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Taxes in Bulgaria

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

Corporate Tax

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:
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%.


Sources:

http://www.worldwide-tax.com/bulgaria/bulgaria_tax.asp

# 1
Author:
Ken
Hi everyone,

Congratulations and good luck wishes for the nice site !

The minimum share capital is reduced to 100 BGN for the limited companies.

regards,
Ken
26 July 2012 13:10:30 Reply Quote
# 2
Author:
Seedy
??

Apart from the now-rescinded requirement for a company to buy property with land here, I suspect that most expats won't want/need to form a limited company these days.....
26 July 2012 13:22:05 Reply Quote
# 3
Author:
Kevin Owen
But they will still sting you for 600lv if you want to wind down your company
26 July 2012 23:23:36 Reply Quote
# 4
Author:
Susan OCarolan
Apart from the now-rescinded requirement for a company to buy property with land here, I suspect that most expats won't want/need to form a limited company these days.....


I realise that this at least appears to be a forum for the expatriate British but it is worth bearing in mind that....

(Wiktionary says…)
an expatriate is...
1. One who lives outside one’s own country.
2. One who has been banished from one’s own country.

Only EU member state citizens are now allowed to buy property, i.e. including land, here without having to form a company.

Only 23% of foreign citizens living in BG (i.e. expats) are EU member state citizens. Even fewer are from the UK (around 7%).

Now, of course, if we are talking "potential expats", that is a different matter. However, it is a pretty good assumption that those from the EU will still be outnumbered.
27 July 2012 10:55:09 Reply Quote
# 5
Author:
Seedy
Kevin, that's just for the company bit - if you want to do everything "by the book" when you transfer your property into your own name, you'll be wishing it were ONLY 600 leva!
27 July 2012 13:52:53 Reply Quote
# 6
Author:
Ivan
From what I understand, the publishers of this site are referring to all expats living in Bulgaria, not only the British.

As a Bulgarian who a few years living in the States before I returning to Sofia, I am really excited to have more and more foreigners, especially US/EU citizens living in Bulgaria!

I think Bulgaria will only benefit from that!

Unfortunately, there is very little understanding of that in the Bulgarian society..., and the attitude ranges from the predominant lack of interest in the issue to some outright hostility here and there... But these are just my observations; you guys will be better suited to discuss this topic.
27 July 2012 14:05:01 Reply Quote
# 7
Author:
Ivan
Just to clarify - mine was in responce to Susan's post
27 July 2012 14:05:59 Reply Quote
# 8
Author:
Ivan
Btw, since the thread is entitled "Taxes in Bulgaria" - I will be really interested to know what the expats in Bulgaria think - are the taxes in Bulgaria really that great for you?

I mean our politicians advertise as the lowest and best in the EU, with the flat tax rates and stuff. I myself haven't really seen much impact on the economy. Or perhaps it's not that visible...
27 July 2012 14:08:25 Reply Quote
# 9
Author:
John Dixon
I am posting this an as American who researched business opportunities in Bulgaria in 2011 as part of a corporate assignment.

My impression back then was that investors get a pretty good deal with the low taxes in Bulgaria....

However, there were a whole bunch of other factors that influence an investment decision, and in our case we ultimately decided to give up on opening a Bulgarian office (which was supposed to be a regional office for the Balkans) at least for the time being.
27 July 2012 16:38:52 Reply Quote
# 10
Author:
Len Smith
Hi Re Company and house I believe if you transfer your house from the company to yourself you have to pay the goverment 3% of what you originally bought it for and then the cost of dissolving your company also what is the situation with a car as you used to have to have a company to own a car has this also changed now .
28 July 2012 09:39:39 Reply Quote
# 11
Author:
Seedy
Hi Re Company and house I believe if you transfer your house from the company to yourself you have to pay the goverment 3% of what you originally bought it for and then the cost of dissolving your company also what is the situation with a car as you used to have to have a company to own a car has this also changed now .


