EY Bulgaria: Bulgaria introduces new temporary obligation for solidarity contribution

Published for a public discussion is a draft of an Act for amending and supplementing the Tax and social securities procedures code, introduced by the Ministry of Finance. A number of amendments of the tax laws are envisaged, however, the most significant proposal is the introduction of solidarity contribution of 33%.

The solidarity contribution is introduced as one-off temporary measure, due by all market participants (with small exceptions) and which would be payable in parallel with the corporate tax.

The contribution shall be due for surplus profits of the entities, carrying out business activity, gained in the second half of 2023, i.e., from 1 July 2023 till 31 December 2023.

The contribution’s rate would be 33%. The basis for its assessment shall be the so-called surplus profits defined as the positive difference between the tax profit for the second half of 2023 and 50% of the average tax profits for the years 2018, 2019, 2020 and 2021, increased by 20%. Alternative methods for determining the tax profit for 2023 are proposed.

It is envisaged that the liable persons shall declare the contribution within the due timelines for filing 2023 annual tax return. However, liable persons shall declare advance contributions by 15 July 2023 and pay them by the 15th of the respective month.

It should be noted that incorrect calculation of the solidarity contribution or of the advance contributions in a smaller amount is subject to penalty of up to

BGN 30 000 (approx. EUR 15,340) and interest for late payment.

It is envisaged that the solidarity contribution shall not be deductible for corporate tax purposes.

If the said measure is adopted, the following shall be observed:

• Preliminary assessment of the existence of a contribution liability.
• Determining advance contributions’ amount.
• Declaring and timely submission of advance contributions.
• Final recalculation of solidarity contributions in accordance with the different possible approaches and their effect on corporate income tax.

Our team will keep you updated with further developments on this matter. 

We are delighted to introduce to you Hilton Sofia’s new General Manager – Mr. Boni Mansi. 

Having joined Hilton Worldwide in 2006 as an Executive Chef at Hilton Kuala Lumpur, Mr. Boni Mansi climbed the ladder with his excellent performance and management skills. In 2011, Mr. Boni Mansi was promoted to Director of Operations and in the span of one year, Hilton Kuala Lumpur was awarded the ‘’Best City Hotel in Kuala Lumpur’’ prize by the TTG Asia Travel Award. 

In 2013, Mr. Boni Mansi moved to China where he became the Director of Operations at Conrad Hong Kong. Under his leadership and together with the great efforts and contribution of the team, Conrad Hong Kong was awarded the ‘’Star Award Winners 2015’’ by Forbes Travel Guide. 

Today, with more than 30 years of experience in the hospitality industry, Mr. Boni Mansi has taken part in hotel management in different countries such as Italy, Britain, Switzerland, Bangkok, Manila, Malaysia, Singapore and Hong Kong. 

We are thrilled to have him at Hilton Sofia and we are excited for the many achievements that are yet to come! 

New Balkans Law Office (www.newbalkanslawoffice.com) is often approached by clients who aredissatisfied with the judgments issued by the Bulgarian courts and feel thatthey have been unfairly treated. While, as a general rule, the Bulgarian courthas the last word in the case, it is also important to recall that Bulgaria isa party to the European Convention on Human Rights (ECHR), which provides additional legal protections against propertyviolations.

Most claims under the ECHR are broughtby individuals, and usually relate to topics such as discrimination, unfairtrials, or intruding upon one’s right to private and family life, among others.Only when all national appeal courts have given judgement on the case can aperson appeal to the European Court for Human Rights in Strasbourg.

However, investors, includingcorporations, can also benefit from the ECHR. Their investments constitute‘property’, which is expressly protected by the Convention.Bulgarian courts areunder the obligation to abide by the Convention’s requirements. Therefore, theymust uphold the claimant’s right to property and, accordingly, ensure thepeaceful enjoyment of their possessions.

We are currently representing one suchinvestor before the Court in Strasbourg. He invested in real estate in Bulgariashortly before the 2008–2009 financial crisis. Subsequent financialdifficulties caused the local developer to take questionable measures withoutthe investor’s knowledge, which resulted in the property being mortgaged andultimately handed over to the lending bank. After several years of complaints,the Bulgarian prosecutor’s office dismissed our client’s claim that anycriminal activity had taken place, in effect denying him protection of hisinvestment. If our complaint under the ECHR is successful and the Court inStrasbourg finds that there has been a violation, the prosecution will have tore-initiate proceedings against the developer. 

