenses accounted for in connection with the said assets and liabilities shall not be recognized for tax purposes. Where the assets referred to in sentence one are depreciable for tax purposes, the said assets shall be posted in the tax depreciation schedule of the receiving company and tax depreciations shall not be charged for the said assets. The accounting profit which has originated at the receiving company as a result of the transformation and, respectively, the income accounted for in connection with any negative goodwill generated, shall not be recognized for tax purposes.
(8) (New, SG No. 110/2007) Where any asset of the transferring company is not recognized according to accounting legislation at the receiving company, the accounting financial result shall be debited with the amount of the said asset upon determination of the tax financial result of the receiving company for the year of transformation, inter alia upon determination of the quarterly tax prepayments. Where any liability of the transferring company is not recognized according to accounting legislation at the receiving company, the accounting financial result shall be credited with the amount of the said liability upon determination of the tax financial result of the receiving company for the year of transformation, inter alia upon determination of the quarterly tax prepayments. The temporary tax differences related to any asset or liability referred to in sentence one, which have originated before the transformation, shall be recognized at the receiving company during the year of transformation according to the standard procedure established by the law.
(9) (New, SG No. 110/2007) Paragraphs (3), (6) and (8) shall not apply to:
1. any tax depreciable assets;
2. any assets and liabilities under deferred taxes;
3. the goodwill, where the accounting income and expenses accounted for in connection therewith are not recognized for tax purposes;
4. any amounts which are assets for the transferring company and liabilities for the receiving company;
5. any amounts which are liabilities for the transferring company and assets for the receiving company;
6. any shares or interests of the receiving company held by the transferring company;
7. any own shares purchased by the transferring company;
8. any subscribed capital unpaid of the transferring company;
9. any assets and liabilities referred to in Item 2 of Article 139 herein.
(10) (New, SG No. 110/2007) Paragraph (4) shall not apply to the financial assets and liabilities subsequent valuations reserve established by financial institutions, where the accounting financial result has been adjusted according to the procedure established by Article 97 herein for the profits and losses from the said subsequent valuations. This reserve shall not be stated in the statements referred to in Article 141 herein.
Statements of Assets and Liabilities Referred to in
Item 1 of Article 139 Herein
Article 141. (1) The statement referred to in Article 140 (6) herein, prepared by the transferring companies, shall contain the following information on each asset and liability as at the date of transformation:
1. type and designation;
2. accounting value;
3. temporary tax difference;
4. (new, SG No. 110/2007) subsequent valuations reserve (revaluation reserve).
(2) A copy of the statement referred to in Paragraph (1) as prepared shall be delivered to the receiving companies and to the revenue authority not later than at the end of the month next succeeding the month of transformation.
(3) In the cases referred to in Article 140 (3) herein, a new statement shall be prepared by the receiving companies and a copy of the said statement shall be delivered to the revenue authority together with the annual tax return. The said statement shall contain the following information on each asset and liability:
1. type and designation;
2. accounting value;
3. pre-transformation temporary tax difference;
4. post-transformation temporary tax difference, determined according to the procedure established by Article 140 (3) herein;
5. (new, SG No. 110/2007) subsequent valuations reserve (revaluation reserve).
(4) Where the values of the assets and liabilities are adjusted according to accounting legislation as a result of the transformation after submission of the statement referred to in Paragraph (3), the receiving company shall prepare an adjusting statement. The adjusting statement shall be delivered to the revenue authority not later than at the end of the month next succeeding the month of occurrence of the circumstances necessitating the adjustment.
(5) The statements referred to in Paragraphs (1) and (3) shall indicate data identifying the transferring companies and receiving companies, as well as the date of transformation and the judgment of court on entry of the said transformation.
(6) (New, SG No. 110/2007) The copies of the statements covered under this Article and of the tax depreciation schedule referred to in Article 140 (5) herein shall be submitted to the National Revenue Agency territorial directorate exercising competence over the place of registration of the receiving companies on a magnetic or optical data carrier, or by electronic means.
Assets and Liabilities Transferred under Item 2
of Article 139 Herein
Article 142. (1) The accounting profits or losses originating upon write-off of any assets and liabilities referred to in Item 2 of Article 139 herein, related to a permanent establishment of a resident company in another Member State of the European Community, shall not be recognized for tax purposes.
(2) The temporary tax differences related to any assets and liabilities referred to in Paragraph 1 herein, shall not be recognized for tax purposes at the time of transformation and during the succeeding years.
(3) For tax purposes, outside the cases referred to in Paragraph (1), the assets and liabilities referred to in Item 2 of Article 139 herein, available at the date of transformation, shall be considered as having been sold at market prices and shall be written off.
(4) In the cases referred to in Paragraph (3), upon determination of the tax financial result, the accounting financial result shall be credited with the profit and shall be debited with the loss arrived at as a difference between the market price of the asset or liability and the accounting value thereof at the date of transformation. Any temporary tax differences related to the asset or liability shall be recognized during the last tax period according to the standard procedure established by this Act. Article 66 (1) and (2) herein shall apply upon determination of the tax financial result.
Assets and Liabilities Transferred under Item 3
of Article 139 Herein
Article 143. (1) The assets and liabilities referred to in Item 3 of Article 139 herein shall be valued for tax purposes at the receiving companies at the value of the said assets and liabilities determined according to national accounting legislation.
(2) The tax depreciable assets referred to in Item 3 of Article 139 herein shall be posted in the tax depreciation schedule according to the standard procedure established by this Act.
Carry-Forward of Tax Losses
Article 144. (1) Upon transformation under this Section, the receiving companies shall not have the right to carry forward the tax losses formed by the transferring companies.
(2) Paragraph (1) shall not apply in the cases of merger by acquisition or merger by the formation of a new company under this Section, as a result of which a permanent establishment of a company from another Member State of the European Community commences the legal existence thereof in the country and the said company has not had a permanent establishment in the country before the transformation.
Tax Losses by Permanent Establishment
Article 145. (1) Any tax losses not carried forward at the time of transformation, formed by a permanent establishment of a resident company in another Member State of the European Community, shall not be deducted.
(2) Upon determination of the tax financial result, the accounting financial result shall be credited with the tax losses carried forward at the time of transformation, formed by a permanent establishment of a resident company in another Member State of the European Community, which have not been deducted from the profits of the permanent establishment.
Regulation of Thin Capitalization
Article 146. (1) Upon transformation under this Section, the receiving companies shall not have the right to recognize for tax purposes any unrecognized expenses on interest payments in the transferring companies resulting from application of the thin capitalization regime.
(2) Paragraph (1) shall not apply in the cases of merger by acquisition or merger by the formation of a new company under this Section, as a result of which a permanent establishment of a company from another Member State of the European Community commences the legal existence thereof in the country and the said company has not had a permanent establishment in the country before the transformation.
Tax Prepayments by Receiving Companies
Article 147. (1) After transformation under this Section, the receiving companies shall make quarterly tax prepayments in the year of transformation.
(2) In the cases referred to in Article 144 (2) herein, the receiving companies shall make monthly or quarterly tax prepayments according to the standard procedure established by this Act on the basis of the tax financial result of the transferring companies.
Write-Off of Holding
Article 148. (1) Where a receiving company has a holding in the capital of a transferring company, the accounting profits or losses in connection with the write-off of the said holding in the capital shall not be recognized for tax purposes.
(2) The income referred to in Paragraph (1) shall not be subject to levy of a tax withheld at source according to the procedure established by Part Three herein.
Tax Treatment of Shareholders of Members of Transferring Companies and
Acquired Companies
Article 149. (1) The accounting profits or losses originating at shareholders or members of transferring companies or acquired companies as a result of an acquisition of shares or interests in receiving or acquiring companies shall not be recognized for tax purposes in the year of accounting for the said profits or losses and shall form a temporary tax difference from a subsequent valuation.
(2) The temporary tax differences, originating at the shareholders or members before the transformation, which are related to the written off shares or interests in the transferring companies or acquired companies, shall not be recognized for tax purposes at the time of transformation.
(3) The temporary tax differences referred to in Paragraphs (1) and (2) shall be considered as having originated in respect of the newly acquired shares or interests and shall be recognized according to the standard procedure established by this Act.
(4) The income accruing to any non-resident legal persons which are shareholders or members of resident transferring or acquired companies from acquisition of shares or interests as a result of transformation shall be taxed or shall be exempted from tax withheld at source according to the standard procedure established by this Act at the date of transformation.
(5) The tax withheld at source referred to in Paragraph (4) shall be due from the shareholder or member upon disposition in any form whatsoever of the newly acquired shares or interests and shall be remitted within sixty days after any such disposition.
(6) (Amended, SG No. 110/2007) On or before the 31st day of January of the relevant year, the non-resident legal persons referred to in Paragraphs (4), (5) and (8) shall submit a declaration to the Sofia Territorial Directorate of the National Revenue Agency, certifying thereby that the said persons have not disposed of the shares or interests newly acquired as a result of the transformation. Any such persons shall submit the declaration referred to in sentence one annually, until the year of disposition of the newly acquired shares or interests.
(7) Upon failure to submit the declaration referred to in Paragraph (6) when due, in addition to becoming liable to the administrative sanction, for the purposes of this Act the non-resident legal person shall furthermore be presumed to have disposed of the newly acquired shares or interests.
(8) (New, SG No. 110/2007) Upon acquisition of shares or interests as a result of transformation through partial division, income shall not accrue to a non-resident legal person, unless shared of the transferring company are cancelled upon the partial division. For the purposes of assessment of the tax at source upon subsequent disposition of the shares or interests referred to in sentence one, the documented cost of acquisition of the said shares or interests shall be zero.
Taxation of Transferring Company upon Transfer of Assets
Article 150. (1) The accounting profits or losses originating at a transferring company as a result of a transfer of assets shall not be recognized for tax purposes in the year of accounting for the said profits or losses and shall form a temporary tax difference from a subsequent valuation.
(2) The temporary tax difference referred to in Paragraph (1) shall be considered as having originated in respect of the newly acquired shares or interests and shall be recognized for tax purposes according to the standard procedure established by the Act.
(3) Where the shares or interests referred to in Paragraph (1) are held by the transferring company for an uninterrupted period of at least five years, the temporary tax difference referred to in Paragraph (1) shall not be recognized for tax purposes at the time of transformation and during the succeeding years.
Tax Evasion
Article 151. The provisions of this Section shall not apply where the transformation has as its objective tax evasion or tax avoidance. Tax evasion shall be presumed, inter alia, where the transformation is not carried out for valid commercial reasons or where the said transformation conceals the disposition of assets.

