Jul 11, 2012

Taxation of the acquisition of shares in Bulgarian private limited companies on their initial creation or subsequent disposition

Where there is no premium over the nominal price, there is no taxable base. If the seller of the shares of the BG Ltd is an individual and the sale price exceeds the registered nominal price, then the Seller is obligated to account for tax on the profit differential. The tax is reported and is due in the year when the shares are legally transferred to the buyer, no matter when the payment will be made. If the seller of the shares is legal entity, then the taxable base is the same. This difference/profit should be included in total annual tax basis and taxed with 10% corporate tax.

So, in case, when the UK Ltd’s buy the shares of the BG Ltd’s at their nominal legally registered price there is no tax liability, no tax event, and no tax basis.

Only the operational accounting profits generated during the financial year are matter of corporate taxation.

Capital gains do not apply as a separate tax as they do in the most EU countries. When the Company A is owner of the 50% shares of Company B, and decides to sell these shares to Company C at price exceeding the nominal price, this is a profit, which is taxable as same as the profits generated from any other activities. When the company A, with registered capital of 50000BGN makes a profit for the financial year, pay the corporate taxes and then take a decision to convert the prior period undistributed profit into capital reserves, legal reserves, or decide to increase the registered capital – this is also not taxable event. InBulgariathis is referred to as an end-of-year balance sheet event…

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