The scope and significance of investorprotection provided by the European Court of Human Rights cannot be overstated- especially for those considering investing in Bulgaria. Property rights, suchas those upheld by the Court, are essential for creating a stable andpredictable legal environment that encourages investors to invest and growtheir businesses. Investors, be they natural persons or corporations, oftenplace large sums of money into foreign countries and rely on the host country’slegal system to protect their holdings. The Court’s focus on investorprotection helps ensure that investors are not subjected to arbitrary ordiscriminatory treatment by host countries, and have incentives to makeinvestments that benefit the economy.

You can read more publications from the New Balkans Law Office at the links below.

• Bulgaria’s start-up visa: a route into EU markets
• Benefits of Shareholders’ Agreements
• How to prove my Source of Funds/Source of Wealth from crypto asset profits
  
  
  

• Unreliable public transport letting down almost three in five (58%) rural SMEs 
• Almost two in three (64%) SMEs believe they don’t have access to sufficient skilled labour in their local area 
  
• More than one in four (27%) SMEs expect their turnover to decrease over the next year, while less than a third (30%) plan to increase investment in technology and R&D  

London – 30 March 2023: Factors such as the availability of quality public infrastructure and access to skilled labour are entrenching a rural-urban divide among UK SMEs. This is according to a new survey of more than 900 SMEs by the British Chambers of Commerce (BCC) and Xero, the global small business platform. The survey, exploring the suitability of SMEs’ local trading environments, found that those based in rural areas were more likely to report a deficit in key success attributes. 

General business outlook 

Across the country, the SME business outlook is subdued. Only half (53%) expect to see turnover growth in the next 12 months, while one in four (27%) expect turnover to shrink over the same period.  Equally, less than a third (30%) of SMEs plan to increase investment in technology, research, and development, while 18% expect a decrease. 

Public transport 

When assessing the suitability of local infrastructure, the rural-urban divide was particularly notable in public transport. Well over half (58%) of SMEs in rural areas do not believe their area has reliable and well-connected trains, compared with just 39% in urban areas. Rail network deficiencies are also impacting SMEs based in business, retail or industrial parks, half (51%) of which were not satisfied with this provision. This rose further still when it came to buses and trams – over three-quarters (79%) in rural or countryside areas do not think they have access to reliable buses and trams, compared to 42% in towns, villages and high streets. There is also a regional disparity evident; SMEs in the North of England (52%) and the Midlands (51%) disagreed that they had access to reliable and well-connected trains, compared with only 36% of SMEs in the South.  

Internet connectivity 

The rural-urban divide is also evident when it comes to connectivity. While three-quarters (75%) of SMEs overall agree their area has reliable broadband, this rises to 82% in urban areas and falls to around half (56%) in rural areas.  

Labour market 

Firms report a high level of dissatisfaction with their local labour markets; almost two in three (64%) SMEs do not believe their local area has high availability of appropriately skilled labour. However, there is divergence on this issue based on the type of business area. Firms in business, industrial or retail parks appear to struggle most acutely with this issue, with almost three in four (72%) stating that they did not have access to appropriately skilled labour. While still concerning, this drops to 56% for firms based in urban areas.  

Alex Veitch, Director of Policy & Public Affairs at the BCC said: 

“Our research highlights the rural-urban divide that continues to exist between firms across the UK, with rural businesses generally reporting higher levels of dissatisfaction with the quality and availability of local resources. High-quality public infrastructure and access to a skilled labour force are both key to the success of a business, in particular SMEs, and today’s findings indicate that rural businesses are at a significant disadvantage. Government must urgently prioritise the development of public infrastructure. Such investment will not only enable local and small businesses to adapt and thrive, it will also create jobs and inject money into local economies across the UK.” 

Jo Copestake, Director of Small Business at Xero, said:

“When small businesses are eventually able to pivot to growth mode, any recovery would be inequitable, as many rural small businesses don’t believe they have the same trading conditions as their urban counterparts. We can’t risk that the conditions for recovery are skewed in favour of businesses in certain locations, which would reinforce the divides that have hampered the nation’s full economic potential for so long. Small businesses are the backbone of our economy, and that means their roots are all around the country. We must create an equitable trading environment, where each and every business can access the digital know-how, connectivity and infrastructure required to build a healthy business.” 

Kempinski Hotel GrandArena Bansko’s fine-dining restaurant, Come Prima, has been recognised as thebest “Restaurant on the Road 2022” by the “Restaurant of the Year Bacchus,Аcqua Panna & S.Pellegrino Awards”.

