Bulgaria introduced the rules for taxation of a global minimum tax on large multinational and national groups of enterprises at the very end of 2023. This happened after the long delays, traditional for the Bulgarian legislative process, lack of open public discussion and changes in the voted texts “on one knee“ at the last moment. This is stated in an analysis of the Expert Club for Economics and Politics.
The topic remained hidden from the general public, on the one hand, under the guise of successive requirements imposed on Bulgaria by the EU. On the other hand, the introduction of such an additional tax is seen as a good opportunity to collect additional budget revenues through the toolkit of the national additional tax, the experts also write.
According to them, this abrupt and non-dialogical introduction of the global minimum tax was driven by the understanding that corporate taxation in Bulgaria is very low. For this reason, it was decided that not only Bulgaria should introduce a national additional tax, but also that the reliefs provided for both by the OECD's Pillar Two project and by the European directive should not be applied.
"The assumption of low corporate taxation in Bulgaria is a myth, and our country is the only (!) country in the EU that has introduced a national additional tax without providing the reliefs and exemptions provided for this purpose," the analysis.
What are the problems?
There is a misconception in Bulgaria that the effective taxation of business in our country is low – globally, 54% of the profits of large multinational groups are taxed at an effective tax rate of less than 10%.
Bulgaria is the only country in the EU that has introduced a national additional tax, but has not allowed full relief for substantial economic activity.
Bulgaria is the only country in the EU that has introduced a national additional tax, but has not adopted the exception for smaller cases “de minimis“.
All 18 EU countries that have already introduced the 15% tax have provided relief for substantial economic activity or the exception for smaller cases “de minimis“, but not our country. Separately, the Baltic states, Poland, Slovakia, Portugal, Malta and Cyprus have delayed the implementation of the global tax rules by 6 years.
Thus, our country is placed in a disadvantageous situation in terms of attracting foreign investments and stimulating the leading Bulgarian industrial groups to international expansion.
What can be done?
It is still not too late to correct the mistakes made in the implementation of the global minimum tax in Bulgaria through a short change in the Law on Corporate Income Taxation. Whether this will happen depends on the deputies in the new parliament, who will be elected on June 9.