Section III
Transfer of Registered Office of European Company or European
Cooperative Society

Applicability
Article 152. Within the meaning given by this Chapter, "transfer of the registered office of a European company or a European cooperative society" shall be an operation whereby:
1. the company, without being dissolved or without incorporation of a new legal person, transfers the registered office thereof from the country to another Member State of the European Community, according to Article 8 of Council Regulation (EC) No 2157/2001 or according to Council Regulation (EC) No 1435/2003, while the assets and liabilities of the company must remain effectively connected with the permanent establishment in the country and the results of exploitation of the said assets must be involved upon determination of the tax financial result, or
2. the company, without being dissolved or without incorporation of a new legal person, transfers the registered office thereof from another Member State of the European Community to the country according to Article 8 of Council Regulation (EC) No 2157/2001 or according to Council Regulation (EC) No 1435/2003, while the assets and liabilities of the company must remain effectively connected with the company which commences the legal existence thereof as a result of this operation, and the results of exploitation of the said assets must be involved upon determination of the tax financial result.
Legal Succession
Article 153. (1) For tax purposes, upon transfer of the registered office of a European company or a European cooperative society under the terms established by Item 1 of Article 152 herein:
1. all acts performed by the said company for the current period and the prior periods, including the adjustments of the tax financial result, shall be considered as having been performed by the permanent establishment;
2. corporation tax shall not be levied on the company for the period from the beginning of the year until the date of the operation;
3. corporation tax shall not be levied on the permanent establishment for the period commencing at the beginning of the year according to the standard procedure, and the activity carried out by the company in the year of the operation shall be considered as having been carried out by the permanent establishment;
4. the permanent establishment shall have the right to carry forward any tax losses not carried forward and formed by the company according to the standard procedure.
(2) For tax purposes, upon transfer of the registered office of a European company to a European cooperative society under the terms established by item 2 of Article 152 herein:
1. all acts performed by the said permanent establishment for the current period and the prior periods, including the adjustments of the tax financial result, shall be considered as having been performed by the company;
2. corporation tax shall not be levied on the permanent establishment for the period from the beginning of the year until the date of the operation;
3. corporation tax shall not be levied on the company for the period commencing at the beginning of the year according to the standard procedure, and the activity carried out by the permanent establishment in the year of the operation shall be considered as having been carried out by the company;
4. the company shall have the right to carry forward any tax losses not carried forward and formed by the permanent establishment according to the standard procedure.
Provisions Applicable upon Transfer of Registered Office
Article 154. The provisions of Section II of this Chapter in respect of the assets and liabilities, profits and losses and temporary tax differences shall furthermore apply upon a transfer of the registered office of a European company or a European cooperative society.

Chapter Twenty
SPECIFIC RULES FOR DETERMINATION OF TAX FINANCIAL RESULT UPON TRANSFERS
BETWEEN PERMANENT ESTABLISHMENT IN COUNTRY AND ANOTHER DIVISION OF SAME
ENTERPRISE SITUATED OUTSIDE COUNTRY

