Have you ever considered that you can pay 0% corporate tax in the European Union? Yes, it is possible. The Bulgarian Real estate investment trust (REIT) is fully exempt from corporate income taxation.
A Bulgarian REIT can be established only as a public joint-stock company. A Bulgarian REIT can neither reorganize itself into another type of company nor change its scope of business.
Capital requirements
The registered capital of a Bulgarian REIT must amount to at least BGN 500,000 /approx. 250 000 euro/. It must be paid in full before the BG- REIT is registered and no contributions in kind are permitted.
In order to operate legitimately, REITs should receive a license from the Bulgarian Financial Commission.
There are no restrictions on investors.
Investments
The Bulgarian REITs are entitled to invest in real estate and limited property rights in real estate, construction works and improvements, mortgage-backed bonds (up to 10% of their own funds), and service companies for their own needs (up to 10% of their own funds). The real estate acquired must be located in the territory of Bulgaria. REIT can also invest in BONDS.
Tax treatment at REIT level
The profits of the BG-REITs are not subject to corporate taxation. However, BG-REITs are legally obliged to distribute at least 90% of their profits (so-called distribution profits) as dividends. The income from dividends distributed by the BG-REIT is subject to taxation at the level of the shareholder.
Corporate investors
Under Bulgarian tax legislation, there is a 5% withholding tax on dividends distributed by the BG-REIT to a nonresident corporate entity.
No withholding tax applies to EU/EEA shareholders – which means 0% dividend tax.
For more information, please contact us.
