What you will learn in this article
- What additional cash contributions are and their legal nature
- When it makes sense to use them instead of a loan or a capital increase
- The procedure for adopting an ACC resolution
- How ACCs differ from a shareholder loan (detailed comparison table)
- Tax treatment under CITA and PITA
- The contested issues between the SAC and SCC
- Practical tips for avoiding tax risks
What are ACCs (Art. 134 CA — temporary funding, NOT capital)
Additional cash contributions are governed by Art. 134 of the Commercial Act. They constitute a special institution of company law, distinct from both capital contributions and civil-law loans.
Legal nature
- ACCs are not a capital contribution — they do not increase the company’s capital and are not reflected as share/equity capital on the balance sheet
- ACCs are not a gift — they are subject to repayment within a defined period
- ACCs are a sui generis (special category) obligation arising from the membership relationship between the partner and the company
- As a general rule, they are interest-free — but the General Assembly may decide otherwise
- Contributions are proportionate to equity interests — each partner contributes in proportion to their share, unless the General Assembly decides otherwise
- ACCs are temporary in nature — they must be repaid within a specified period
Two statutory grounds (Art. 134(1) CA)
The law provides that ACCs may be imposed:
“...to cover losses and in case of a temporary need for cash.”
The interpretation of this wording is one of the most contested issues in Bulgarian company and tax law — more on this in the SAC vs. SCC section below.
When to use them (cash flow, avoiding a capital increase)
ACCs are a suitable instrument in the following situations:
1. Temporary liquidity shortfall
The company expects incoming payments (e.g., under a client contract) but currently lacks sufficient funds to cover running costs (rent, salaries, suppliers). ACCs allow rapid funding without interest costs or formal banking procedures.
2. Covering losses
If the company has accumulated losses, ACCs can provide the funds to cover them — for example, to pay overdue liabilities or to sustain operations until profitability is achieved.
3. Avoiding a formal capital increase procedure
A capital increase requires: amending the articles of association, registration with the Commercial Register, and a state fee. ACCs are not registered in the Commercial Register and do not require an amendment to the deed of incorporation — the process is considerably faster and cheaper.
4. Tax advantages
ACCs (provided the requirements of Art. 134 CA are met) are not declared as received/granted loans in the annual tax return — neither under CITA (Part VI) nor under PITA (Art. 50(1)(5)). This makes them more convenient than a shareholder loan from a reporting perspective.
When ACCs are NOT suitable
- Where long-term financing is needed — ACCs are intended for temporary requirements
- Where interest accrual is desired — although permissible, it complicates the tax treatment
- In an EOOD with a sole owner that is a legal entity, which cannot contribute funds under Art. 134 (although the decision is formally adopted by the sole owner)
Procedure (General Assembly resolution — maximum amount, interest, repayment period)
Step 1: Convene the General Assembly
The managing director convenes the General Assembly with an agenda that includes a resolution on additional cash contributions.
For an EOOD, the decision is adopted by the sole owner of capital in writing.
Step 2: Adopt the resolution
The resolution is adopted with a majority of more than 3/4 of the capital (Art. 134(2) CA). The articles of association may prescribe a higher majority, but not a lower one.
Mandatory elements of the resolution:
- Maximum amount of additional cash contributions — total sum and/or per-partner amount
- Proportionality — whether contributions are proportionate to equity interests or in a different ratio
- Contribution deadline — by when partners must transfer the funds
- Repayment deadline — by when the company must return the contributions
- Interest — whether the contributions are interest-free or bear interest (and at what rate)
- Justification — specific financial indicators substantiating the need
Important note on justification: The resolution must be substantiated — it must cite specific reasons (losses, temporary need) and financial data. An unsubstantiated resolution may be challenged by a dissenting partner and may lead to tax reclassification by the NRA (National Revenue Agency).
Step 3: Dissenting partner’s right to withdraw
Under Art. 134(3) CA, a partner who did not attend the General Assembly or who voted against the resolution may withdraw from the company within one month of the adoption of the resolution.
This is an important safeguard for minority partners — if they do not wish to fund the company, they have the right to exit.
Step 4: Transfer the funds
Partners transfer the funds to the company’s bank account within the agreed deadline. The payment reference should include “additional cash contribution under Art. 134 CA” and the General Assembly minutes reference number.
Step 5: Repayment
The company repays the contributions within the deadline set by the General Assembly resolution. If it cannot repay on time, the General Assembly may adopt a new resolution extending the deadline.
What happens if a partner fails to contribute
If a partner fails to make the additional cash contribution within the prescribed deadline, they may be expelled from the company under Art. 126 CA — after a written warning and the provision of an additional reasonable deadline.
ACCs vs. shareholder loan — comparison
| Criterion | ACCs (Art. 134 CA) | Shareholder loan |
|---|---|---|
| Legal basis | General Assembly resolution with 3/4 majority | Loan agreement |
| Justification | Mandatory (losses / temporary need) | Not required |
| Interest | Interest-free as a rule | Typically at market rate |
| Tax reporting (PITA) | Not declared (Art. 50(1)(5)) | Declared in annual tax return |
| CITA Part VI | Not declared (if Art. 134 requirements are met) | Declared |
| Partner’s right to withdraw | Right to withdraw within 1 month | No such right |
| Commercial Register entry | No | No |
| Can be converted to capital? | Yes (Art. 72 CA) | Yes (Art. 72 CA) |
| Required majority | 3/4 of capital | No General Assembly resolution needed |
| Repayment deadline | Mandatorily set in the resolution | By agreement |
| Risk of tax reclassification | Low (if Art. 134 requirements are met) | Low (if market-rate interest is charged) |
| Suitable for EOOD | Yes, but formal | Yes — more flexible |
Practical takeaway: ACCs are preferred when the objective is short-term interest-free funding without reporting obligations. A shareholder loan is a more flexible instrument — it does not require justification, allows freely negotiated terms, and does not require a supermajority vote.
