Tax Treatment of Income, Generated Through Mutual Fund Investments

Corporate taxation

The income earned by a mutual fund, defined as publicly offered collective investment scheme in Bulgaria, is tax exempt, as stipulated by art.174 of the Bulgarian Corporate Income Tax Law

VAT Taxation

Management of Mutual Fund is classified as tax-free financial service according to art.46, para 1, item 6 of the Value Added Tax Law.

Taxation of income earned on mutual fund investments

Capital gain income, realized on mutual fund investment, by local physical entities or physical entities, placed for tax purposes in country, member of the European Union or the European Economical Space, in cases of redemption or purchase of the units on a regulated market under Art. 152, para 1 and 2 of Markets in Financial Instruments Act, is tax exempt; so these incomes decrease the accounting financial result, determining the tax financial result of the legal entities, who are tax exempt by the Corporate Income Tax Law. In case of losses, realized on mutual fund investment, the entities that are taxed by the Corporate Income Tax Law should increase their accounting financial result by the negative difference between selling and acquiring price of the units. When units are acquired on different prices and then a part of them is sold, without proofs which exactly are sold, the acquiring price is the average measured price, determined on the acquiring price of the moment of the selling. These incomes are tax exempt at the source.
Capital gain income, realized on mutual fund investment, as well as financial assets, received by physical entities from third countries, is levied with 10% on the taxed income.