Tax law

Тhe Corporate Income Tax Act (CITA) and the Personal Income Tax Act (PITA) stipulate some of the main tax rules and procedures in Bulgaria.

Corporate income tax

Corporate income tax in Bulgaria is 10%. The tax base for calculating the corporate tax is the tax profit.

Corporate income tax is levied on the taxable profit of local legal persons and foreign legal persons from a place of business in Bulgaria. Legal persons that are not registered in Bulgaria and do not operate in the country through a place of business pay tax only on income derived from sources in Bulgaria.

Taxable persons who are subject to corporate taxation file an annual tax return form for the tax financial result and the annual income tax due. The annual tax return form is filed not later than March 31st of the following year, at the territorial directorate of the National Revenue Agency where the taxable person is registered. The annual activity report is filed together with the annual tax return form.

Capital gains from transactions with shares in public companies and traded rights in such shares realized on a regulated EU or Bulgarian stock market are not subject to withholding tax.

Withholding tax

Dividends and liquidation proceeds payable by resident entities to both resident and foreign natural persons are subject to a 5% final withholding tax at the source. When a foreign individual is treated for tax purposes as a resident of a member-state of the European Union or in another country – member of the European economic area, then certain incomes are not subject to tax.

Withholding tax on the income of foreign persons

The tax rate on the income tax from interest, author and license fees is 5% (under the provisions of the CITA) and it is 10% on all other income.

Persons required to deduct and pay withholding tax shall declare the tax for the quarter by submitting a declaration form by the end of the month following the quarter. The declaration form shall be submitted to the territorial directorate of the National Revenue Agency where the payer of the income is registered or is to be registered.

Agreements for avoiding double taxation

When in a tax treaty or another international agreement ratified by Bulgaria there are provisions different from those of the CITA, the provisions of the relevant tax treaty or agreement shall be applied.

Taxable persons are entitled to a tax credit under the terms and conditions of the CITA for taxes paid abroad in case the provisions of an international treaty are not applied.

The tax credit is determined for each country and for each type of income individually and is limited to the amount of the Bulgarian tax on such profits or income.

In order to benefit from the advantages for the avoidance of double taxation, provided for in a contract, the foreign person must submit an application form to the tax administration.

Personal income tax

Taxation of personal income, including income from a sole trader, is governed by the PITA.

Taxable persons under the PITA are:

  • local physical persons – on income from sources in Bulgaria and abroad;
  • foreign physical persons – on income from sources in Bulgaria;
  • local and foreign persons required to withhold and pay taxes under the PITA.

The types of taxes on personal income are:

  • tax on the total annual tax base – 10% (levied on the income of: employment; other business activities, such as profession, trade, etc; rental or other paid granting of rights or property for use; income from other sources);
  • tax on the annual tax base – 15% (levied on the income of the business as a sole trader, as well income from economic activity accruing to any natural persons, registered as agricultural producers);
  • definitive taxes– 10%, 8% or 7% (levied on specifically listed income accrued/paid in favour of non-resident persons from sources in Bulgaria, if not realized through a fixed base in the country, as well as certain types of income received by local physical persons).

The tax return form shall be filed by April 30th of the year following the year of acquisition of the income. The tax should be paid by April 30th of the year following the year of acquisition of the income.

Value Added Tax (VAT)

The Value Added Tax Act (VATA) governs the imposition of value added tax (VAT). Under VATA, a taxable person is any person who independently carries out any economic activity, whatever the purpose and results.

VAT rate is 20% and applies to:

  • any taxable supply of goods or services effected for consideration, except those specified in the law, which are subject to a tax rate of 0%;
  • imports of goods within the country;
  • any paid intra- European Union acquisition with place of performance within the country.

Reduced rate of 9% applies to accommodation in hotels and similar establishments, including holiday accommodation and letting out of places for camping lots or caravans. A 0% tax rate is applicable to the explicitly provided for in the VATA supplies.

Subject to compulsory registration under the VATA is any taxable person having a taxable turnover of BGN 50,000 or more for a period not exceeding twelve consecutive months last preceding the current month. That person is obligated to submit an application for registration under the VATA within 14 days after the lapse of the tax period during which such turnover has accrued to the said person. The obligation to register shall arise notwithstanding the time period over which the taxable turnover has accrued, but not for a period longer than 12 consecutive months.

Intra-Community delivery

Intra-Community (intra- European Union) supply of goods is the supply of goods transported by or on behalf of the provider /a VAT registered person/ or the recipient from the territory of a Member State to the territory of another Member State, where the recipient is a taxable person or a non-taxable legal person that is VAT registered in another Member State. Any intra-European Union acquisition of goods, whose supply within the territory of the country is an exempt supply under the VATA.