The Ministry of Finance in Bulgaria has agreed that foreign investors acquiring shares in Bulgarian companies by exchanging them for compensation vouchers will not be subject to withholding tax.
The Ministry says it will now treat the exchange of vouchers for shares not as a special transaction, but as a normal cash payment for them. Accordingly, profits on shares will be exempt from taxation regardless of how they were paid for.
“The tax treatment when exchanging vouchers for shares has been a hot topic in recent months,” says a spokesman for RZB Bank in Vienna. “It arose when the government offered its stake in the Bulgarian Telecommunications Company to the public via an auction, and the sale price was defined in compensation instruments.”