site.btaParliament Ratifies Bulgaria-Malta Agreement for Avoidance of Double Taxation

Parliament on Friday ratified in two readings during a single session an agreement between Bulgaria and Malta for the avoidance of double taxation on income and property, and for the prevention of tax evasion and avoidance, with 117 votes in favor, 31 against, and 11 abstentions. The document was signed on December 10, 2024 in Brussels.

Bringing the agreement in line with the OECD minimum standards set out in the BEPS Plan is one of the main reasons for concluding the new agreement, according to the the Council of Ministers. On the other hand, Bulgaria received recommendations in the latest OECD Peer Review Report under Action 14 of the BEPS Plan in regard to making dispute resolution mechanisms more effective, and the new agreement is a key step in this direction.

Other significant provisions cover rules for the establishment of permanent establishments, tax treatment of international transport, transactions between related parties, and the taxation of certain passive income at source, such as interest, royalties, licensing fees, and gains from the transfer of shares or comparable rights, under certain conditions.

In accordance with Malta’s policy, the effective exemption of dividends paid by local entities to Bulgaria is maintained. Additionally, an agreement has been reached for exemption from taxation in the source country for dividends paid to the state, local government bodies, the central bank, wholly state-owned entities, as well as to pension funds. Bulgaria reserves the right to impose a 5% withholding tax on dividends when they are not exempt from taxation on other grounds.

The new agreement also reflects Bulgaria’s interests regarding the allocation of taxing rights between the two countries for various types of income and provides greater protection for the tax position of Bulgarian local entities.