Len

The cost is based on the current value of the house, not the original purchase price. You need a new valuation, from an accredited valuer (yes, they DO exist here! ) since you and the company are "related parties", a new skitsa, local tax of 1.95%, notary fee, lawyer's fee, blah blah blah. It's round about then that you start to realise it wasn't a good idea to pay that builder in cash to renovate your house, which is now worth a fair bit more. Of course, you can always just work on imaginary figures and hope the BG tax-man doesn't decide to check it all out in a year or ten and come after you for whatever he decides you ought to have paid.

All that is before the liquidation expenses and and dividend tax if your accountant and lawyer haven't done their sums properly.

And the whole palaver and added expense simply because the BG government was allowed to break EU law by treating EU citizens differently from Bulgarians and now expects them to pay to be placed in the situation they should have been in in the first place.
28 July 2012 10:24:53 Reply Quote
# 12
Author:
Susan OCarolan
what is the situation with a car as you used to have to have a company to own a car has this also changed now .


Well, not sure how long back or who (EU citizen or not ) you are talking about.

I’ve been here nearly five years and, as an EU member state citizen that has never been necessary, during that time and probably for longer. If....

...you have applied to immigration for a Certificate for Long-Term Residence (CLTR), they will, perhaps unbeknownst to you (as they didn’t necessarily tell you at the time and it is not on the card), have established a ЛНЧ (10 digit number beginning with 100) for you (btw, the tax man also knows you by that number). That would be used by KAT (they are able to equate your CLTR number with the appropriate ЛНЧ) to register your vehicle in your own name.

If you had not registered with immigration then it is (probably) true that you would have to register the car in your company name and all that entails, including having to go to the district where your company is registered and legally (i.e. through a notary) transfer the car into your company name before registering it at KAT.

On reflection, I guess you could say that in order to register a car in your own name you would need a ЛНЧ , which means you would have had to register with immigration for the CLTR, which probably means you would have to have property here, in which case, ipso facto you would “have to have a company to own a car”. However, you could still register it in your own name as opposed to the company name. Also, long-term apartment dwellers don't need a company and I'm sure they can register with immigration and hence register their car in their own name.

Edited by Susan OCarolan on July 29, 2012, 13:41
29 July 2012 13:12:53 Reply Quote
# 13
Author:
chrissy
I have just gone through the proceedure of changing the house from business to our selves as private owner.
There is no getting away with making up you own numbers valuation etc.
First you have a valuation done then you have to put that amount of money into your business account to buy the property from your business then the tax is calculated on 10% of the profit the difference between what you paid for it and the valuation now and if the property is valued over 55 thousand lev then you have to register for vat and pay 20% vat on it then it can all be transfered into your name and then the business has to be liquidised and six months must elapse before it can be closed. It is expensive long winded and a performance to be honest for us all but if these business's are not closed and the value of property goes up which it already has with the building work we have all done then their will be the problem in the future of higher tax and vat and well we might as well give the whole lot to the Bulgarian govenment.
1 August 2012 10:16:54 Reply Quote
# 14
Author:
Seedy
Of course, if you have proper receipts for the building work and materials used in the renovation then this is allowable against the notional increase in value of the property.

I'm a little confused about the VAT situation - although the VAT threshold is BGN50,000 this normally applies only to companies which actually trade. I've never heard of a company existing only for the purpose of allowing a foreigner to hold property being required to register for or charging any VAT when the property is sold. The "owner" is normally a creditor of the company to the tune of the original purchase price paid - bad news for those who cheated and put the tax valuation in the notary deed rather than the real price - so I would have thought that the best way to approach it might be to demand the company pay you back and agree to take the company's only asset in full and final settlement of the debt

Incidentally, you don't have to actually deposit all of the notional purchase price into the company's bank account in one chunk - you can deposit say 10% then withdraw it and deposit the same amount again, withdraw that etc until the full amount has passed through the account, even if none of it actually stays there.....
1 August 2012 11:07:50 Reply Quote
# 15
Author:
chrissy
hi seedy we were told that the money can be paid in and taken out of the business account to the full value of the house and that is exceptable but to demand full payment back from the company was never told to us but i like the idea and hope it works for other people
thanks chrissy
1 August 2012 14:45:52 Reply Quote