As we will see, in Bulgaria the rules regarding Controlled Foreign Companies (CFC) [ Controlled Foreign Company (CFC) Rules – Правила за контролирани чуждестранни компании (CFC) ] do not apply if the controlled company is not subject to taxation or is exempt from tax in the country in which it is resident for tax purposes .

The various rules against tax avoidance practices that directly affect the functioning of national markets are outlined in Council Directive (EU) 2016/1164 , also known as the Taxation Directive or the Tax Avoidance Directive , adopted on 12 July 2016.

On 11 November 2018, the Bulgarian Parliament adopted amendments to the Corporate Income Tax Act pursuant to Council Directive (EU) 2016/1164.

SPECIFIC RULES FOR DETERMINING THE TAX FINANCIAL RESULT IN THE CASE OF A FOREIGN CONTROLLED COMPANY are contained in Chapter Nine “a” (Articles  47в. to 47д.) of the Law on Corporate Income Tax – Закон за Корпоративното Подоходно Облагане (ЗКПО).

The third paragraph of Article 47в., by providing that: “For the purposes of paragraphs 1, point 2, does not take into account the place of business of a controlled foreign company which is not subject to taxation or is exempt from tax in the country in which the controlled foreign company is resident for tax purposes.”,  effectively excludes Bulgarian companies controlling foreign companies which are not subject to taxation or exempt from tax in the country in which they are resident for tax purposes from the application of the Bulgarian rules regarding Controlled Foreign Companies (CFCs).