Taxes in Bulgaria
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In Bulgaria income of any individual is subject to a flat income tax rate of 10% in 2012. Exemptions are granted to taxpayers with specific types of income. The standard rate of tax for a Bulgarian corporate tax in in 2012 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 their main residence, they will be considered a Bulgarian resident.
An employer is obliged 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
In 2012, standard corporate tax in Bulgaria is flat 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 in Bulgaria
Taxation of Employee
An employer is obligated to deduct tax at source from an employee and to make additional contributions to social security.
Social Security – Bulgaria
As regards to salaried employees, the social security rates are:
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%.