Income from Transfer to Another Division of Enterprise
Article 155. (1) The accounting income, accounted for at market value and originating upon a transfer from a permanent establishment in the country to another division of the same enterprise situated outside the country, shall be recognized for tax purposes where:
1. the particular transfer coincides with the ordinary transactions of the said permanent establishment with third parties, or
2. the ordinary activity of the said permanent establishment consists in similar transfers to the other divisions of the enterprise.
(2) Any accounting income arising from cash resources provided by the permanent establishment to another division of the same enterprise situated outside the country shall not be recognized for tax purposes with the exception of financial institutions for which raising of cash resources and extending of loans is a core activity.
(3) Any accounting expense related to a transfer from a permanent establishment to another division of the same enterprise situated outside the country shall not be recognized for tax purposes where accounting income, which is recognized for tax purposes, does not arise at the said permanent establishment as a result of the transfer. Where, as a result of a transfer to another division of the same enterprise, situated outside the country, the permanent establishment charges accounting income at the amount of the costs actually incurred (at cost price), the accounting expenses charged in connection with the said transfer shall be recognized for tax purposes.
Expenses upon Transfer from Another Part of Enterprise
Article 156. (1) Any accounting expenses accounted for at market value in connection with any goods, services and rights which are the result of a transfer from another division of the same enterprise, situated outside the country, shall be recognized for tax purposes in the permanent establishment in the country where the said expenses are accounted for within the ordinary activity of the permanent establishment related to a sale of the transferred goods, services or rights in an altered or unaltered state.
(2) Any accounting expenses, accounted for at market value and originating upon transfer of any goods and services from another division of the same enterprise, situated outside the country, to a permanent establishment in the country, shall be recognized for tax purposes in the permanent establishment where:
1. the particular transfer coincides with the ordinary transactions of the said division of the enterprise with third parties, or
2. the ordinary activity of the said division of the enterprise consists in similar transfers to the other divisions of the enterprise.
(3) Any accounting expenses accounted for according to the costs actually incurred (cost price) and originating upon transfer of any services from another division of the same enterprise situated outside the country, outside the cases referred to in Paragraphs (1) and (2), shall be recognized for tax purposes in the permanent establishment in the country. Sentence one shall furthermore apply in respect of the administrative management services received in direct connection with the permanent establishment.
(4) Any accounting expenses, accounted for at costs actually incurred (cost price) and originating upon transfer of rights related to know-how, patents and other items of intellectual or industrial property, from another division of the same enterprise situated outside the country, outside the cases referred to in Paragraph (1), shall be recognized for tax purposes in the permanent establishment in the country. Where the said items are produced or acquired by the branch of activity of the enterprise which transfers the said items and which specialized in the creation or acquisition of any such items, the accounting expenses, accounted for at market value, shall be recognized for tax purposes.
(5) Where the rights transferred under Paragraph (4) satisfy the criteria for a tax intangible fixed asset, the expenses on the acquisition thereof under Paragraph (4) shall not be recognized for tax purposes and the amounts shall be posted in the tax depreciation schedule. The tax depreciable value of the said rights shall be determined according to the standard procedure established by this Act.
(6) Any accounting expenses arising from cash resources received in the permanent establishment from another division of the same enterprise situated outside the country shall not be recognized for tax purposes with the exception of:
1. the financial institutions, for which raising of cash resources and extending of loans is a core activity, or
2. the cases in which the cash resources are provided by a third party as an interest-bearing loan for the purposes of the permanent establishment and are used exclusively in the activity of the permanent establishment; in such case, the accounting expenses accounted for at the amount of the interest payments due to the third party shall be recognized for tax purposes upon compliance with the other provisions of this Act.
Treatment of Assets upon Transfer from or to
Another Part of Enterprise
Article 157. (1) Any assets provided to the permanent establishment in the country by another division of the same enterprise situated outside the country, which are related to the activity of the permanent establishment, outside the cases referred to in Article 156 (1) herein, shall be valued for tax purposes at the costs actually incurred (cost price) by the division of the enterprise transferring the said assets. The tax depreciable assets referred to in sentence once, which are used in the activity of the permanent establishment for a period of at least two years, shall be posted in the tax depreciation schedule according to the standard procedure established by this Act.
(2) Where the tax depreciable assets referred to in Paragraph (1) are provided for temporary use for a period not exceeding two years, the permanent establishment in the country shall be recognized, for tax purposes, the accounting expenses charged to the amount of the depreciations charged by the transferring division of the enterprise for the said assets. The expenses charged may not exceed the annual tax depreciation which would have been charged if the maximum permissible annual rates of tax depreciation under Article 55 herein were used.
(3) For tax purposes, the assets transferred shall be considered as having been sold at market prices at the time of transfer of assets manufactured or acquired by the permanent establishment in the country to another division of the enterprise situated outside the country and shall be written off.
(4) In the cases referred to in Paragraph (3), upon determination of the tax financial result, the accounting financial result of the permanent establishment shall be credited with the profit and shall be debited with the loss arrived at as a difference between the market price of the asset and the accounting value thereof at the date of transfer. The temporary tax differences related to the said asset shall be recognized according to the standard procedure established by this Act. Article 66 (1) and (2) herein shall apply upon determination of the tax financial result.
(5) Paragraphs (3) and (4) shall not apply where accounting income (profit) or costs (losses) originate from the transfer of the assets. The standard procedure established by this Act shall apply in such cases.

Chapter Twenty-One
TAX REGULATION UPON DISSOLUTION THROUGH LIQUIDATION OR THROUGH
ADJUDICATION IN BANKRUPTCY AND UPON DISTRIBUTION OF SHARE IN LIQUIDATION
SURPLUS
Section I
General Dispositions

Article 158. Upon dissolution through liquidation or through adjudication in bankruptcy, for the period until the expungement thereof, the taxable person shall fulfil the obligations thereof according to the standard procedure established by this Act and in compliance with the requirements of this Chapter, inter alia submitting the requisite financial statements, which shall be prepared and presented according to accounting legislation.

Section II
Corporation Tax upon Dissolution

Assessment of Tax upon Dissolution
Article 159. (1) Corporation tax shall be due at the date of entry of the dissolution in the Commercial Register.
(2) The corporation tax referred to in Paragraph (1) shall be assessed on the basis of the tax profit for the period from the beginning of the year until the date of entry of the dissolution.
(3) The prepayments remitted since the beginning of the year and until the date of entry of the dissolution shall be deducted upon assessment of the tax.
Remittance of Tax upon Dissolution
Article 160. (1) The corporation tax due under Article 159 herein shall be remitted within thirty days after the date of entry of the dissolution.
(2) The corporation tax remitted upon dissolution shall be deducted from the annual corporation tax due for the year of dissolution or from the corporation tax due for the last tax period, where the date of submission of the motion for expungement upon liquidation or the date of expungement upon bankruptcy, as the case may be, is in one and the same year as the date of dissolution.
(3) Where the date of dissolution and the date of submission of the motion for expungement upon liquidation, or the date of dissolution upon bankruptcy, as the case may be, are in different years, the financial statement prepared as at the date of dissolution and the financial statement prepared as at the 31st day of December of the year of dissolution of the taxable person shall be submitted with the annual tax return on the year of dissolution.