Tax treatment (CITA — Part VI declaration)
CITA — when ACCs are NOT declared
If the additional cash contributions meet all requirements of Art. 134 CA (General Assembly resolution, justification, specified deadline), they are not declared as granted/received loans in Part VI of the annual tax return under Art. 92 CITA (ZKPO).
CITA — when ACCs ARE treated as a loan
If ACCs do not meet the requirements of Art. 134 CA — for example:
- The resolution is not substantiated
- No repayment deadline is specified
- The contributions are used for purposes other than covering losses or temporary cash needs
- The repayment period is “unreasonably” long
...then the NRA may reclassify them as a loan. The consequences are:
- A requirement to charge market-rate interest (for related parties — Art. 15 CITA)
- An obligation to declare in Part VI of the annual tax return
- Tax adjustment of the interest under CITA
PITA — reporting by natural person partners
ACCs from a natural person partner are not declared in the annual tax return under Art. 50(1)(5) PITA (ZDDFL), provided they meet the requirements of Art. 134 CA.
If, however, the NRA reclassifies them as a loan — the natural person will be required to declare them as a granted loan.
SAC vs. SCC — the contested issues
One of the most significant divergences in Bulgarian jurisprudence concerns the interpretation of the two grounds in Art. 134(1) CA: “to cover losses and in case of a temporary need for cash.”
NRA and SAC position (tax cases): Cumulative interpretation
According to the NRA and the prevailing case law of the Supreme Administrative Court (SAC) in tax cases:
- The two grounds (losses + temporary need) must exist simultaneously (cumulatively)
- If the company has no losses but needs working capital — ACCs under Art. 134 are not permissible
- In such a case, the funds provided are treated as a loan with a requirement for market-rate interest and tax adjustment
SCC position (partner expulsion cases): Alternative interpretation
The Supreme Court of Cassation (SCC) in cases under Art. 126 CA (expulsion of a partner for failure to make an ACC) holds that:
- The two grounds are alternative — losses OR temporary cash need
- It is sufficient for only one of the two grounds to be present
- This is a more favourable interpretation for companies
What this means in practice
The two positions create legal uncertainty:
- Under commercial law (before the SCC) — the ACC resolution may be valid (alternative interpretation)
- Under tax law (before the SAC) — the same resolution may be challenged by the NRA if there are no losses (cumulative interpretation)
Practical recommendation: To minimise tax risk, we recommend that the General Assembly resolution always cite both grounds (losses and temporary need), even if only one is present in practice. The justification should contain specific financial indicators — balance sheet, profit and loss statement, cash flow forecast.
Practical tips
- Provide detailed justification — cite specific figures (accumulated losses, expected receipts, current liabilities). The more detailed the justification, the harder it is for the NRA to challenge the ACC classification.
- Set a reasonable repayment period — SAC case law indicates that an “obviously unreasonable period” (e.g., 20 years) may serve as grounds for reclassification as a loan. A recommended period is 1–3 years.
- Document the transfer — the bank transfer should reference “ACC under Art. 134 CA, General Assembly Minutes dated [date]”. Do not accept cash contributions — they are harder to prove.
- Maintain proportionality — by default, contributions are proportionate to equity interests. If the General Assembly decides otherwise, the resolution must explicitly state this.
- Repay on time — failure to repay within the specified period may signal to tax authorities that the contributions are not “temporary” and should be reclassified as a loan.
- Consider charging interest — although ACCs are interest-free as a rule, for related parties (as the partner and the company are), the NRA may view the absence of interest as a deviation from arm’s length conditions (Art. 15 CITA). Consider charging a minimal interest rate.
- The General Assembly minutes are the key document — retain them carefully along with the accounting records that substantiate the need for ACCs.
- For EOODs — the decision is adopted by the sole owner in writing. The justification requirement is equally important as for OODs.
Frequently asked questions
Conclusion
Additional cash contributions under Art. 134 CA are an effective tool for temporary funding of OODs and EOODs, offering advantages over a loan: no interest, no reporting burden, and a fast procedure with no Commercial Register entry. However, their proper use requires careful justification, a reasonable repayment period, and thorough documentation — otherwise, there is a real risk of tax reclassification by the NRA.
The divergence between SAC case law (cumulative interpretation) and SCC case law (alternative interpretation) is an additional reason for heightened care when structuring ACCs.
The Innovires Legal team can assist you with preparing the General Assembly resolution, tax planning, and documenting ACCs. Contact us to discuss the optimal approach for your specific situation.
This article is prepared for informational purposes only and does not constitute legal advice. For a specific legal question related to your situation, please consult a qualified lawyer. The information is current as of the publication date (26 March 2026) and may be affected by subsequent legislative changes.
Need assistance?
The Innovires team can assist you with additional cash contributions — from preparing the General Assembly resolution to tax planning.