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The Bulgarian Ministry of Finance added a new very important Appendix (Reference No.1 to Appendix 4) to the Annual Tax Return that legal entities are obliged to submit for the calendar year of 2013.
The appendix concerns transactions between related parties (both local and foreign ones) and transactions that were carried out with companies registered in offshore zones. In the application, all companies are obliged to disclose the amounts of such transactions that were settled during the year, as well as the type of the transactions (sales or purchases of goods, services etc.; loans; intercompany remunerations and other types of incomes or expenses).
Due to the fact that the above-mentioned changes also concern transactions with physical persons, on March 10 2014 the National Revenue Agency published instructions for the filling out of Reference No.1 to Appendix 4 of the Annual Tax Return declaration according to the text and meaning of Art.92 of the Corporate Income Tax Act and Reference No.7 to Appendix 4 of the Annual Tax Return, related to Art.50 of the Income Taxes on Natural Persons Act. The afore-mentioned Guideline also attempts to clarify the ambiguity of the phrase "persons that have carried out transactions" included in Reference No. 1, which in some cases is replaced with "settled transactions" creating an obvious inconsistency in the method of reporting of loans and other transactions.
The guidelines also indicate the exceptions when it is not necessary to provide information for Reference No. 1, such as dividends and liquidation proceeds, personal performing of work by partners / owners in non-labor relationships in the company, with duly provided tax and insurance information. One must not forget that in cases of failure to file an appendix to the annual tax return or if false or incorrect data is provided, the penalty to be imposed ranges between 100 - 1,000 lev (Art. 262 of the Corporate Income Tax Act). In this regard, it is stated that considering the fact that Appendix № 4 is a new requirement and not well-known to taxpayers, one should be cautious about the presence of any errors.
This new requirement is another step of the Tax Administration towards the building of a harmonized tax system in the country, and one which will also cover the requirements of the EU legislation and meet the needs for a unified international tax control.