Section III
Corporation Tax on Last Tax Period

Last Tax Period
Article 161. (1) The last tax period of any taxable person dissolved through liquidation shall commence on the 1st day of January of the year in which the motion for expungement under Article 273 (1) of the Commerce Act was submitted and shall end on the date of submission of the said motion.
(2) The last tax period of any taxable person dissolved through adjudication in bankruptcy shall commence on the 1st day of January of the year in which the expungement was effected and shall end on the date of expungement.
(3) The last tax period of any permanent establishment of a non-resident person shall commence on the 1st day of January of the year in which the activity of the said establishment was discontinued and shall end on the date of discontinuance of the said activity.
(4) The taxable person shall be liable to corporation tax in respect of the tax profit realized during the last tax period according to the standard procedure established by this Act. The corporation tax due shall be final.
(5) For tax purposes, the assets manufactured or acquired by the permanent establishment in the country at the date of dissolution shall be considered as having been sold at market prices and shall be written off. Upon determination of the tax financial result for the last tax period of the permanent establishment, the tax financial result shall be credited with the profit and shall be debited with the loss arrived at as a difference between the market price of the assets referred to in sentence one and the accounting value of the said assets at the date of transformation. The temporary tax differences related to the asset shall be recognized during the last tax period according to the standard procedure established by this Act. Article 66 (1) and (2) herein shall apply upon determination of the tax financial result.
Declaring of Tax on Last Tax Period
Article 162. (1) The tax return on the last tax period, determined under Article 161 (1) herein, shall be submitted on the date of submission of the motion for expungement together with a copy of the said motion.
(2) The tax return on the last tax period, as determined under Article 161 (2) herein, shall be submitted by the holder of the position of trustee in bankruptcy within thirty days after the date of expungement of the taxable person together with a copy of the judgement of court on the expungement.
(3) The tax return on the last tax period, as determined under Article 161 (3) herein, shall be submitted on the date of discontinuance of the activity.
(4) Where the date of submission of the motion for expungement upon liquidation or the date of expungement upon bankruptcy, as the case may be, or the discontinuance of the activity of a permanent establishment is before the 31st day of March and the annual tax return for the last preceding year has not been submitted, the taxable person or the holder of the position of trustee in bankruptcy shall submit the said return within the time limits referred to in Paragraphs (1), (2) and (3).
(5) Where the date of dissolution and the date of submission of the motion for expungement upon liquidation, or the date of expungement upon bankruptcy, as the case may be, are in one and the same year, the financial statement prepared at the date of dissolution and the financial statement prepared at the date of submission of the motion for expungement or at the date of expungement, as the case may be, shall be submitted with the tax return referred to in Paragraphs (1) and (2).
Remittance of Tax on Last Tax Period
Article 163. (1) The corporation tax due on the last tax period, determined under Article 161 (1) herein, shall be remitted on or before the date of submission of the motion for expungement of the taxable person. The said tax shall be final.
(2) In the cases referred to in Article 161 (2) herein, the corporation tax due on the last tax period shall be remitted on or before the date of expungement.
(3) In the cases referred to in Article 161 (3) herein, the corporation tax due on the last tax period shall be remitted on or before the date of discontinuance of activity. The said tax shall be final.
(4) Where the date of submission of the motion for expungement upon liquidation or the date of expungement upon bankruptcy or the discontinuance of activity of a permanent establishment is before the 31st day of March and the corporation tax for the preceding year has not been remitted, the taxable person shall remit the corporation tax for the preceding year within the time limits referred to in Paragraphs (1), (2) and (3).
Tax Treatment upon Continuation of Activity after Date of Submission of
Motion for Expungement by Taxable Person Dissolved through Liquidation
Article 164. (1) Any taxable person, dissolved through liquidation, which continues the activity thereof after submission of a motion for expungement, shall fulfil the obligations thereof according to the standard procedure established by this Act for the period from the date of submission of the motion for expungement until the date of expungement, inter alia declaring and remitting the corporation tax due. The liquidator shall incur solidary liability with the taxable person for the tax liabilities of the said person which have arisen in connection with the continuation of activity.
(2) The last period for tax purposes in the cases referred to in Paragraph (1) shall commence on the 1st day of January of the year in which the expungement was effected and shall end on the date of expungement or shall commence on the date of submission of the motion for expungement and shall end on the date of expungement, when the said two dates are in one and the same year.
(3) The taxable person shall be liable to corporation tax in respect of the tax profit realized during the last tax period under Paragraph (2) according to the standard procedure established by this Act. The said tax shall be final.
(4) The tax return on the last period for tax purposes in the cases referred to in Paragraph (1) shall be submitted by the holder of the position of liquidator within thirty days after the date of expungement of the taxable person together with a copy of the judgment of court on the expungement. Where the date of expungement is before the 31st day of March and the annual tax return on the preceding year has not been submitted, the holder of the position of liquidator shall submit the said return within the time limit referred to in sentence one.
(5) The corporation tax due for the last period for tax purposes in the cases referred to in Paragraph (1) shall be remitted on or before the date of expungement. Where the date of expungement is before the 31st day of March and the corporation tax for the preceding year has not been remitted, the taxable person shall remit the corporation tax for the preceding year within the time limit referred to in sentence one.
Tax Treatment upon Distribution of Share in Liquidation Surplus
Article 165. (1) The assets distributed as a share in a liquidation surplus at the time of distribution for tax purposes shall be considered as having been sold by the taxable person at market prices and shall be written off.
(2) In the cases referred to in Paragraph (1), upon determination of the tax financial result, the accounting financial result shall be credited with the profit and shall be debited with the loss arrived at as a difference between the market price of the assets and the accounting value thereof at the date of distribution of the share in a liquidation surplus. The temporary tax differences related to the said assets shall be recognized according to the standard procedure established by the Act. Article 66 (1) and (2) herein shall apply upon determination of the tax financial result.
(3) Any accounting income and expenses, accounted for in connection with the distribution of a share in a liquidation surplus in the form of assets, shall not be recognized for tax purposes.

Chapter Twenty-Two
REDUCTION, RETENTION AND EXEMPTION FROM LEVY OF CORPORATION TAX
Section I
General Dispositions

Concept of Retention
Article 166. "Corporation tax retention" shall be the right of any taxable person not to remit to the executive budget the amounts of corporation tax as assessed according to the procedure established by this Act, which subsist in the patrimony of the taxable person and are spent for purposes prescribed by a law.
General Requirement for Corporation Tax Retention or Reduction
Article 167. (1) Corporation tax shall be retained or reduced and, respectively, the accounting financial result shall be debited according to the procedure established by this Chapter, subject to the condition that the taxable person does not incur at the 31st day of December of the relevant year:
1. any coercively enforceable public obligations, and
2. any obligations for sanctions under effective penalty decrees related to violation of statutory instruments regarding public obligations, and
3. any interest payments in connection with a failure to remit the obligations referred to in Items 1 and 2 when due.
(2) Fulfilment of the requirement covered under Paragraph (1) shall be certified by the taxable person in the annual tax return.
Accounting for Retained and Reduced Corporation Tax
Article 168. (1) The retained corporation tax and the corporation tax reduction according to the procedure established by this Chapter shall be accounted for in owners' equity.
(2) (Repealed, SG No. 110/2007).
Partial Recognition of Undistributable Income or Expenses
Article 169. (1) The portion of the undistributable income or expenses, corresponding to the activities in respect of which the corporation tax retention is enjoyed, shall be arrived at by multiplying the total amount of the undistributable income or expenses by the proportion of the net sales accruing from the activities in respect of which the corporation tax retention is enjoyed and all net sales.
(2) The undistributable amounts whereby the accounting financial result is adjusted, which cannot be related to any single specific activity and which are associated with the performance of an activity in respect of which a retention is enjoyed, shall be allocated to the activity in respect of which the corporation tax is retained, and the tax financial result in respect of the said activity shall be determined on the basis of the proportion referred to in Paragraph (1).
Declaring of Retained or Reduced Corporation Tax
Article 170. Where any taxable person is allowed to retain or reduce corporation tax on different grounds according to the procedure established by this Chapter, the said person shall mandatorily declare in the annual tax return the sequence in which the said person has enjoyed the different grounds for corporation tax retention or reduction.
Retention of Additionally Ascertained Corporation Tax
Article 171. (1) Any taxable person, who has been allowed to retain corporation tax in a prior year, shall furthermore have the right to retention in respect of the additionally ascertained undeclared corporation tax for the relevant prior year, subject to the condition that the said person fulfils all requirements provided for in this Chapter for the relevant corporation tax retention.
(2) The time limit for fulfilment of the said requirements shall begin to run as from the date of ascertainment of the additional corporation tax.
Cessation of Right to Retention
Article 172. (1) The right to reduction or retention according to the procedure established by this Chapter shall cease upon transformation of a taxable person, with the exception of transformation through change of the legal form according to the procedure established by Article 264 of the Commerce Act, as well as upon transfer of an enterprise under Article 15 of the Commerce Act.
(2) Paragraph (1) shall furthermore apply upon restructuring of cooperative organizations.
Non-fulfilment of Requirements
Article 173. (1) Where any requirements of this Chapter for subsequent use (spending) of retained corporation tax are not fulfilled, the said tax shall be due according to the standard procedure established by this Act for the year for which the said tax applies.
(2) Paragraph (1) shall not apply where, in the cases of transformation, the receiving companies or newly formed companies fulfil the obligations of the transferring companies in compliance with the terms and procedure established by this Chapter, referring to the transferring companies. In the cases referred to in sentence one, the receiving companies or newly formed companies shall incur solidary liability for the retained corporation tax of the transmitting companies.
(3) Paragraph (2) shall furthermore apply upon restructuring of cooperative organizations.

