Greek tax on transactions with Bulgaria revoked | KPMG | BG

Greek tax on transactions with Bulgaria revoked

Greek tax on transactions with Bulgaria revoked

KPMG's Tax News outline and highlight legislative changes and trends in the area of tax.

1000

Related content

The eighth issue comments on the recent developments with regard to the Greek tax at the rate of 26% on transactions with Bulgaria.

Introduction

As we informed you in the fourth issue of Tax News, on 21 March 2015, Greece introduced new rules for deducting expenses for tax purposes. Pursuant to thоse rules, expenses paid by Greek legal entities to individuals and legal entities who are tax residents of countries with preferential tax regimes, including Bulgaria, Ireland and Cyprus, would have been disallowed for tax purposes, unless taxed with a “withholding tax” at the rate of 26%.

On 23 April 2015, the Greek Ministry of Finance issued for public consultation a draft version of a decree which should have regulated the practical implementation of the new rules.

In the meantime, Bulgaria filed a complaint with the European Commission based on Article 259 of the Treaty on the Functioning of the European Union (TFEU). The position of Bulgaria, expressed in the complaint, was that the Greek tax introduced on transactions with Bulgarian persons is inconsistent with the European Union law and violates the fundamental principles embedded in the TFEU. 

Reasoned opinion of the European Commission

On 17 August 2015, the Ministry of Finance of the Republic of Bulgaria published a press release about the reasoned opinion issued by the European Commission on 3 August 2015 in favor of Bulgaria.

The conclusion of the European Commission is that, through the introduction of limitations for deducting some cross border expenses for tax purposes, Greece has failed to fulfill its obligations under Article 34 (free movement of goods) and Article 56 (free provision of services) of the TFEU. Thus, the reasoned opinion of the European Commission states that, through the Greek tax introduced on transactions with Bulgaria, Greece has violated the EU law. 

Revocation of the Greek tax

Following the reasoned opinion issued by the European Commission, the Greek Parliament has adopted a law ratifying the Third bail-out plan, including revocation of the provisions introducing the 26% tax on transactions with Bulgaria.

As noted in the press release of the Ministry of Finance, Bulgaria expresses its satisfaction with this measure. 

 

© 2017 KPMG Bulgaria OOD, a Bulgarian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Connect with us

 

Request for proposal

 

Submit