A situation is possible where company shares of the capital of a limited liability company (LLC, Ltd.) have been transferred from one partner to another not with the usual purchase and sale contract, but with a donation contract. Accordingly, in this situation, the question arises whether the company shares as an object of donation are subject to taxation according to the Bulgarian legislation.
According to the Commercial Law, the company share can be transferred and inherited. The transfer of a company share from one partner to another is carried out freely, and to third parties – in compliance with the requirements for accepting a new partner and the conditions established by law. The company share can be transferred through a contract (sale, donation, etc.), and the law requires the contract to be concluded in writing with notarization of the signatures and the content executed at the same time, and to be entered in the commercial register.
The Law on Local Taxes and Fees (LLTF) defines the objects subject to an acquisition tax – such are the properties acquired by donation or another gratuitous way, as well as real estate, limited real rights over them and motor vehicles acquired in a remunerative way. Property acquired free of charge in other ways, as well as debts repaid through forgiveness, are subject to taxation in the amount of the donation tax.
In the practice, however, has been adopted the understanding that no tax is due upon the transfer of company shares by donation. An argument regarding non-taxation is that in Art. 46, para. 2 of the LLTF, which determines the valuation of the property – taxable base, there is no express text or corresponding reference to the provision of Art. 33, para. 1, item 6, which regulates the valuation of enterprises and shareholdings in commercial companies and cooperatives.
In view of the non-obligation of tax for the gratuitous acquisition of shares, when transferring company shares by donation, no declaration should be submitted.
In case of acquisition of company shares by donation or in another way and in case of doubt about the liability of tax, you can contact our experts.