Section II
Exemption from Levy of Corporation Tax

Collective Investment Schemes and Investment Companies
of Closed-End Type
Article 174. Any collective investment scheme, which has been admitted to public offering in the Republic of Bulgaria, and any licensed investment company of the closed-end type under the Public Offering of Securities Act, shall be exempt from the levy of corporation tax.
Special Purpose Investment Companies
Article 175. Any special purpose investment company under the Special Purpose Investment Companies Act shall be exempt from the levy of corporation tax.
Bulgarian Red Cross
Article 176. The Bulgarian Red Cross shall be exempt from the levy of corporation tax.

Section III
General Tax Reliefs

Tax Incentives upon Hiring of Unemployed Persons
Article 177. (1) Any taxable person shall have the right to debit the accounting financial result thereof upon determination of the tax financial result, where the said person has hired a person under an employment relationship for not less than twelve successive months who, at the time of the hiring thereof, was:
1. registered as unemployed for more than one year, or
2. a registered unemployed person who had attained the age of 50 years, or
3. an unemployed person of reduced working capacity.
(2) The debiting shall be performed by the amounts paid for labour remuneration and the contributions remitted for the account of the employer to the public social insurance funds and the National Health Insurance Fund during the first twelve months after the hiring. The said debiting shall be performed on a single occasion during the year wherein the twelve-month period lapses.
(3) Debiting shall not be performed in respect of any amounts received under the Employment Promotion Act.
(4) Debiting shall not be performed where tax relief under Article 192 herein has been enjoyed in respect of the persons hired.
Enterprises Hiring People with Disabilities
Article 178. (1) Any legal person, which is a specialized enterprise or a cooperative within the meaning given by the Integration of Persons with Disabilities Act, which as at the 31st day of December of the relevant year, is affiliated to the nationally representative organizations of and for people with disabilities, shall be allowed to retain 100 per cent of the corporation tax due there from if:
1. not less than 20 per cent of the total number of employees are blind and visually impaired persons;
2. not less than 30 per cent of the total number of employees are hearing-impaired persons;
3. not less than 50 per cent of the total number of employees are people with other disabilities.
(2) The legal persons referred to in Paragraph (1) shall be allowed to retain the corporation tax due there from in proportion to the number of people with disabilities or occupational rehabilitees to the total of number of employees, where the conditions for the number of hired persons under Paragraph (1) are not fulfilled.
(3) Retention shall be admissible where the tax retained is spent entirely on integration of people with disabilities or on the maintenance and creation of jobs for occupational rehabilitees during the two years next succeeding the year for which the retention is enjoyed. The said resources shall be planned, spent and accounted for by ordinances of the national organizations of and for people with disabilities in consultation with the Minister of Finance.
Agricultural Producers
Article 179. (1) Any legal person, which is registered as an agricultural producer, shall be allowed to retain 60 per cent of the corporation tax due there from in respect of the tax profit derived thereby from unprocessed plant and animal produce, inter alia from apicture, sericulture, freshwater fisheries in man-made water bodies and hothouse horticulture.
(2) Retention shall be admissible where the tax retained is invested in tax tangible and intangible fixed assets needed for performance of the activities specified in Paragraph (1) not later than before the end of the year next succeeding the year for which the retention is enjoyed.
Air Traffic Services Authority
Article 180. (1) The Air Traffic Services Authority State-Owned Enterprise shall be allowed to retain 60 per cent of the corporation tax due there from in respect of the tax profit derived thereby from the core activity thereof.
(2) Retention shall be admissible where the tax retained is invested in and spent on implementation of the European programmes for integration and harmonization of the national air traffic control systems of the European countries and on maintenance of the pecuniary reserve provided for in the Civil Aviation Act.
Social and Health Insurance Funds
Article 181. (1) Any social and health insurance fund, which has been established by a law, shall be allowed to retain 50 per cent of the corporation tax due there from in respect of the economic activity thereof which is directly related or auxiliary to the implementation of the core activity thereof.
(2) Retention shall be admissible where the tax retained is invested in the core activity not later than before the end of the year next succeeding the year for which the retention is enjoyed.

Section IV
(Heading amended, SG No. 110/2007, effective 1.01.2007)
De Minimis or Regional State Aid in the Form of Tax Reliefs

