More and more entrepreneurs decide to develop their business activities in Bulgaria precisely because of one of the main advantages of the tax system in Bulgaria – 10% income tax. This is far from the only advantage that makes our country attractive to business. In this article we will tell you a little more about individual taxes in Bulgaria.
The taxes can be categorized on the basis of several different factors, such as: according to the methods of their repayment, according to the time of payment, taxes according to the place in which they are deposited, according to the subject of taxation. Two are the main categories of taxes in Bulgaria, on which we will concentrate in this article: direct and indirect. This separation of taxes is based on who bears the burden of the tax and according to the subject of taxation.
Direct taxes in Bulgaria are aimed at taxation of property, wealth and income. These are taxes that are charged and deducted directly from taxpayers’ income. They are:
- Corporate tax on annual tax profit;
- Personal income tax;
- Withholding taxes.
The corporate tax rate is 10%.
Corporate tax is imposed upon:
- The profit of local legal entities;
- The profit of local legal entities, which are not traders, including faith organizations, from transactions under Article 1 of the Commercial Law, as well as from the rental of movable property and real estate;
- The profit of foreign legal entities from a permanent establishment in the Republic of Bulgaria;
- The profit from the activities of certain gambling organizers.
The taxable amount for determining corporation tax is the tax profit. The tax period for determining corporation tax is the calendar year. For newly established taxable persons, the tax period shall cover the period from the date of their establishment until the end of the year. The declaration of corporate taxes in Bulgaria is made as the taxable persons submit an annual tax declaration according to a model for the taxable financial result and the annual corporate tax due. The annual tax return shall be submitted by March 31st of the following year to the territorial directorate of the National Revenue Agency for registration of the taxable person.
The Corporate Income Taxation Act contains specific provisions on minimum and regional State aid in the form of tax breaks.
Natural person income tax (NP)
The tax rate is 10%. Local citizens paying taxes in Bulgaria are subject to tax on their income from sources in Bulgaria and abroad (including business as sole trader), and the income of foreign individuals is taxed only if it is acquired from sources in Bulgaria. Taxable income is income from all sources acquired by the taxable person during the tax year, except for income that is tax-free under the law. In determining the amount of taxable income from the relevant source, the costs provided for by law shall be deducted in cases where the law has provided for a deduction of costs. The declaration of NP income tax shall be made by submitting the annual tax declaration. This must happen by April 30th of the year following the year of acquisition of the income, in the local directorate of the NRA at the permanent address of the individual.
Tax deducted at the source
In this type of taxes in Bulgaria, the subjects of taxation are:
- Dividends and liquidation shares distributed among resident legal entities
They may be in favor of:
- foreign legal entities, except where the dividends are realized by a foreign legal entity through a permanent establishment in the country;
- local legal entities that are not traders, including municipalities.
- Income of foreign legal entities from a source in the country, where they are not realized through a permanent establishment in the country, including:
- income from financial assets and from transactions in financial assets issued by local legal entities, the state and municipalities;
- interest, including interest contained in finance lease installments;
- rental income or other provision for the use of movable property;
- remuneration for technical services;
- remuneration under franchise and factoring contracts;
- remuneration for management or control of a Bulgarian legal entity;
- income from agriculture, forestry, hunting and fisheries on the territory of the country;
- income from rent or other provision for the use of real estate located in the country;
- and others.
The tax rate is 10%. It shall be deducted by the legal person charging the income, who shall then pay the withheld tax to the State budget.
Indirect taxes in Bulgaria are practically taxes on sales, consumption, consumption. In other words, those taxes are payable to the State by a third party on whose behalf the tax is actually at issue. Or – the indirect tax is paid into the budget by the seller, but is actually paid by the buyer as it is included in the price of the goods and services. To a large extent, indirect tax also determines the level of prices. Here are the taxes in Bulgaria that are indirect:
- Value added tax – VAT
- Excise duties
- Customs duties
Value added tax – VAT
The tax rate is 20%, and for hotel services – 9%. There are some supplies specified in the law that are taxable at zero rate.
The following types of transactions are subject to taxation:
- taxable supplies of goods or services for consideration;
- for consideration an intra-Community acquisition with a place of performance on the territory of the country, carried out by a person registered under the law or by a person for which an obligation to register has arisen;
- for consideration intra-Community acquisition of new vehicles with a place of performance on the territory of the country;
- intra-Community acquisition for consideration with place of performance on the territory of the country of excise goods;
- imports of goods.
Excise duty is among the indirect taxes in Bulgaria and is a tax that taxes the sale or use of goods such as alcohol, tobacco products and energy products.
The duty shall constitute an indirect tax, charge or levy fixed by the executive in respect of the import or export of goods from or into a country.
Taxes and taxation are among some of the most important moments in any business. As for your business to be in compliance with the law, extended knowledge in the field. We are here to help you – CONTACT US and get tax consultations from the right place.