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Brussels, 19 February 2009

Direct taxation: The European Commission requests that Bulgaria end discriminatory tax treatment of foreign governmental, municipal and corporate bonds

The European Commission has formally requested Bulgaria to change its tax provisions according to which income from Bulgarian governmental, municipal and corporate bonds are exempt from tax, whereas no such exemption is granted for similar bonds issued abroad. The Commission considers that these rules are incompatible with the EC Treaty, which guarantees the free movement of capital. The request takes the form of a reasoned opinion (second step of the infringement procedure provided for in Article 226 of the EC Treaty). If there is no satisfactory reaction to the reasoned opinion within two months, the Commission may decide to refer the matter to the European Court of Justice.

According to the Bulgarian rules, interest and discounts (difference between the market price of a bond and its nominal value) from Bulgarian governmental, municipal and corporate bonds are tax exempt. Interest and discounts from governmental, municipal and corporate bonds issued in other EU Member States or EEA/EFTA states are not eligible for such an exemption and are subject to income tax in Bulgaria at a rate of 10%.

The Commission is of the opinion that these rules may dissuade Bulgarian taxpayers from investing in bonds issued in other Member States and thus restrict the free movement of capital. Bulgaria thus fails to fulfil its obligations under Article 56 of the EC Treaty and Article 40 of the EEA Agreement.

The Commission's case reference number is 2008/2053.

For the press releases issued on infringement procedures in the taxation or customs area see:

For the latest general information on infringement measures against Member States see:

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