The Bulgarian State Budget Law, published in the Official Gazette on March 27, 2025, introduces several amendments to the Bulgarian Pillar Two legislation—in effect since January 1, 2024—including:
- Safe harbors: Amends the transitional country-by-country (CbC) reporting safe harbor to reflect the OECD December 2023 administrative guidance. This includes the anti-hybrid arbitrage rules that applies to transactions entered into after December 18, 2023. The legislation also includes the transitional UTPR safe harbor.
- Domestic minimum top-up tax (DMTT): Amends the accounting standard that must be used for DMTT purposes, providing that DMTT must be based on the local accounting standard if certain conditions are met (in line with the OECD July 2023 Administrative Guidance). A tie-breaker rule is provided in case local constituent entities apply different accounting standards. The design of the DMTT remains otherwise unchanged and is generally aligned with the general GloBE rules.
- Switch-off rule: Implements the switch-off rule with respect to the QDMTT safe harbour in accordance with the OECD July 2023 administrative guidance. The rule requires to (partly) switch-off the QDMTT safe harbor (i.e., apply the credit instead of the exemption method) in cases where, for example, a foreign QDMTT jurisdiction has opted to exclude investment entities or securitization entities from the scope of its QDMTT.
- Additional OECD guidance: Introduces several other elements of the OECD administrative guidance (e.g., treatment of marketable transferable tax credits, changes for blended CFC regimes), as well as several elections (e.g., equity investment inclusion election).
Read an April 2025 report prepared by the KPMG’s EU Tax Centre