The award ceremony took place in Sofia on 23 March 2023. The official gala dinner was attended by240 guests from Bulgaria and abroad, including professionals from the culinary industry, journalists, gourmet lovers and business representatives. They enjoyed an around-the-world five-course menu prepared by leading international chefs and an elegant musical programme. The executive chef of Kempinski HotelGrand Arena Bansko, Nikola Todorov, was also among the guests and had the honour of accepting the prize statuette on behalf of the hotel, which is a themed hand-painted ceramic plate. Prizes were awarded on-stage for eight different categories, two of which, “Dessert” and “Restaurant on the Road”, were new this year. Six of the categories were competitive, judged by three different professional juries – “Bacchus Restaurant of the Year, Acqua Panna& S.Pellegrino”, “Delicious Place”, “Author’s Handwriting”, “Wine and Beverages”, “Debut” and “Dessert” – and the other two, “Readers’ Restaurant” and “Restaurant on the Road”, were selected for an open public vote that took place online on the official page of Bacchus magazine.

“It is a great honour for me to accept this award on behalf of the entire team. Thank you for your vote of trust and support. Every next award motivates us more and more to strive for culinary perfection and to create unforgettable culinary experiences for our guests,” commented Nikola Todorov.

Established in 2001,the Bacchus, Acqua Panna & S.Pellegrino Restaurant of the Year awards havebeen celebrating the successes of the Bulgarian gastronomic scene for three decades. They are awarded at a special ceremony that includes a gala dinner with a themed programme.

More information about all the winners can be found at https://www.bacchus.bg/novini/2023/03/24/4462852_restorant_na_godinata_za_2022_g_e_nikolas_0360/.

If you would like to try the tempting menu of chef Nikola Todorov at the award-winning Come Prima Restaurant and have a wonderful stay at Kempinski Hotel Grand Arena Bansko, you can learn more about the special accommodation offers here: https://www.kempinski.com/en/hotel-grand-arena/overview#Offers.

POSITIVITY RITUAL – 60MIN | 120BGN

Enjoy complimentary use of all Sense Spa facilities with every treatment booked

For reservations contact us T: +359 2 446 25 10 | E: spa@sensehotel.com

SHOP ONLINE: spa.sensehotel.com

The Eurobank Group’s Board of Directors meets in a full quorum in Sofia from Monday, March 27, 2023, to Wednesday, March 29, 2023, holding its session outside Greece, where it is headquartered, for the first time since 2016, a decision indicative of the importance Eurobank attaches to its investment in Bulgaria. 

On its first official visit in the country since announcing the agreement with BNP Paribas Personal Finance, that further strengthens Postbank by adding valuable assets with significant upside, Eurobank’s senior management will have a meeting with the President of the Republic of Bulgaria Mr. Rumen Radev and other leading statesmen, as well as with corporate clients and Postbank staff. The talks will include the team of Eurobank’s executives consisting of Chairman of the Board of Directors, Μr. George Zanias, Chief Executive Officer, Mr. Fokion Karavias, Deputy CEO, Mr. Stavros Ioannou, Head of International Activities & Group Private Banking General Division, Mr. Michalis Louis and the CEO and Chairperson of Postbank’s Management Board, Mrs. Petia Dimitrova. 

Eurobank’s Chairman of the Board of Directors, Μr. George Zanias, underlined the high importance Eurobank places in the Bulgarian market, one of the three markets of systemic importance for the Group along with Greece and Cyprus. As he stated: “Eurobank is fully committed in its investment in Bulgaria and Postbank, that has established a leading role as one of Bulgaria’s systemic banks, enjoying a strong customer base as a reliable, trusted, and innovative partner. This is due to the commitment, hard work and creativity of the Postbank’s team that has increased the Bank’s market shares and prospects, on the back of significant growth achieved over the last 30 years. For that we are particularly proud. Eurobank, being the only Greek systemic Bank with strong presence in five markets, continues to strengthen its international activities which have achieved a strong increase in net adjusted profit by more than 50% in 2022 to €224 million with 43% of it coming from Bulgaria.”

Mrs. Petia Dimitrova, CEO and Chairperson of Postbank’s Management Board, said: “We sent a year that was very successful for Postbank. Our loan portfolio exceeded BGN 10 billion, which is a growth of 14.5% on an annual basis and a market share of 11.9%. The deal for the acquisition of the Bulgarian branch of BNP Paribas Personal Finance will allow us to take an even more stable position in the “big four” of the banking business. In recent years, we have had a series of successful mergers, with which we have proven that consolidation is a process that reflects entirely positively on the market and our customers, who receive even faster, profitable, convenient and innovative services from a larger institution, part of a strong international group”.

