Bulgaria: Withholding tax procedure for Bulgarian government bonds
final beneficial owners may apply to obtain tax relief on interest/redemption paid on Bulgarian government bonds by using the procedure indicated below.
This is further to our Settlement Announcement A13179, dated 3 December 2013, regarding the launch of Clearstream Banking1’s direct link with the National Bank of Bulgaria for Bulgarian government bonds.
Note: The withholding tax procedure for equities and corporate bonds remains unchanged.
Withholding tax rates
The standard rate of withholding tax applicable on income paid on Bulgarian government bonds is 10%.
Reduced rates of withholding tax are available to eligible beneficial owners as follows:
- Treaty rate: for residents of countries that have a Double Taxation Treaty (DTT) in place with Bulgaria and if the rate granted by the treaty is lower than the standard rate. The maximum rate of withholding tax is defined in the relevant DTT.
- 0%: for EU individuals.
- 0%: for Bulgarian legal entities.
- 0%: for Bulgarian individuals.
Relief at source
Important requirement for relief at source:
A beneficial owner that is a DTT resident and whose annual income exceeds BGN 500,000 per tax payer is not eligible for relief at source. In such a situation, the final beneficial owner must apply for a standard refund through CBL (see the "Standard refund" section below).
The CBL customer is responsible for maintaining records of each beneficial owner’s total income for government bonds deposited with CBL, in order both to comply with this restriction and to ensure that no relief at source application is filed with CBL if the BGN 500,000 limit is reached and/or exceeded.
In order to benefit from relief at source on income from Bulgarian government bonds, customers of CBL must ensure that we receive the following documents at the latest one business day before Record Date, by 10:00 CET:
- One-Time Certificate for Bulgarian Government Bonds (see attachment) completed and duly signed by the customer, that specifies, among other things, whether or not the customer is the sole beneficial owner of all the Bulgarian government bonds held in the account. Any changes to any details must be communicated in a new One-Time Certificate. And
- List of Beneficial Owners – Bulgarian Government Bonds (see attachment) that indicates the name and complete address of each beneficial owner, the applicable withholding tax rate, the common code or ISIN and the nominal amount or number of securities. Bulgarian beneficial owners must ensure that their Tax Identification Number is completed together with all other requested information.
Plus, for DTT resident beneficial owners and EU individuals:
- Certificate of Residence (see attachment) with the full name and address of the beneficial owner, issued by the beneficial owner’s tax authorities annually before the first interest payment in that year. The Certificate of Residence must cover the record date of the respective dividend payment in order to be accepted by the Bulgarian Tax Authorities. And
- Declaration of the beneficiary of the income (see attachment) completed, signed and submitted before the first interest payment in that year. The Declaration remains valid for one calendar year, provided that there are no changes in the details declared.
A quick refund of withholding tax is available for beneficial owners eligible for tax relief at source if the required certification has not been provided within the relief at source deadline.
The eligibility criteria and certification requirements are the same as for relief at source (see above).
Deadline for quick refund
In order to benefit from a quick refund of tax withheld on interest from Bulgarian government bonds, customers must ensure that we receive the above-described documents at the latest 10 business days before the end of the quarter in which the relevant payment took place.
If payment date was 15 February 2014, the quick refund deadline is 10 business days before 31 March 2014.
A standard refund of withholding tax is available, if relief at source and quick refund have not been obtained, for eligible beneficial owners that are not residents of Bulgaria (including DTT residents whose annual income exceeds BGN 500,000).
To apply for a standard refund of withhholding tax on income from Bulgarian government bonds, CBL must receive the following documentation within the stated deadline:
- Claim Form (see attachment) completed by each beneficial owner in five copies. One Claim Form must be provided for each reclaim application and may include several ISINs and payment dates during the same calendar year.
- Credit Advice (see attachment) that identifies income payment details including the security type, gross amount of payment, date of payment and amount of tax withheld. It is required from each intermediary financial institution between the beneficial owner and CBL.
For example, if the only intermediary financial institution between CBL and the beneficial owner of interest income is the CBL customer himself, then both a CBL Credit Advice and a Credit Advice issued by the customer are required.
Deadline for standard refund
The statutory deadline for reclaiming withholding tax using the standard refund procedure is five years after the relevant income payment for which the tax reclaim is made.
The deadline by which CBL must receive the documentation for a standard refund application is, at the latest, two months before the statutory deadline. All standard refund applications received after this deadline will be processed by CBL on a “best efforts” basis. However, in such cases, CBL will apply an extra charge and accepts no responsibility for forms that have not reached the Bulgarian Tax Authorities by the date considered to be the statute of limitations deadline.
