| Bulgaria Income Tax Rate Bulgaria personal income tax rate for 2009 is a flat 10%.
Bulgarian residents are liable for income tax on their worldwide income, with tax credits available for overseas taxes paid. If income is derived from a country with which a double taxation treaty exists, the elimination of double taxation is effected in accordance with that tax treaty.
Income received from all sources during the year is taxable with some exceptions. These include income from the sale of one or two properties under certain conditions, scholarships for education in the country and abroad, and income from interests and deposits in local commercial banks and branches of foreign banks.
Tax Rate: In Bulgaria, a 10% flat rate has replaced the previous progressive income tax rates. The net income of sole proprietors is taxed separately by way of a 15% final flat tax.
Tax Allowance: The only personal allowance granted under the Bulgarian Personal Income Tax Act (PITA) is the annual BGN 7,920 allowance available to disabled individuals.
Capital Gains Tax in Bulgaria: Capital gains arising on the exchange of shares and stock in connection with a corporate restructuring are taxed at 10% in Bulgaria.
Taxable incomes from additional voluntary securing and life insurance are taxed at 15%.
Nonresidents are generally taxed on Bulgarian source income in the same manner as residents.
To be considered a Bulgarian resident, the requirements must be met of residency in Bulgaria of at least 183 days in any calendar year, and occasionally also if residency is less than 183 days, if the individual has a home in Bulgaria that is his main residence, he will be considered a Bulgarian resident.
Inheritance Tax: Inheritance tax in Bulgaria is levied on property situated in Bulgaria or abroad that is inherited by Bulgarian citizens. Inheritance tax is also levied on property in Bulgaria inherited by nonresidents. The tax rate is 0.7% - 1.4% when inherited from relatives in the lateral line or 5% - 10% where not acquired from relatives.
In some cases, (e.g. gifts to spouse and relatives in the direct line) the inheritance is exempt from tax.
Wealth Tax: There is no wealth tax in Bulgaria.
Tax Year: Tax year in Bulgaria is the calendar year.
Bulgaria Corporate Tax RateBulgaria corporate tax rate for 2009 is 10%.
Alternative Taxes
Alternative taxes in Bulgaria substitute the corporation tax and apply to:
- Gambling Companies: The tax rate is 10% or 12% over the earnings from pledges or the nominal value of the pledges printed on slip-forms, tickets and others, depending on the type of gambling. This tax is final and payable monthly. The tax on gambling games and casinos is calculated with reference to the number of devices used and is paid quarterly.
- Budget enterprises: The tax rate is 3% (for municipalities - 2%) and is payable on trading income and income from the rental of personal and real property. This tax is final and payable monthly.
- Certain entities or individuals performing nautical commercial navigation may choose whether to pay corporation tax or an alternative tax in connection with operating ships. The alternative tax is payable in monthly instalments at a rate of 10% and is based on the net tonnage of the ship and the number of the days in operation.
Bulgaria Capital Gains Tax: In Bulgaria, capital gains tax is paid by an individual on the sale of real estate or work vehicles such as planes or cars on the difference between the sale price and the higher of two calculations - the market price of the asset sold, or the cost of purchase linked to the index.
An individual who sells one moveable asset pays tax on the difference between the sale price and the cost of the asset sold on adjusting the cost to the rate of inflation.
Capital gains tax for companies in Bulgaria is added to the taxable income of a company. Quoted shares sold on the Bulgarian Stock Exchange are exempt. Unrealised capital gains or financial assets are taxable only in the case of financial institutions.
Branch Profit Tax: Overseas companies earning profits in Bulgaria, including profits from branches, are subject to the same tax rates as resident companies. Specific rules apply with regards to transfers between Bulgaria based activity of the company and that operated overseas.
Fringe Benefits Tax: Benefits provided in kind to employees are taxable at a 10% rate on the employer in Bulgaria. Tax exemptions include food vouchers of up to 40 Leva per month per person; life assurance made on account of the employer within the range of 60 Leva per person; and transportation for organised workers from home to their place of work.
Real Estate Tax: Real estate tax in Bulgaria is levied on the owners of land and buildings. Farm land and forests are exempt. The tax rates are set by municipalities and range from 0.15% to 0.3% of the net book value of the property plus accumulated depreciation cost.
Withholding Taxes in Bulgaria: A 10% withholding tax is levied on the following income derived by nonresidents:
- fees for technical services
- fees earned in accordance with agreements for franchising and factoring
- management and directors' fees
- income from property or from transactions in property.
