Tax Optimization Is an Art
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Tax on the activity from ships operation


Pursuant to Art. 254, Par. 1 of the Corporate Income Tax Act (CITA), the taxable persons mentioned in Chapter 34 can choose whether their activity from ships operation to be levied with the tax on the activity from ships operation. The tax rate is 10 per cent. The taxable persons, who have chosen to be levied under this procedure, are levied with this tax for a term not shorter than 5 years.

According to Art. 218, Par. 2, for all the remaining activities, except for those that must be levied with the alternative tax, the taxable persons must be levied with corporate tax.

Who is entitled to pay alternative tax on the activity from ships operation?

This tax is paid by the persons performing marine commercial navigation if they comply with all the following conditions:

1. They are companies registered under the Commercial Act or are permanent establishments of a company, which is established for taxation purposes in another European Union-member state or European Economic Area-member state in accordance with the respective tax legislation, and, based on a Tax Treaty concluded with a third state, is not considered as established for taxation purposes in another state outside the EU or the EEA;

2. They operate with owned or rented ships, and also rent out ships;

3. They do not refuse to train trainees on board of the ships, except for the cases when the number of the trainees for a period of one year exceeds the ratio 1 trainee per 15 officers navigating the ships;

4. They recruit their crews with Bulgarian citizens or citizens of another EU or EEA-member states;

5. At least 60 per cent of the net tonnage of the operated ships belong to ships that are being navigated under Bulgarian flag or the flag of another EU or EEA-member states.

6. They operate according to the requirements of international conventions and the EU legislation regarding ships navigation safety and security, the environmental protection from ships navigation, and the living and working conditions on board.

Tax on the activity from ships operation is also due by the persons performing marine commercial navigation when they are administering ships based on management contracts, and at the same time are complying with the following conditions:

– they meet the criteria mentioned above in Items 1, 5 and 6;
– more than half of the administrative staff ashore or the crew consists of Bulgarian citizens or citizens of other EU member states or EEA member states;
– at least two thirds of the tonnage of the ships managed are administered by companies that are residents for tax purposes of an EU member state or another EEA member state.

Restrictions to the scope of the tax

The taxable persons are not entitled to apply the procedure for levying the activity from ships operation for:

1. Sea ships with net tonnage below 100 tons;
2. Fishing ships;
3. Entertainment ships, except for passenger ships;
4. Ships which the taxable persons have consigned for management or under a bareboat charter contract, except for the cases when the ships are consigned to the state;
5. Installations for extraction of ores and minerals, oil platforms and ships performing dredging, towing and dragging activities.

Legislation

The activity from ships operation is levied with alternative tax pursuant to the Corporate Income Tax Act.

Terms for declaring and paying

§ By 31 December of the previous calendar year – filing a declaration for exercising the right to choose under Art. 259, Par. 1;
§ By the end of each month – paying the tax for the previous month;
§ By 31 March of the next calendar year – filing an annual tax return for the previous calendar year.

Declaring the tax on the net tonnage of ships for the operation days of the ship:

The annual tax return is submitted to the National Revenue Agency’s territorial directorate, where the taxpayer is registered.

Pursuant to Art. 259, Par. 3 of CITA, when submitting the tax return the taxpayer shall also submit an annual statement of operations. Pursuant to § 1, Item 56 of CITA’s Supplementary Provisions, the annual statement of operations shall be the one under Art. 20, Par. 4 of the Statistics Act.

Download forms:

Template of the declaration under Art.259, Par.1 of CITA.

Annual Tax Return under Art. 259, Par. 2 of CITA for the tax due on the activity from ships operation.

Returns are submitted to:

§ The National Revenue Agency office, where the taxpayer is registered, or
§ By mail with confirmation of receipt

Tax due is paid:

§ Via banks

To state budget accounts of NRA’s territorial directorate, where the taxpayer is registered.

Payment can be made from every bank by filling in a payment order (deposit slip) forpayment to the budget.

! Usually the banks deduct a fee for the transfers. The lowest fee is deducted by the bank where the account of the respective NRA territorial directorate (office) is opened.

§ Via Internet

Payment via Internet requires a debit card and registration on the websites of E-pay and NRA

§ With postal order for tax payment.

The postal order shall specify the address and name of the respective territorial directorate (office) of NRA, the postal code, as well as the amount due.

Sanctions

Pursuant to Art. 261, Par. 1 of CITA, a taxable person that fails to submit the tax return under this law, or fails to submit it in due time, or fails to state data or circumstances, or states false data or circumstances resulting in either a lower amount of the tax or ungrounded abatement, or assignment, or exemption from tax, shall be penalized with a property sanction to the amount of BGN 500 to BGN 3,000. In case of a repeated (§ 1, Item 44 of the Supplementary Provisions) violation under Par. 1 the property sanction shall be to the amount of BGN 1,000 to BGN 6,000 (Art. 261, Par. 2 of CITA).

Pursuant to Art. 277 of CITA the persons who have applied the procedure for levying the activity from ships operation and do not comply with the conditions that entitle them to choose shall be penalized with property sanction to the amount from BGN 20,000 to 30,000, and in case of a repeated violation – to the amount from BGN 40,000 to 60,000. These persons shall not be entitled to apply the procedure for levying the activity from ships operation for the period of 5 years (Art. 277, Par. 2 of CITA).

A taxable person who fails to perform his/her obligations under Art. 259, Par. 3 (to submit an annual statement of operations), shall be penalized with a property sanction to the amount of BGN 500 to BGN 2,000, and in case of a repeated violation – to the amount of BGN 1,500 to BGN 5,000 (Art. 276 of CITA).

The statements for establishing the administrative offences shall be drafted by the National Revenue Agency authorities, and the penal rulings shall be issued by the Executive Director of the National Revenues Agency or an official authorized by him/her (Art. 278, Par. 1 of CITA).

Pursuant to Art. 278, Par. 2 of CITA the establishing of offences, issuing, appealing and execution of penal rulings shall be done under the procedure of the Administrative Offences and Sanctions Act.