Bulgaria Reduced its Taxes

Bulgaria Reduced its Taxes

January 01, 1999 | By Keith Martin in Washington, DC

BULGARIA REDUCED ITS TAXES effective January 1 in the hope of spurring more investment. The corporate tax rate has been reduced from 30% to 27%. A 5% investment tax credit has also been adopted to attract investments to municipalities where unemployment for the past five years exceeded 1.5 times the national unemployment rate. Value added taxes have been reduced from 22% to 20% and made easier for big infrastructure projects to recover during construction. In the past, VAT on inputs could only be recovered against VAT on outputs after the company reached a high enough turnover rate to register as a tax collector. Effective January 1, companies with contributed capital of more than the equivalent of US$1 million will be allowed to register for up to a three-year period before turnover reaches the minimum required levels. However, not all tax changes were for the better. Rules that prevent Bulgarian companies that are “thinly capitalized” from deducting interest payments have been extended to bank loans. A 50% income tax holiday for 10 years that was adopted in 1997 to encourage foreign investment has been repealed for new investments.