BULGARIA Law and Practice Contributed by: Nikolay Zisov, Svetlina Kortenska, Deyan Terziev and Teodora Peycheva, BOYANOV & Co.
5.2 Tax Consequences From a tax perspective, a spin-off is generally consid- ered a tax-neutral event for both VAT and corporate income tax purposes. From a corporate income tax perspective, the trans- formed companies and foreign business establish- ments will be subject to corporate income tax for the final tax period, as per the general tax laws. This taxa- tion is considered conclusive. At the shareholder level, accounting gains or losses arising from the acquisition of shares in the receiv- ing or acquiring companies are not recognised for tax purposes in the year of acquisition. These gains or losses could lead to temporary tax differences in future periods. Income earned from the acquisition of shares by for- eign legal entities may be subject to withholding tax or be exempt, depending on the general tax laws and applicable Double Tax Treaties. Withholding tax on capital gains, if applicable, is due within 60 days of the share transfer. 5.3 Spin-Off Followed by a Business Combination There are no restrictions on conducting a business combination after a spin-off procedure is completed. However, the Bulgarian Commerce Act stipulates that, during a spin-off process, neither the converting nor the receiving company can change its legal form simultaneously. The specific requirements for a post-spin-off business combination depend on the nature of the transaction. Typical requirements may include: • adherence to applicable tax regulations; • filing with the National Revenue Agency (NRA); • obtaining merger clearance from the Commission for Protection of Competition (if necessary); • registering relevant changes with the Bulgarian Commercial Register; and • conducting due diligence on the business transac- tion.
5.4 Timing and Tax Authority Ruling A spin-off typically takes at least four months to com- plete. The timeline is influenced by statutory notifi- cation requirements to relevant authorities, prepa- ration of necessary documentation, and obtaining certificates from foreign company registers, including notarisation and apostille. Before initiating the spin- off, parties must notify the NRA. The NRA issues a certificate within 60 days of the notification submis- sion. Furthermore, the conversion agreement or con- version plan (as applicable) for the spin-off should be published under the company file of the participat- ing capital companies in the Commercial Register at least 30 days prior to the date of conducting a gen- eral meeting to decide on the conversion. Neverthe- less, most of the terms for the preliminary procedures before the adoption of the conversion decision by the general meeting of the participating companies can run concurrently. 6. Acquisitions of Public (Exchange- Listed) Technology Companies 6.1 Stakebuilding There is insufficient publicly available information to conclude whether it is customary for an investor to approach the acquisition of a public company by way of gradually building and acquiring a stake prior to making a voluntary or mandatory takeover bid. How- ever, it is not unusual for a potential investor to acquire minority stakes of shares in a public company before proceeding with the acquisition of larger stakes of shares, which would either: • enable a voluntary takeover offer (where the inves- tor acquires more than one third of the shares in a company which has a controlling shareholder); or • trigger mandatory offer placing requirements (in case of acquisition of more than one third of the shares in a company which does not have a con- trolling shareholder or more than 50% of the voting rights absent controlling shareholder). Strategies for the use of “creeping” minorities may also apply, to the extent an investor has acquired more than one third but less than two thirds of the voting rights and is generally prohibited from acquiring more
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