Taxable Persons which May Not Enjoy Tax Reliefs
Article 182. (1) (Redesignated from Article 182 and amended, SG No. 110/2007, effective 1.01.2007) A tax relief constituting regional aid shall not apply in respect of any taxable persons which:
1. are active in the sectors of coal, steel, shipbuilding, synthetic fibres manufacture, fisheries, as well as production of agricultural products listed in Annex I to the Treaty establishing the European Community, for the respective activity, or
2. (amended, SG No. 110/2007, effective 1.01.2007) are placed in liquidation, or are subject to rehabilitation proceedings, or
3. are defined as enterprises in difficulty.
(2) (New, SG No. 110/2007, effective 1.01.2007) A tax relief constituting de minimis aid shall not apply in respect of:
1. any taxable persons which are active in the fishery and aquaculture sector according to Council Regulation (EC) No 104/2000 on the common organization of the markets in fishery and aquaculture products;
2. any taxable persons which are active in the primary production of agricultural products listed in Annex I to the Treaty establishing the European Community;
3. any taxable persons which are active in the processing and marketing of agricultural products listed in Annex I to the Treaty establishing the European Community;
4. any taxable persons which are active in the coal sector according to Council Regulation (EC) No 1407/2002 on State aid to the coal industry;
5. any enterprise in difficulty;
6. the investment in any road freight transport vehicles, where provided by a taxable person performing road freight transport for hire or reward;
7. investment in any assets used in export-related activities towards third countries or Member States.
(3) (New, SG No. 110/2007, effective 1.01.2007) Any tax relief constituting regional aid may not be enjoyed, either, by a taxable person in respect of which any of the conditions under Paragraph (1) occurs during the period of implementation of the relevant initial investment.
(4) (New, SG No. 110/2007, effective 1.01.2007) Any tax relief constituting de minimis aid may not be enjoyed, either, by a taxable person in respect of which a condition under Paragraph (2) occurs during the period of investment.
Municipalities with Unemployment Rate Above National Average
Article 183. (1) The municipalities where the rate of unemployment is by 35 per cent or more higher than the national average shall be designated annually by an order of the Minister of Finance on a motion by the Minister of Labour and Social Policy, which shall be promulgated in the State Gazette.
(2) The municipalities where the rate of unemployment is by 50 per cent or more higher than the national average shall be designated annually by an order of the Minister of Finance on a motion by the Minister of Labour and Social Policy, which shall be promulgated in the State Gazette.
(3) A municipality whereof the administrative centre is situated in another municipality shall be included in the list referred to in Paragraphs (1) and (2) on the basis of the average weighted level of unemployment in the relevant municipalities, determined on the basis of the size of the economically active population therein.
Tax Relief for Carrying Out Manufacturing Activities in Municipalities
with Unemployment Rate Above National Average
Article 184. (Amended, SG No. 110/2007, effective 1.01.2007) Any taxable person shall be allowed to retain up to 100 per cent of the corporation tax [due there from] in respect of the tax profit derived thereby from the manufacturing activities carried out, including processing of materials supplied by customers, where the following conditions are simultaneously fulfilled:
1. the taxable person carries out manufacturing activities solely in municipalities where the rate of unemployment for the year preceding the current year was by 35 per cent or more higher than the national average for the same period;
2. (amended, SG No. 110/2007, effective 1.01.2007) the conditions covered under:
(a) Article 188 - in the cases of de minimis aid, or
(b) Article 189 - in the cases of regional aid
are fulfilled.
Specific Cases of Retention
Article 185. (1) Where a municipality drops out of the scope of municipalities referred to in Article 183 herein as a result of an increase in employment, the person which has acquired the right to corporation tax retention shall preserve the said right during the next five successive years, reckoned from the year during which the region drops out of the list, subject to fulfilment of the rest of the conditions for retention.
(2) Where the taxable person satisfied the conditions referred to in Item 1 of Article 184 herein in the year preceding the year in which the municipality dropped out of the scope of municipalities referred to in Article 183 herein but did not carry out manufacturing activity during the said period owing to performance of preparatory work and the said manufacturing activity commences during a subsequent year, the right to tax retention shall accrue as from the year of commencement of the manufacturing activity and shall be preserved during the next four successive years, subject to fulfilment of the rest of the conditions for retention.
Investment Tax Credit
Article 186. (Amended, SG No. 110/2007, effective 1.01.2007) (1) Any taxable person shall have the right to reduce the corporation tax due there from for 2007 by up to 10 per cent of the value of the material and immaterial fixed assets acquired according to accounting legislation, where the conditions covered under Article 188 herein are fulfilled.
(2) The right referred to in Paragraph (1) shall accrue subject to the condition that the assets acquired are used in an activity implemented in municipalities where the rate of unemployment for the year preceding the current year was by 50 per cent or more higher than the national average for the same period.
Tax Relief for Cooperatives
Article 187. (1) (Amended and supplemented, SG No. 110/2007, effective 1.01.2007) Any cooperative and any enterprise formed thereby, which is affiliated to a cooperative union within the meaning given by Chapter Four of the Cooperatives Act, shall be allowed to retain up to 60 per cent of the corporation tax [due there from] where the conditions for de minimis aid under Articles 188 herein are fulfilled.
(2) Any cooperative and any enterprise formed thereby shall transfer 50 per cent of the corporation tax so retained to the investment funds of the cooperative unions within the time limits for crediting the said tax to Budget Revenue.
(3) Annually, on or before the 31st day of March, the cooperative unions shall account to the Ministry of Finance for the raising and the spending of the corporation tax so retained on the assigned purpose. Should it be established that the conditions for retention have not been fulfilled, the tax retained which has accrued to the cooperative unions shall be refunded thereby to the executive budget with the interest due.
Tax Relief Constituting De Minimis Aid
Article 188. (Amended, SG No. 110/2007, effective 1.01.2007) (1) A tax relief constituting de minimis aid shall be available where the sum total of de minimis aids received by the taxable person during the last three years, including the current years, regardless of the form or source of acquisition of the said aids, does not exceed the lev equivalent of EUR 200,000, and in respect of taxable persons in the road transport sector, the lev equivalent of EUR 100,000, determined according to the official exchange rate of the lev against the euro. These ceilings shall apply regardless of whether the aid is financed in whole or in part by resources of the European Community. The sum total of de minimis aids received shall furthermore include the reduced or retained corporation tax due from the taxable person for the last three years, including the corporation tax which is subject to reduction or retention for the current year. The sum total of de minimis aids received shall not include the retained corporation tax in respect of which the conditions of Article 189 herein are fulfilled.
(2) The retained tax under Article 184 herein and the part of the retained tax under Article 187 herein, which is not transferred to the investment funds of the cooperative unions, must be invested in material or immaterial fixed assets according to accounting legislation within four years after the beginning of the year for which the tax is retained.
(3) The retained tax, invested in the assets referred to in Paragraph (2), and the reduction of the tax under Article 186 herein, shall be cumulated with other State aid approved by decision of the European Commission or authorized under Article 9 of the State Aids Act in respect of the said assets, up to the maximum permissible intensity of the aid determined by the National Regional State aid map (OJ No. C 73 of 30 March 2007).
(4) The taxable person shall declare the amount of de minimis aids received, regardless of the form or source of acquisition of the said aids, during the last three years, including the current year, in the annual tax return for the year for which the corporation tax is retained.
Tax Relief Constituting Regional Aid
Article 189. (Amended, SG No. 110/2007, effective 1.01.2007) (1) Taxable persons must fulfil the following conditions for the grant of regional aid:
1. the retained corporation tax must be invested in material and immaterial assets which form part of an initial investment;
2. the initial investment must be made within four years after the beginning of the year for which the tax was retained;
3. the initial investment must be made in municipalities where the rate of unemployment for the year of retention is by 35 per cent or more higher than the national average for the same period;
4. the activity related to the initial investment must continue to be implemented in the respective municipality for a period of at least five years after the year of completion of the initial investment; this circumstance shall be declared annually by the annual tax returns until the lapse of the five-year period;
5. at least 25 per cent of the value of the material and immaterial assets forming part of the initial investment must be self-financed or debt-financed by the taxable person; the corporation tax retained, as well as other resources containing any State aid element whatsoever, shall not be treated as self-financing or debt-financing;
6. the material and immaterial forming part of the initial investment must have been acquired under market conditions not differing from the conditions between unrelated parties; the immaterial assets forming part of the initial investment must be depreciable assets;
7. the value of the eligible expenditure on the immaterial assets forming part of the initial investment must not exceed 50 per cent of the sum total of eligible expenditure on the material and immaterial assets forming part of the initial investment;
8. the immaterial assets forming part of the initial investment must be used solely in the activity of the taxable person and must be included in the assets thereof for a period of at least five years;
9. the tax retained must not exceed 50 per cent of the present value of the material and immaterial assets forming part of the initial investment, determined at the 31st day of December of the year of retention; the interest rate for the purposes of determination of the present value of the initial investment shall be the reference interest rate for the year of retention set by the European Commission;
10. the projected amount of the initial investment and the period of implementation thereof shall be declared by the annual tax return for the year for which the corporation tax is retained.
(2) The retained corporation tax shall be cumulated with other State aid approved by decision of the European Commission or authorized under Article 9 of the State Aids Act in respect of the same initial investment, up to the maximum permissible intensity of the aid determined by the National Regional State aid map.
(3) In the cases where the tax relief is granted for a large investment project which has received aid from all sources whereof the total value exceeds the lev equivalent of EUR 37.5 million, determined according to the official exchange rate of the lev against the euro, the tax relief may be enjoyed for the relevant year solely if:
1. the taxable person has notified the revenue authority of the project at the latest before commencement of the implementation thereof;
2. a positive decision from the European Commission has been received following a notification procedure provided for in Article 88 (3) of the Treaty establishing the European Community.
The Minister of Finance shall inform the European Commission according to the procedures established in the State Aids Act. The taxable person shall be obligated to provide the Minister of Finance with the information necessary for the transmission of a notification to the European Commission.
(4) Where Paragraph (3) must not be applied to a large investment project, the tax relief may be enjoyed solely if the adjusted regional aid ceiling for large investment project is complied with as laid down in the Decision of the European Commission approving a National Regional State aid map.
(5) For the purposes of Paragraph (3), the value of the aid and the value of the eligible expenditure on the material and immaterial assets included in a large investment project shall be determined at present value at the date of notification of the European Commission according to the procedure established by the Article 88 (3) of the Treaty establishing the European Community. For the purposes of Paragraph (4), the value of the aid and the value of the eligible expenditure on the material and immaterial assets included in a large investment project shall be determined at present value at the date of commencement of the implementation of the project.
Restrictions upon Enjoyment of Tax Reliefs
Article 190. (Amended, SG No. 110/2007, effective 1.01.2007) (1) A taxable person may not enjoy more than one tax relief under this Section during one and the same year.
(2) The assets in which a tax retained according to Article 188 (2) herein is invested shall be excluded from the scope of the initial investment.