N.B.: With respect to tax reclaims in general, customers are reminded that CBL accepts no responsibility for their acceptance or non-acceptance by the tax authorities of the respective country. It is the customer's responsibility to determine any entitlement to a refund of tax withheld, to complete the forms required correctly and to calculate the amount due.
When are refunds received?
The estimated time for receiving a refund is two months from the date when CBL receives the certified documents in the cases where no audit has been assigned within the same period. This time can vary depending on when the application is filed and the complexity of the information supplied in the reclaim form.
Guidelines for completing the Claim Form
|Wording of the Claim Form||Completion details|
|Year concerned||The year of the payment (to be filled in by the beneficial owner)|
|For relief under the tax treaty between Bulgaria and _______________||To be filled in by the beneficial owner (DTT resident or EU/EEA individual)|
|PART I - Particulars of the payer of the income in Bulgaria|
|Name of the payer of the income|
Address, residency or seat of company
Identification number/unique identification code
|To be left blank - CBL as payer of the income will complete this section|
|PART II - Particulars of the claimant|
|Name/title (if company or body of persons)||To be filled in by the beneficial owner|
|Address of fiscal residence of the claimant||To be filled in by the beneficial owner|
|Identification number/unique identification code||To be filled in by the beneficial owner - Social Security number or ID number for individuals and VAT or registration number for legal entities|
|1. To be completed if the claimant is an individual||To be filled in by the beneficial owner|
|2. To be completed if the claimant is a company or a body of persons||To be filled in by the beneficial owner|
|3. Specific requirements to the claimant, if any, in relation to the application of the Tax Treaty||To be filled in by the beneficial owner - for example, if the beneficial owner is an individual resident of an EU/EEA Member State or is eligible for full exemption under the applicable DTT|
|PART III - Declaration of the payer of the income in Bulgaria|
|To be left blank - CBL as payer of the income will complete this section|
|Declaration of the beneficiary of the income||To be filled in and signed by the beneficial owner|
|Certificate of the Tax Authority of the beneficiary’s country of residence||To be filled in and signed by the local tax authorities of the beneficial owner|
Important notes on related matters
Certification from tax authorities
For U.S. residents: Form 6166 is acceptable.
In general, particular forms of certificate of residence issued by the tax authorities of other countries could be accepted by the Bulgarian Tax Authorities, but without any guarantee. CBL cannot be held liable in cases of rejection.
Capital Gains Tax
Capital Gains Tax is levied on trades made on the Over-The-Counter (OTC) market in all cases. According to Bulgarian tax legislation, tax is levied on income from transactions with financial assets issued by the government. Capital Gains Tax is levied on the positive difference between the selling and purchase amounts of deals for the calendar year. Currently, all Bulgarian government securities are traded OTC only. Declaration, calculation and payment are exclusively incumbent on the final beneficial owner.
No responsibility falls on Clearstream Banking and consequently no action will be taken by Clearstream Banking with regard to Capital Gains Tax and Clearstream Banking will not provide any reporting to its local agent.
The Bulgarian Tax Authorities may perform an audit no later than five years from 1 January of the year following the year in which the tax liability should have been declared or did occur.
If the Bulgarian Tax Authorities conduct an audit on CBL as taxpayer and should any documentation/information linked to the final beneficial owners be provided by CBL for the purposes of the audit, CBL will inform its customer accordingly about the requirements and the time frame within which the documentation/information must be submitted.
The customer is responsible for obtaining and submitting the requested documentation/information by the prescribed deadlines.
Furthermore, the Bulgarian Tax Authorities may require translation and notarisation of any documents submitted to them in the context of an audit. In such cases, CBL will notify its customer and the costs of such translation/notarisation incurred by CBL will be charged to customers.
For further information, customers may contact the Clearstream Banking Tax Help Desk on:
|Telephone:||+352-243-32835||+49-(0) 69-2 11-1 3821||+65-6597-1665|
|Fax:||+352-243-632835||+49-(0) 69-2 11-61 3821|
or Clearstream Banking Customer Service or their Relationship Officer.
1. Clearstream Banking refers to Clearstream Banking S.A., registered office at 42, avenue John F. Kennedy, L-1855 Luxembourg, and registered with the Luxembourg Register of Commerce and Companies under number B-9248 (CBL).
|As a registered customer, subscribe to our free email alerts service to receive immediate, daily and/or weekly notification of the latest customer publications on our website. Unsubscribe at any time; we respect your email privacy.|