Bulgaria’s Finance Ministry will heed the criticism of the European Commission (EC) regarding dividend taxation, the ministry said in a statement on May 8. The changes, however, will take place once they undergo full inter-departmental review at the ministerial level and are co-ordinated with the EC.

The EC slammed Bulgaria over its dividend tax policy regarding international investments earlier this week. Currently, Bulgarian legislation exempts all foreign investors with more than a 15 per cent stake in a Bulgaria-registered company from tax. If a foreign company owns less than 15 per cent, then the dividend is subject to a five per cent tax.

Another problem, according to the EC, is that dividends payable to companies operating in the European economic area (EEA) and countries from the European Free Trade Agreement (EFTA) are also levied a five per cent tax, whatever the size of their shareholding.

The other issue refers to dividends payable by EU, EEA and EFTA-registered companies to Bulgarian companies. Tax on dividends payable by Bulgarian companies is included in the overall tax base. Dividends, payable to Bulgarian companies from EU firms, however, are exempt from tax on dividends when the stake is above 15 per cent. Dividends on shareholding, which is higher than 15 per cent, are levied a 10 per cent tax, as well as all dividends from EEA and EFTA companies.

The Commission sent formal letters of notice, the first step in its infringement procedure, to Bulgaria on May 6.