I. General provisions:
Each partner in a limited liability company (LLC) in Bulgaria is entitled to a liquidation share. Each partner has a partnership share of the company’s property, the amount of which is determined according to his share in the capital. The share in the capital determines the property rights of the partners, one of which is the right to a liquidation share.
For tax purposes, the term liquidation share includes the distribution of a share of the property of one person upon its termination in favor of another person or upon termination of that other person’s membership.
It is important to clarify what tax the income from liquidation shares is subject to. Taxable income from liquidation shares in favor of local individuals from sources in Bulgaria and abroad is subject to final tax. The final tax for income from liquidation shares is determined on the positive difference between the value of the liquidation share and the documented price of acquisition of shares in the company.
II. Declaration and payment of the final tax:
When taxing a liquidation share, the tax rate is 5%.
For the liquidation share, the final tax is withheld and paid by the enterprise – payer of the income, by the end of the month following the quarter in which the liquidation share was charged.
Enterprises – payers of income, obliged to withhold and pay final tax, submit a declaration according to the sample for the tax due, which is submitted within the deadlines for paying the tax due.
Another obligation of the paying enterprise is the submission to the National Revenue Agency of a report on the income paid during the year. In case of deletion/termination of the enterprise, the reference is provided within 30 days from the date of deletion of the taxable person/termination of the activity.
It is important to note that the income acquired by the individual during the year from a liquidation share from a domestic source is not subject to declaration in the annual tax return.
For consultation regarding the tax treatment of income from a liquidation share, you can contact our experts.