Section V
Tax Reliefs Satisfying Requirements for Permissible State Aid for
Employment

Taxable Persons which May Not Enjoy Tax Reliefs
Article 191. The tax relief under this Section may not be enjoyed by any taxable persons which:
1. carry out activities in the sectors of coal, steel, transport and shipbuilding, for the respective activity, or
2. are subject to bankruptcy proceedings, are placed in liquidation, or are subject to rehabilitation proceedings, or
3. are defined as enterprises in difficulty, or
4. receive any aids to export-related activities, namely aids directly linked to the quantities exported, to the establishment and operation of a distribution network or to other current expenditure linked to export activity, or
5. receive any aids contingent upon the use of domestic over imported goods.
Tax Relief for Employment Promotion
Article 192. (1) Upon determination of the tax financial result, the accounting financial result may be debited with the compulsory social insurance contributions remitted for the current year for the account of the employer in respect of the newly created jobs, where the conditions covered under Article 193 herein are fulfilled. The said reduction shall be enjoyable on a single occasion in the year during which the persons are appointed.
(2) The right referred to in Paragraph (1) shall accrue subject to the condition that the jobs have been created in municipalities where the rate of unemployment for the year preceding the current year is by 50 per cent or more higher than the national average for the same period.
General Conditions
Article 193. (1) Any taxable persons which apply this Section must fulfil the conditions for the grant of State aid for employment according to European Commission Regulation (EC) No 2204/2002, including:
1. the average number of employees for the current year must have increased compared to the preceding year as a result of the newly created jobs, and persons registered as unemployed must be appointed to the newly created jobs under an employment contract;
2. the newly created jobs must be maintained for a minimum period of three years;
3. the State aid referred to in Article 192 herein, together with other State aids for employment in respect of the same newly created jobs, must not exceed 50 per cent of the relevant percentage according to the applicable regional aid map, as adopted by a Council of Ministers decree, of the cost of wages and compulsory social insurance contributions for the newly created jobs for two years;
4. the State aid referred to in Article 192 herein, together with other regional aids and State aids for employment, must not exceed 50 per cent of the relevant percentage according to the applicable regional aid map, as adopted by a Council of Ministers decree, of the sum total of the initial investment and the cost of wages and compulsory social insurance contributions for newly created jobs, related to the initial investment, for two years.
(2) Where the State aid for employment referred to in Article 192 herein, including other State aids for employment, exceeds BGN 30 million for three years, the reduction shall be valid where the conditions under this Section are fulfilled and the taxable person has been granted a permissibility authorization by the European Commission under the terms and according to the procedure established by the State Aids Act.
(3) The fulfilment of the conditions under this Section shall be declared by the annual tax return.

PART THREE
WITHHOLDING TAX
Chapter Twenty-Three
SCOPE OF TAXATION

Withholding Tax on Income from Dividend and Shares in Liquidation
Surplus
Article 194. (1) A tax withheld at source shall be levied on any dividends and shares in a liquidation surplus, as distributed (apportioned) by any resident legal person in favour of:
1. any non-resident legal persons, with the exception of the cases where the dividends accrue to a non-resident legal person through a permanent establishment in the country;
2. any resident legal persons which are not merchants, including any municipalities.
(2) The tax referred to in Paragraph (1) shall be final and shall be withheld by the resident legal persons distributing dividends or shares in a liquidation surplus.
(3) Paragraph (1) shall not apply where the dividends and shares in a liquidation surplus are distributed in favour of:
1. any resident legal person which participates in the capital of the company as a representative of the State;
2. any common fund.
Tax Withheld on Income of Non-resident Persons
Article 195. (1) Any income which has its source inside the country, referred to in Article 12 (2), (3), (5) and (8) herein, accruing to any non-resident legal person, were not accruing through a permanent establishment, shall be subject to levy of a tax withheld at source which shall be final.
(2) The tax referred to in Paragraph (1) shall be withheld by the resident legal persons, the sole traders or the permanent establishments in the country which charge the income to the non-resident legal persons, with the exception of the income referred to in Article 12 (3) and (8) herein.
(3) Where the payer of the income is not a taxable person covered under Article 2 herein and in respect of the income referred to in Article 12 (3) and (8) herein, the tax shall be withheld from the recipient of the income.
(4) Paragraphs (1) and (2) shall furthermore apply where the non-resident person, acting through a permanent establishment, charges the said income to other divisions of the enterprise thereof situated outside the country, with the exception of the cases where accounting expenses are not recognized for tax purposes or accounting expenses or assets, accounted for at the costs actually incurred (cost price) are recognized for tax purposes of a permanent establishment.
(5) The prepayments in connection with the income referred to in Paragraph (1) shall not be subject to levy of a tax withheld at source.
Securities Traded on Regulated Market
Article 196. Any income from disposition of shares in public companies, negotiable rights attaching to shares in public companies, and shares in and units of collective investment schemes, shall not attract a tax withheld at source where the said disposition is effected on a regulated Bulgarian securities market.

Chapter Twenty-Four
TAXABLE AMOUNT

Taxable Amount for Withholding Tax on Dividend Income
Article 197. The taxable amount for assessment of the tax withheld at source on any income accruing from dividends shall be the gross amount of the dividends distributed.
Taxable Amount for Withholding Tax on Liquidation Surplus Share
Article 198. The taxable amount for assessment of the tax withheld at source on any income accruing from shares in a liquidation surplus shall be the difference between the market price of the claim by the relevant shareholder or member and the documented cost of acquisition of the shares or interests thereof.
Taxable Amount for Withholding Tax on Non-resident Persons' Income
Article 199. (1) The taxable amount for assessment of the tax withheld at source on the income referred to in Article 195 (1) herein shall be the gross amount of the said income, with the exception of the cases referred to in Paragraphs (3) and (4).
(2) The taxable amount for assessment of the tax withheld at source on any income accruing to any non-resident legal persons from interest payments under financial lease contracts, in the cases where the contract does not stipulate the rate of the said interest, shall be determined on the basis of the market rate of interest.
(3) The taxable amount for assessment of the tax withheld at source on any income accruing to any non-resident legal persons from acts of disposition of financial assets shall be the positive difference between the selling price of the said assets and the documented cost of acquisition thereof.
(4) The taxable amount for assessment of the tax withheld at source on any income accruing to any non-resident legal persons from disposition of immovable property shall be the positive difference between the selling price and the documented cost of acquisition of the immovable property.
(5) The selling price, for the purposes of Paragraphs (3) and (4), shall be the valuable consideration under the transaction, including the reward other than money, which shall be valued at market prices as at the date of charging of the income.
(6) Upon termination of a financial lease contract before expiry of the term of validity thereof and without passing of the right of ownership to the relevant assets which are subject of the contract, the non-refundable lease payments shall be considered income from use of property acquired by the non-resident legal person at the time of termination. The withholding tax on the income from interest payments, remitted until the time of termination of the lease contract, shall be deducted from the withholding tax due on income from use of the property.

Chapter Twenty-Five
RATES OF TAX

Rates of Tax
Article 200. (1) (Amended, SG No. 110/2007) The rate of tax on the income covered under Article 194 herein shall be 5 per cent.
(2) The rate of tax on the income covered under Article 195 herein shall be 10 per cent.

Chapter Twenty-Six
DECLARING OF TAX

Declaring of Tax. Certificate on Tax Withheld on
Non-resident Persons' Income
Article 201. (1) (Supplemented, SG No. 110/2007) The persons, who or which have withheld and remitted the tax at source under Articles 194 and 195 herein, and the persons who or which have charged the income referred to in Article 12 (3) and (8) herein, shall declare this circumstance to the National Revenue Agency territorial directorate exercising competence over the place of registration or over the place where the payer of the income is registrable, by means of a declaration in a standard form. Any such declaration shall be submitted each quarter not later than at the end of the month next succeeding the quarter during which the tax was remitted.
(2) Where the payer of the income is not registrable, the tax declaration shall be submitted to the Sofia Territorial Directorate of the National Revenue Agency.
(3) In the cases where the payer of the income is a person who or which is not obligated to withhold and remit a tax, the declaration shall be submitted by the recipient of the income before submission of the request for the issuance of a certificate referred to in Paragraph (4) or within the time limit referred to in Paragraph (1), whichever of the two is the earlier.
(4) A certificate on the tax remitted according to the procedure established by this Act on income accruing to non-resident legal persons shall be issued in a standard form at the request of the interested party. Any such certificate shall be issued by the National Revenue Agency territorial directorate where the tax is subject to remittance.

