CORPORATE TAXATIONBasic aspects of the corporate taxation in Bulgaria are regulated in the following acts:
- Corporate Income Tax Act (CITA)
- Value Added Tax Act (VATA)
- Tax-Insurance Procedure Code (TIPC)
General Corporate Taxation Rates
- Corporate Tax on the Annual Taxable Profit rate – 10%)
- Tax on Dividend and Liquidation Share rate – 5%)
- Withholding Tax for Non-resident Legal Entities rate – 10%)
- Tax on Expenses rate – 10%)
Withholding Tax is levied on:
Dividends and liquidation shares, distributed by resident legal entities in favour of (a.) non-resident legal entities, except in case of dividends realized by the non-resident legal entity by means of a permanent establishment in Bulgaria, and in favour of (b.) resident legal entities that are not traders.Final Tax on Expenses is levied on:
- Hospitality expenses related to the business operations of the taxpayer
- Social expenses, if provided in kind to employees, workers and individuals with signed personal management or control agreements, including expenses for food coupons and for supplementary voluntary social security, voluntary health insurance and life insurance contributions
- Vehicle exploitation related expenses, if vehicles are exploitated for management operations.
Final Tax on Expenses is levied in case of documentarily substantiated expenses only. Some Deadlines
- The Annual Financial Report must be published in the Bulgarian Trade Register by June 30th each year.
- The Annual Tax Return must be submitted by March 31th each year.
- Corporate Tax must be paid by March 31th each year.
- Advance payments for Corporate Tax are made monthly or quarterly, depending on the net sales income of the trader for the previous year.
- Monthly payments must be made: for Jan., Feb. and March – until April 15th, and for the months from Apr. to Dec. – until the 15th day of the current month. The quarterly payments must be made: until the 15th day of the month following the quarter, and for the 3rd quarter – until Dec.15th. For the 4th quarter no advance payment is to be made.
- Withholding Tax must be paid by the end of the month following the quarter when a decision to distribute dividends or liquidation shares is taken or an income is charged.
- The Tax on Expenses must be paid by March 31th of the following year.
DOUBLE TAXATION AVOIDANCE
Bulgaria has signed Double Taxation Treaties (DTT), based on the Organization for Economic Co-operation and Development (OECD) model, with approximately 70 countries.
If a resident payer charges to a non-resident entity an income up to BGN 500,000 on a yearly basis, on which a Withholding Tax is levied, no claim for relief under the Tax Treaty is to be made. The recipient of the income has to present to the payer a number of documents instead: Certificate of Fiscal Residence in a different country, under the applicable Tax Treaty for the year when the income is charged; Declaration that the recipient is the real recipient of the income; Declaration that the recipient doesn’t have a trade operations office in Bulgaria.
For any specific DTT questions you could contact the Tax Treaty Directorate of the National Revenue Agency of the Republic of Bulgaria on +359 2 9859 3060.
VALUE ADDED TAX (VAT)
- The standard VAT rate is 20%.
- The VAT rate on tourism services is 9%.
- There is a 0% VAT rate on some supplies and services.
In Bulgaria, the legal entities do not register for VAT automatically. You could register for VAT voluntarily or when legally obliged. Generally, you must register for VAT with the National Revenue Agency if your business turnover reaches more than BGN 50 000 for no longer than 12 consecutive months. You could register voluntarily if it is below this. Apart from the general VAT registration, the VAT Act also provides some different regulations for specific supplies and services.VAT is due on:
- Import of goods
- Taxable supply of goods or services performed against consideration
- Intra-Community acquisitions performed against consideration with a place of supply in Bulgaria.
VAT exceptions are provided for:
- Financial and insurance services supplying
- Culture related supplies
- Supplies of non-profit nature
- Health care related supplies
- Education, sports and physical education related supplies
- Social security work and welfare related supplies.
- VAT return submission – until the 14th day of the month, for the preceding month.
- VAT payment – until the 14th day of the month, for the preceding month.
Each delay in VAT return submission or in VAT payment is a subject of a significant monetary sanction and penalty interest.
TAX DUE ON RENTAL INCOME
According to the latest legal regulations, if the rent payer is a legal entity or a self-employed individual, the Tax Due on Rental Income is deducted by the payer and it is its/his obligation to pay it to the tax authority. The tax rate is 10% of the taxable income. The deadline for the rent payer to pay the deducted tax is the 10th day of the month following the month when the tax has been deducted.
REAL PROPERTY TAX
All real property owners are liable for Real Property Tax payment. In Bulgaria, it is an annual tax and must be paid in the beginning of the calendar year. Generally, this tax is paid together with the Garbage Fee. There is a possibility provided for the liable persons to pay the tax and the fee in several contributions during the year. Nevertheless, if the liable person pays the Real Property Tax entirely by April 30th, a 5% discount is provided.
Each municipality determines the tax rate for the real properties in it. The Municipal Council determines it with an ordinance in the range between 0,1 and 4,5‰ of the real property tax assessment.