Postbank, a subsidiary of Eurobank Group, has completed 30 years of successful presence in the Bulgarian market, that was celebrated at a special event in October 2022. In the past year alone, the financial institution won 25 prestigious local and international awards. Postbank received the highest world recognition “Top Employer” for 2023 from the international independent Top Employers Institute. In recognition of the demonstrated exceptional results, Postbank has been awarded the “Bank of the Year” for the fourth time, also was named “Best Retail Bank” for the fifth time in a row by the international edition World Finance Magazine and won numerous awards for its innovative products, services and corporate social responsibility. 

***

Postbank is the fourth biggest bank in Bulgaria in terms of assets, having a broad branch network across the country and a considerable client base of individuals, companies and institutions. In June 2022, Bulgarian Credit Rating Agency (BCRA) confirmed Postbank’s BBB long-term rating, with stable outlook. Postbank completed in a few years two successful deals, acquiring and integrating for a record time first Alpha Bank – a branch of Bulgaria, and then Piraeus Bank Bulgaria. They are another step to strengthen its position as a systemic bank on the market and to expand its customer base.

DGKV has advised on the €2.5 million convertible funding round that the European Innovation Council (EIC) Fund led as part of its support for Transmetrics.  The transaction is the inaugural quasi-equity financing of the EIC Fund in Bulgaria.  Existing shareholders and angel investors joined the EIC Fund in underwriting Transmetrics’s growth ambitions ahead of a planned Series A round.

In charge of a dedicated budget of €10.1 billion, the EIC is the EU’s preeminent program with funding opportunities for breakthrough technologies and game changing innovations.  The EIC Fund manages investments of up to €15 million per recipient in the form of patient capital provided to competitively selected SMEs and start-ups for scale-up and other relevant costs.

Transmetrics is an AI platform whose software is designed to deal with inefficiencies in the logistics sector, such as freight vehicles running half-empty, by facilitating higher fleet utilization rates and lower transport-related expenses and carbon emissions.  EIC funding will enable Transmetrics to further improve its technology, boost its client portfolio of logistics service providers and contribute to sustainability and efficiency in the industry.

DGKV’s team advising the EIC Fund was led by partner Valentin Bojilov and assisted by associate Zhanet Miteva.

Find out more on our website.

DGKV advised Bianor Holding AD, listed on the Bulgarian Stock Exchange, on the entry in definitive agreements for the acquisition of the software companies Itido Technologies OOD and Databreathe EOOD. 

The completion of the acquisitions will take place if certain conditions precedent are fulfilled. Bianor’s group companies are active on the US, the EU and Bulgarian markets providing video streaming technologies services and software solutions for the defense industry. 

The acquisitions are part of Bianor’s growth strategy to consolidate other Bulgarian software businesses and diversify its existing portfolio. 

Itido specializes in web and mobile software products while Databreathe specializes in machine learning and AI.

DGKV’s Partners Gergana Monovska and Georgi Tzvetkov and Senior Associate Vlada Tsenova led the team. 

The training Financial Reporting issues will be divided into two separate modules on two different starting dates. You can take advantage of our offer which includes the two modules or choose only one of the topics. The training will be held in live-online format by PwC’s lead expert RolandBalogh who is a Senior Manager and a Head of the consolidation and structuring services at PwC Hungary. Here is more information about the two modules and some of the topics that will be discussed along the course:

Module 1:Acquisitions, group reorganisations 

Date & Time:19 April, 2023 (10:00 – 14:00 EET) 

Тopics:

• Consolidation withpractical examples; 
• Accounting issues of disposals; 
• Equity method inpractice.

Module 2:Consolidation
Date & Time: 27 April, 2023 (10:00 – 14:00 EET)
Topics:

• Introduction toconsolidation – current issues, most common difficulties; 
• Different types of financial statements – which provides the highest value in different situations?

The course alsoprovides you with 6-month access to the IFRS10 Consolidated financialstatements and the IAS28 Investments in associates and joint venturese-learning modules immediately after registering, so that you will have thechance to freshen up your basic IFRS knowledge about the subject before themodules.

Apply for a course: https://www.pwc.bg/en/online-forms/academy-courses-registration-form.htm
Learn more here: https://www.pwc.bg/en/academy/assets/fy23/PwCBG-Academy-AcquisitionsGroupCons-IFRSFinanciaReportingIssues_EN.pdf