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Taxation in Bulgaria

Taxation in Bulgaria

Updated on Monday 18th April 2016

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Any company or partnership incorporated in Bulgaria, as well as permanent establishments of foreign legal entities, are subject to taxation in Bulgaria. Bulgarian residents and Bulgarian resident companies are taxed on their worldwide income, while non-residents and non-resident legal entities are only taxed on their Bulgarian source income.
 
Business owners who want to open a company in Bulgaria should know that all of the main business entities in Bulgaria are subject to taxation and filing requirements.
 
Some of the most important types of companies in Bulgaria are:
 
- the joint stock company,
- limited liability company,
- sole trader,
- branch of a foreign company.
 
Our Bulgarian lawyers can help you choose the right type of company for your business.
 
Corporate taxation in Bulgaria
 
The standard corporate tax rate in Bulgaria is 10%. There are no applicable surtaxes or alternative minimum taxes. Certain incentives are available for investments in various economic areas and EU grants are also available in Bulgaria. 
 
In Bulgaria, the tax year is the same as the calendar year. According to law, the annual corporate tax must be paid until 31 March, the following year. Quarterly or monthly advance instalments must be paid during the year. The annual corporate tax return also has to be filled until this date.
 
Dividends in Bulgaria are subject to a 5% withholding tax if they are distributed to individuals, Bulgarian non-profit companies and non-resident companies (except for EU/EEA companies). Royalties paid to non-resident companies are subject to a 10% withholding tax, if no double tax treaties apply. Technical service fees are also subject to a 10% withholding tax when paid to a non-resident company.
 
Companies in Bulgaria also need to make contributions to the social security and they are subject to other taxes, such as the real property tax or the transfer tax.
 
More than 60 double tax treaties were signed with other countries by the Bulgarian government over the years in order to attract foreign investment. Another advantage of these treaties is that the corporate tax is exempt and paid only in the country of origin or credited, this meaning that the corporate tax is paid in Bulgaria but the company will receive that amount as credit in your country of origin.
 
Personal taxation in Bulgaria
 
Individuals are considered Bulgarian residents if they have a permanent address in Bulgaria, they spend more than 183 days per year in the country or if their centre of vital interest is located in Bulgaria. By contrast, individuals can have a permanent address in Bulgaria and not have their main place or business in the country, therefore they are not taxed.
 
Married couples in Bulgaria cannot file their return jointly; each individual must file its own return. The taxable income for individuals in Bulgaria includes income from employment, income from business of professional activities, capital gains or income from rent etc. The standard tax rate is 10% and an 8% tax applies for interest from bank deposits. 
 
The value added tax (VAT) applies for all goods sold in Bulgaria. The standard VAT rate is 20% and reduced rates apply to special services. Our Bulgarian lawyers can help you register for VAT in Bulgaria if it is required by law.
 
Our law firm in Bulgaria can offer you complete legal services in Bulgaria. Please feel free to contact us if you want to invest in Bulgaria.   
 
If ever in need of qualified legal consultancy in other European countries, clients are always welcomed to seek the help of our attorney partners in Cyprus or law firm in Switzerland
 

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