Chapter Twenty-Seven
TAX REMITTANCE

Tax Remittance
Article 202. (1) Any payers of income withholding the tax at source under Article 194 herein shall be obligated to remit the taxes due as follows:
1. within three months after the beginning of the month next succeeding the month during which a decision was made on distribution of dividends or shares in a liquidation surplus: in the cases where the owner of the income is a resident of a State wherewith the Republic of Bulgaria has an effective convention for the avoidance of double taxation;
2. not later than at the end of the month next succeeding the month during which a decision was made on distribution of dividends or shares in a liquidation surplus: in all other cases.
(2) Any payers of income withholding the tax at source under Article 195 herein shall be obligated to remit the taxes due as follows:
1. within three months after the beginning of the month next succeeding the month of charging of the income: in the cases where the owner of the income is a resident of a State wherewith the Republic of Bulgaria has an effective convention for the avoidance of double taxation;
2. not later than at the end of the month next succeeding the month of charging of the income: in all other cases.
(3) The tax due referred to in Paragraphs (1) and (2) shall be remitted to the relevant National Revenue Agency territorial directorate exercising competence over the place of registration or over the place where the payer of the income is registrable.
(4) Where any payer of income referred to in Paragraph (2) is not a taxable person and in respect of any income referred to in Article 12 (3) and (8) herein, the tax shall be remitted by the recipient of the income within the time limit referred to in Paragraph (2), and the income shall be considered to be charged as from the date of receipt of the said income by the non-resident legal person. The tax due shall be remitted to the relevant National Revenue Agency territorial directorate exercising competence over the place of registration or over the place where the payer of the income is registrable. Where the payer of the income is not registrable, the tax shall be remitted to the Sofia Territorial Directorate of the National Revenue Agency.
(5) Any overremitted tax shall be refunded by the National Revenue Agency territorial directorate whereto the tax is subject to remittance.
Liability
Article 203. Where the tax referred to in Articles 194 and 195 herein has not been withheld and remitted according to the relevant procedure, the said tax shall be due solidarily by the persons which incur tax liability for the relevant income.

PART FOUR
TAX ON EXPENSES
Chapter Twenty-Eight
GENERAL DISPOSITIONS

Scope of Taxation
Article 204. A tax on expenses shall be levied on the following expenses supported by documents:
1. any business entertainment expenses;
2. any expenses on fringe benefits provided in kind to factory and office workers and to persons hired under a management and control contracts (hired persons); the expenses on fringe benefits provided in kind shall furthermore include:
(a) the expenses on contributions (premiums) for voluntary retirement and health insurance and voluntary unemployment and/or vocational-training insurance, and/or life assurance and life assurance linked to an investment fund;
(b) the expenses on food vouchers;
3. the expenses related to operation of means of transport where used to service management operations.
Expenses on Fringe Benefits Not Provided in Kind
Article 205. Any expenses on fringe benefits, which are not provided in kind and which constitute income of a natural person, shall be taxed under the terms and according to the procedure established by the Income Taxes on Natural Persons Act.
Recognition of Tax on Expenses
Article 206. (1) The expense and the tax thereon shall be recognized for tax purposes in the year of charging and shall not form a temporary tax difference according to the procedure established by Chapter Eight herein.
(2) The tax on expenses shall be final.
Taxable Persons
Article 207. (1) Taxable persons in respect of the tax referred to in Items 1 and 3 of Article 204 herein shall be the persons which are subject to levy of corporation tax.
(2) Taxable persons in respect of the tax referred to in Item 2 of Article 204 herein shall be all employers or commissioning entities under management and control contracts.
Exemption from Taxation of Fringe Benefit Expenses on Contributions
and Premiums for Supplementary Social Insurance and Life Assurance
Article 208. No tax shall be levied on any expenses on fringe benefits referred to in Item 2 (a) of Article 204 herein not exceeding the amount of BGN 60 per month per hired person, where the taxable persons do not incur any coercively enforceable public obligations at the time of incurrence of the expenses.
Exemption from Taxation of Fringe Benefit Expenses on Food Vouchers
Article 209. (1) No tax shall be levied on any expenses on fringe benefits referred to in Item 2 (b) of Article 204 herein not exceeding the amount of BGN 40 per month, provided in the form of food vouchers to each hired person, where the following conditions are simultaneously fulfilled:
1. (amended, SG No. 110/2007) the agreed basic monthly remuneration of the person in the month of provision of the vouchers is not lesser than the average monthly agreed basic remuneration of the said person for the last preceding three months;
2. the taxable person does not incur any coercively enforceable public obligations at the time of provision of the vouchers;
3. the vouchers are provided to the taxable person by a person which has obtained authorization to carry on operator business from the Minister of Finance on the basis of a competitive procedure;
4. the amounts on the vouchers as provided, paid by the taxable person to the operator, may be used solely for settlement through bank transfer with the persons which have concluded a contract for provision of services with the operator, or for refunding to the taxable person, up to the amount of the nominal value of the vouchers, in the cases where the said vouchers have not been used;
5. the persons wherewith the operator has concluded a contract for provision of services to the hired persons are registered under the Value Added Tax Act .
(2) The right to carry on operator business shall be limited to a person which has obtained authorization from the Minister of Finance and which:
1. has a paid up share (registered) capital of at least BGN 2 million at the time of submission of the documents for the grant of authorization;
2. is registered under the Value Added Tax Act;
3. is not subject to bankruptcy proceedings or is not placed in liquidation;
4. does not incur any coercively enforceable public obligations at the time of submission of the documents for authorization;
5. is represented by any persons who:
(a) have not been convicted of a premeditated offence at public law, unless rehabilitated;
(b) have not been members of a supervisory body or a management body of any corporation dissolved through bankruptcy during the two years last preceding the date of the judgment on institution of bankruptcy proceedings, if any creditors have been left unsatisfied.
(3) The authorization shall be granted by the Minister of Finance on the basis of a competitive procedure and shall be withdrawn when the person ceases to satisfy the requirements covered under Paragraph (2).
(4) The grant, refusal of authorization or withdrawal of an authorization granted shall be effected by a written order of the Minister of Finance.
(5) Any refusal to grant an authorization and any withdrawal of an authorization shall be appealable according to the procedure established by the Administrative Procedure Code.
(6) The procedure for the conduct of a competitive procedure, for the grant and withdrawal of an authorization, the terms and a procedure for the printing of vouchers, the number of vouchers issued, the terms for organization and control of the conduct of operator business shall be established by an ordinance of the Minister of Labour and Social Policy and the Minister of Finance.
Exemption from Taxation of Fringe Benefit Expenses on Transportation
of Factory and Office Workers and Persons Hired under Management
and Control Contract
Article 210. (1) No tax shall be levied under Item 2 of Article 204 herein on any expenses on fringe benefits incurred on transportation of factory and office workers and of persons hired under a management and control contract from the place of residence to the place of work and back.
(2) Paragraph (1) shall not apply where any such transportation is carried out by passenger car or by extra bus services.
(3) Paragraph (1) shall furthermore apply where the transportation of factory and office workers is carried out by passenger car to inaccessible and remote areas and the taxable person cannot ensure the implementation of the activity thereof without incurrence of the expense.

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