Interest and royalties paid to non-residents is subject to a 10% withholding tax in Bulgaria, unless a lower treaty rate applies. The EU Interest and Royalties Directive applies to transactions between associated companies but this does not reduce the withholding tax until 1 January 2011, when a 5% tax rate applies. Eligible payments are exempt from withholding tax from 1 January 2015.
Other Taxes in Bulgaria: Compulsory social and health security contributions vary from 28% to 35.5% depending on what is insured. It can cover sickness, maternity, unemployment benefit and old age pensions. Generally, contributions are based on earnings and levied on both the employer and employee. The employer pays 65% and the employee 35% of the total amount due.
The employer also pays contributions for 'Labour accidents and occupational disease' of between 0.4% and 1.1% in Bulgaria, depending on the economic activity of the enterprise as well as 0.5% to the fund for 'Guaranteed claims by workers and employees' up to a maximum of 1,400 Leva.
Non-residents who hold a long-term stay permit must pay health insurance at 6%.
Taxation of Dividends: Dividends paid between Bulgarian resident companies are tax exempt and not subject to withholding tax.
Dividends paid to non-resident companies are subject to a withholding tax of 5% unless a lower treaty rate applies. However, such dividends are exempt under the EC parent-subsidiary Directive provided at least 15% of the capital of the subsidiary is owned by the overseas parent for at least two years.
Foreign Source Income: Resident companies in Bulgaria are taxed on their worldwide income and there are no special rules relating to the taxation of overseas income.
From 1 January 2009, dividends paid to a Bulgarian resident company in respect of its shareholding of any size in an EU/EEA-resident company are exempt from Bulgarian corporate income tax.
Foreign Tax Relief: Tax credits are available with respect to foreign tax paid on overseas income by resident individuals. The credit is limited to the amount of the Bulgarian corporation tax and income tax payable on that income. If Bulgaria has signed a double taxation treaty with the country where the income is sourced, the rules of the treaty apply.
Tax Year: Tax year in Bulgaria is the calendar year.
Reporting Dates and Tax Payment in Bulgaria: The tax year in Bulgaria is the year ending on December 31. A limited company files an annual report by March 31. An individual must file an annual report by April 15.
Companies that finished the previous year with a profit pay 12 monthly advance payments in the following year. New companies in Bulgaria make 4 quarterly advance tax payments.
Types of Corporations in Bulgaria
In Bulgaria, the following are accepted forms of incorporation:
A limited liability company (with the suffix OOD)
- At least 1 shareholder or more is required to set up the company. The shareholders may be individuals or companies.
- The minimum share capital is BGN 5,000, with the minimum nominal value of BGN 10 a share.
- At least 70% of the capital must be paid up before registration.
- The owners of the company are liable only for the amount of capital invested.
- An annual shareholders' meeting must be convened at least once a year.
- A director must be appointed for the company.
A liability company with a single shareholder (with the suffix EOOD)
- This is an OOD company owned by one individual, who may be a foreign resident.
- The single shareholder may serve also as a director of the company.
A consolidated company (with the suffix AD)
- At least 1 shareholder or more is required to set up the company.
- The minimum share value is BGN 1.
- The company must have a minimum registered capital of BGN 50,000. For banks, the minimum capital requirements are BGL 10 million.
- At least 25% of the registered capital must be paid up before registration.
- The company is managed by a board of management, or at two levels by 'a supervisory board' and a 'board of management'.
A consolidated company with a single shareholder (with the suffix EAD)
- The company is owned and controlled by a single shareholder.
- It is compulsory to file an annual balance sheet with the tax authorities.
Bulgaria Sales Tax / Value Added Tax (VAT) RatesThe standard tax rate of Value Added Tax (VAT) in Bulgaria is 20%.
A reduced rate of 7% applies solely to the service of accommodation, provided by a hotel-keeper, when it is part of organised tourism. A zero tax rate is applicable to exports, as well as to transactions exempted from VAT under international agreements to which Bulgaria is a party. In all other cases of taxation, including the import of goods from countries which are not members of the European Union, the tax rate of 20% is applicable.
Exempt transactions include health care, social care and insurance, education, sport and culture, financial and insurance services and gambling etc. Some transactions related to land and buildings are exempted from taxation but, if the supplier chooses, they may be treated as taxable.
Transactions are exempt where the place of execution is outside Bulgaria. No tax is charged but the recipient has the right to claim tax credits on the related goods and services.
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