According to the Bulgarian law, Bulgarian entities are allowed to be acquired by foreign shareholders, even in commercial activities such as real estate. However, they are subject to a 10 percent corporate tax.
The corporate tax in Bulgaria is applied based on the profit of the company and the after-tax profit is allowed to be distributed as a dividend or it can be kept within the company.
Companies registered in Bulgaria or foreign legal entities trading in Bulgaria through a branch are subject to a 10 percent corporate tax. If a company is not registered in Bulgaria and does not perform trading activities in this country through a branch, but it gains income from sources in Bulgaria, it is required to pay only a tax based on the respective revenue.
The corporate tax must also be paid by legal entities that are not having trading activities, but generate profits on transactions or on rental of movable of immovable property. They are subject to Article 1 of the Bulgarian Trade Act.
What type of companies and activities are subject to corporate tax?
Bulgarian legal entities that conduct commercial activities, Bulgarian non-legal entities that generate profits on transactions governed by Article 1 of the Trade Act, as well as unincorporated companies in Bulgaria. Furthermore, the corporate tax also applies to foreign entities that make trading activities using a branch and foreign unincorporated entities that also have trading activities through a branch.
What companies pay other tax rates instead of a corporate tax?
A 3 percent tax rate applies to state budget-funded entities, such as departments and a 2 percent tax rate applies for municipal authorities. Companies that activate in the gambling activity pay a gambling tax calculated on the number of bets placed or on the number of machines operated. In this case the rate is 15 percent. A 10 percent tax on vessel operation is applied to merchants shipping operations based on the net vessel tonnage and foreign legal entities and unincorporated companies are subject to a 10 percent tax.
VAT in Bulgaria
The value added tax (VAT) applied in Bulgaria on any paid goods or services provided, as well as on intra-community acquisitions of new vehicles, excise goods or imports of goods. The applied tax rate is 20 percent, but hotel services benefit from a reduced rate of 9 percent. Activities such as exports, legal advice or incomes from financial services like insurance or banking services are exempt from VAT.
Registration for VAT is mandatory for each business that has a turnover of more than 50,000 BGL in the previous year and a bank account must be opened in order to pay the VAT.
Are you interested in opening a company in Bulgaria? Contact our Bulgarian lawyers and they will provide you all the information and they will help you through the entire process.
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