Last partial update, June 2011

• In Bulgaria income of any individual is subject to a flat income tax rate of 10% in 2011.
• Exemptions are granted to taxpayers with specific types of income.
• The standard rate of tax for a Bulgarian corporate tax in in 2011 is 10%.

Income Tax for an Individual

• An individual in Bulgaria is liable for tax on his income as an employee as well as on income as a self-employed person. In the case of an individual who answers the test of a "permanent resident" of Bulgaria, tax will be calculated both on his income earned in Bulgaria and overseas.
• A foreign resident who is employed in Bulgaria pays tax only on his income in Bulgaria.
• 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.
• An employer is obligated to deduct the income tax payable as well as national insurance, immediately each month from a salary paid to an employee.
• Certain payments are deducted from taxable income as detailed below.

Corporation tax - Bulgaria

Corporate Tax

In 2011, standard corporate tax in Bulgaria is 10%.

A special tax rate is applicable for companies dealing in shipping as well as companies engaged in games of chance and gambling.

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 BGL 5,000, with the minimum nominal value of BGL 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 BGL 1.
• - The company must have a minimum registered capital of BGL 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 Capital Gains

• 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 regular income.

 Reporting Dates and 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 make 4 quarterly advance payments. 

Deduction of Tax at Source -Bulgaria

Taxation of Employee

An employer is obligated to deduct tax at source from an employee and to make additional contributions to social security.

Bulgaria Social Security

As regards to salaried employees, the social security rates are:

• Employer 17.8%-18.5%.
• Employee 12.9%.

Other deductions

Tax must be deducted at source from the following payments to non-residents on the basis of the following:

•  Dividend - The standard deduction is 5% (0% from dividend paid to EU/EEA companies).
•  Interest - the standard rate of tax deducted at source - 10%.
•  Royalties - the standard rate of tax deducted at source - 10%.

Some forms of income in Bulgaria are tax-exempt as follows:

• Income from the sale of a residential apartment and a car, subject to the terms specified in law.
• Profit on the sale of securities.
• Interest received by an individual on deposits with local commercial banks.
• Subsidies for children paid by the State.
• Grants given to students who are residents of Bulgaria for studies in Bulgaria and overseas.
• Prizes from lotteries and games of change.
• Prizes given by the State for cultural works.
• A profit from the sale of assets received as an inheritance or a gift.
• Work clothes and uniforms supplied free of charge to an employee.
• Travel tickets to the place of work that are supplied to an employee by an employer.

Bulgaria Value Added Tax

• VAT in Bulgaria is 20%. There is a reduced rate of 9% for hotel services.
• VAT is payable on assets and services in Bulgaria as well as on imports into Bulgaria.
• Exports from Bulgaria are exempt from VAT.
• Income from financial services such as insurance and banking services are exempt from VAT. Legal advice is also exempt from VAT subject to the terms specified in law.
• Every business that had a turnover in excess of BGL 50,000 in the previous 12 months must register with the VAT authorities.
• A 'VAT' bank account must be opened that will be used for payments of VAT and receipt of refunds.

 Bulgaria Real Estate Tax

• The rate of tax on real estate that is 0.01%-0.45%.
• The rate is determined according to the location of the municipalities.

 Bulgaria Transfer Tax

• The tax is levied on transfer of real estate and vehicles. The tax rates are 0.1%-3%.

 Bulgaria Inheritance Tax

• Inheritance Tax is levied on individuals inheriting Bulgarian property.
• The tax rate is 0.4% for close relatives,up to 6.6% for non close relatives.
• There are exemptions for property valued under BGN 250,000.

Bulgaria Tax Deductions

• All forms of tax relief relate to the income of an individual in Bulgaria.
• The following amounts are subject to the definitions and limits in Bulgarian law.

Personal Tax Relief Comments

• Compulsory social security payments Up to 10% of taxable income.
• Voluntary payments for a pension and medical insurance Up to 10% of taxable income.
• Donations Up to 5%-50% of taxable income. 

Bulgaria Business Deductions

In addition to the reductions/credits specified above, reductions and business expenses may be claimed in Bulgaria as follows:

• Offset of losses - a loss may be offset up to 5 years forward. 
• Consolidated statements - it is not possible in Bulgaria to offset a loss in one company in a group against the profit of another company in the group.
• Financing costs - interest on credit is allowable for tax, if not exceeding the 3:1 debt to equity ratio. Non deductible interest can be carried forward for 5 years, subject to certain terms.
• Rental income - There is a 10% deduction for rental income.

An employer's contributions to pension and health funds that are not legally compulsory are allowable to a limit of BGL 40 a month for each employee.

Bulgaria Depreciation of Fixed Assets

• The customary method of depreciation in Bulgaria is the straight line method.
• An asset that cost less than BGL500 is not defined as a fixed asset.

A table of rates of depreciation according to the straight line method is as follows:

• Type of Asset Depreciation Percentage
• Buildings 4%
• Machinery and equipment 30%
• Infrastructure, roads and transport vehicles 10%
• Computers and software 50%
• Vehicles 25%
• Other fixed assets 15%
• Intangible Assets 33.3%