Corporate taxation
If you are looking to start up a new company in Bulgaria and need to know what the prevailing tax rates are, or if you are looking just to obtain up-to-date information on the current tax rates effective in Bulgaria, you are on the correct page. Herein below, SKM provides a brief overview of the most important types of corporate taxes applicable to the companies operating inBulgaria, as well as details of their amount, percentages, method of application and payment.
However, if you would like to concentrate on your core business and prefer not to waste your time trying to understand and apply directly the below figures and tax rates, tables and complicated calculations – just contact us. It is our duty to perform all the above activities, to take care of your tax calculations, as well as to apply tax percentages that will be most advantageous to you, as permitted by law. We, at SKM, enjoy working with figures and percentages and do tax calculations, and that is what we do best!
The major aspects of corporate taxation in Bulgaria are governed by the Bulgarian Law on Corporate Income Taxation, Law on Value Added Tax, and Tax-Insurance Procedure Code.
Corporate Income Tax
|
Basic rates |
|
| Corporate Income Tax |
10% |
| Tax on Dividends |
5% |
| Distributed to EU Companies |
0% |
| Withholding Tax (WHT) |
10% |
| Tax on Entertainment Allowance |
10% |
A tax loss may be carried forward for a term of up to 5 years if only certain conditions are met. General operating costs are deducted from income generated prior to calculating the tax base whereon the corporate income tax is to be charged.
Withholding tax
Withholding tax is imposed on interest and royalty payments at 10% (with transitional arrangements in place meaning thatBulgariawill apply the exemption for connected EU corporate entities as from 2014). Withholding tax is due on dividend payments to individuals and non-resident corporate recipients at 5% (with the EU rules on payments to connected corporate recipients already applying in this area).
Tax on entertainment allowance
Such allowances include: costs of lunches and dinners, gifts, clothes, food, taximeter services, drinks, and other similar. This type of expense should relate to the principal activity of the company. After the tax due thereon has been paid, these expenses become a tax deductible expense for the company. However, VAT due on such expenses cannot be offset or claimed.
Terms
| Annual Corporate Income Tax Return | must be submitted before the 31st March each year |
| Annual corporate profit tax | must be paid before the 31st March each year |
| Annual financial reports | must be published in the Commercial Register before the 30th June each year |
| Advanced corporate tax | must be paid before the 15th day of current month for the pervious month |
| Dividend tax | must be paid until the end of month following the month in which the decision was made |
| Withholding tax (WHT) | must be paid until the end of month following the month in which the decision was made |
| Tax on entertainment allowance | should be paid until the 15th day of the following month |
A tax liable person who submits its annual tax return by 31st of March by e-signature and pays the tax due within the same term shall have the right to a 1% discount on the tax due, but not more than BGN 1,000.
Double Taxation Prevention Treaties
Bulgariais a signatory to Treaties for the Prevention of Double Taxation with many countries all over the world. When certain income is taxable under the Bulgarian Law on Taxes on the Income of Natural Persons but there is an exemption (reduced tax) under any Taxation Treaty, the income is taxed, if at all, but only according to the provisions of the Taxation Treaty.Bulgariahas Treaties in force with following countries:
| Albania | Algeria | Armenia |
| Austria | Azerbaijan | Bahrain |
| Belarus | Belgium | Canada |
| China | Croatia | Cyprus |
| CzechRepublic | Denmark | Egypt |
| Estonia | Finland | France |
| Georgia | Germany | Greece |
| Hungary | India | Indonesia |
| Iran | Ireland | Israel |
| Italy | Japan | Jordan |
| Kazakhstan | Lebanon | Luxembourg |
| Kuwait | Latvia | Lithuania |
| Macedonia | Malta | Morocco |
| Moldova | Mongolia | Netherlands |
| Norway | North Korea | Poland |
| Portugal | Qatar | Romania |
| Russia | Serbia | Spain |
| Singapore | Slovakia | Slovenia |
| South Africa | South Korea | Sweden |
| Switzerland | Syria | Thailand |
| Turkey | Ukraine | United Kingdom |
| UAE | US | Uzbekistan |
| Vietnam | Zimbabwe |
For further details of the application thresholds, documents required to be submitted for application purposes, and the specific terms and conditions, you may contact directly the Double Taxation Treaties Directorate at NRA on the following telephone numbers:
+ 359 2 9859 3061
+ 359 2 9859 3071
+ 359 2 9859 3173, or just contact our experts.
Depreciation of Fixed Tangible Assets in Bulgaria
The most common method of depreciation of fixed assets in Bulgaria is the straight line method.
An asset the value of which is less than BGN 700 is not considered a fixed tangible asset.
Here follows a table that shows the depreciation rates applied under the straight line method to the various items of assets:
|
Type of Asset |
Depreciation Rate |
| Buildings |
4% |
| Plant and equipment |
30% |
| Infrastructure, roads and transport vehicles |
10% |
| Hardware and software |
50% |
| Motor vehicles |
25% |
| Other fixed assets |
15% |
| Intangible Assets |
33.3% |
VAT – Value Added Tax
|
Rates |
|
| Standard rate |
20% |
| For tourist industry (hotel accommodation) |
9% |
| VAT on EU Supplies |
0% |
| VAT on Export |
0% |
The newly incorporated companies in Bulgaria do not automatically enter Bulgarian VAT system. There are two methods of registration under VAT in Bulgaria – voluntary and obligatory registration. You can voluntarily register your company under VAT at any time and at any turnover level. This method of registration is preferable.
VAT requires obligatory registration when:
- the turnover of your company reaches the amount of BGN 50,000 for the last 12 months;
- a threshold of BGN 70,000 is applied with regard to intra-community transactions and distance selling toBulgaria.
VAT in Bulgaria is levied and payable: on any sale of goods; delivery of services; and on the import of goods. Revenue from financial services, such as insurances or bank services is not subject to VAT.
Terms
| VAT return submission | before 14th day of every month |
| VAT payment | before 14th day of every month |
Please bear in mind that any delays in submitting the monthly VAT returns, as well as any delays in paying VAT due, are subject to serious sanctions by the local tax authorities!
You can verify the validity of the VAT number of your customer issued by any Member State by choosing that Member State from the drop-down menu and entering the number to be validated. Please click here to follow Europe site validation link.
Income tax on rental agreements
As of 1 January 2011, companies that pay real property rents to natural persons are now obliged to withhold and pay the tax due on the rent. The taxable base for this tax is 90% of the monthly rent agreed in the contract (10% are recognised as costs of the landlord). The tax rate is 10% on the above taxable base.
The tax has to be paid until the 10th day of the month following the month the rent is paid for.
Real estate taxes
Real estate (property) taxes in Bulgaria are annual taxes. They are due at the beginning of the year. This type of tax is paid usually together with the „household waste fee”. The tax and the fee can also be paid in 3 instalments throughout the year.
The property tax is due on the sale of real estate, when this real estate is not the principal housing of the person. Real estate tax rates are determined by the Municipality at the location of the property.
Further details of the property taxes applicable inBulgaria, the method of their calculation and payment, as well as of the terms and discounts, may be found in the Law for Local Taxes and Fees, published on our website.