Mazars in BULGARIA

Corporate taxes and other direct taxes

Bulgaria has a flat corporate income tax rate of 10% applied on the annual tax profit. The tax profit may be also deducted by tax losses to be carried forward within five subsequent financial years. Bulgaria applies thin capitalization rules to interest expenses from loans provided or guaranteed by related parties.

The financial result of collective investment schemes and enterprises with special purposes are not taxable with corporate income tax.

Advance tax payments should be made each month or quarter, based on the estimated tax profit for the current year.

Withholding tax rates are 5 % for dividends and 10 % for interests, royalties and other (Double tax treaties between Bulgaria and other countries could also be applied in order the withholding tax rate to be decreased). There is no withholding tax if the dividends, interests and royalties are paid in favor of EU member state parent company.

Social, representative expenses and the expenses for vehicles are also taxable with 10 % tax rate.

There is also tax for operating of ships. It applies for entities, which fulfill specific conditions. The tax rate is 10 % and it is applied to the calculated base for all ships - the ship’s net tonnage, by law amounts for each type of ship and the days in exploitation of the ship.

Local taxes are determined by each municipality in ranges, stated in Local taxes and fees Law.

Local taxes and fees include:

  • real estate tax – its ratio is in the range between 0.1 and 4.5 ‰. Base for taxation for non-living real estates of companies is the highest of book value or calculated by municipality tax valuation. Base for taxation of all living real estates is the municipality’s tax valuation.;
  • transportation vehicle tax – determined as exact amount, depending on vehicle type, and power;
  • tourist tax – applicable for each overnight in place of accommodation. The range of tax is between 0.20 and 3 BGN for overnight;
  • gift tax – applied for gifts of all kind, with very limited exemptions. Applies also for forgiven payables. There are the two rate ranges applicable – between 0.4 and 0.8 % for gifts between brothers and sisters and their children; and between 3.3 and 6.6 % for all remaining;
  • tax on the acquisition of property for a consideration – applies for real estates, vehicles and limited real estate rights, acquired for a consideration. The tax rate range is between 0.1 and 3 % of the value of the property, or of the value of the more expensive property in case of exchange;
  • inheritance tax - exempt in a limited extent (family members);
  • tax on the carriage of passengers by taxi – fixed amount between 300 and 1 000 BGN for each car, used for providing taxi services;
  • patent tax – it’s applied for micro entities or individuals, which activities are small services like tailoring, very small stores, carpentry, etc. There are fixed amounts, determined by each municipality;
  • garbage fee – fee collected from municipalities for maintaining of waste disposal, and cleaning the public areas (parks, streets, sidewalks, etc.);
  • wide range of other fees, usually imposed for specific services, like social services, technical and other services, rent of plots for sale at market places, sidewalks, etc.
Transfer pricing in Bulgaria
Arm’s lenght principle since 1989
Documentation liability  
APA  
Penalty
lack of documentation  
tax shortage late payment interest
Related parties 50% < direct or indirect control or personally related
Safe harbours  

Level of attention paid by Tax Authority:

5/10

Exchange rate BGN/EUR : 1,95583

VAT and other indirect taxes

For year 2019, the standard VAT rate is 20 %, while the reduced rate is 9 % (applicable for accommodation, provided by hotels and similar places for accommodation, including holiday accommodation and renting of places for caravans and camping). VAT-exempt services include financial and insurance services, the transfer of buildings and some land plots, and rights related to them, rent of real estate to individuals for housing, post services and post stamps, education services, gambling, supplies, related to culture, religion, medical and social care services and, also supplies, for which no tax credit has been used.

VAT payers are obliged to submit VAT returns, sales and purchase registers, VIES and Intrastat declarations on monthly basis.

VAT Options in Bulgaria Applicable / limits
Distance selling EUR 35,790/year
Call-off stock
VAT group registration*  
Cash accounting - yearly amount in EUR (approx.) EUR 500,000/last 12 months
Import VAT deferment
Local reverse charge
Option for taxation - letting of real estate
Option for taxation - supply of used real estate**
VAT registration threshold approx. EUR 25,565/last 12 months

* If specific conditions are fulfilled and after permitment from tax authorities

** 5 years time test

Other indirect taxes include excise duties (on mineral oils, spirits, beer, wine, tobacco and tobacco products, gas, electricity and solid fuels).

Personal income tax / Social security system

Personal income tax is applied at a flat rate of 10% on most of the incomes.

 

Income from employment and self-employment is subject to social security and health insurance contributions. In case of employment, the employee’s contribution amounts to 13.78% (10.58% social security and 3.2% health insurance). For the employer, the contributions are 18.92% (14.12% and 4.8% respectively). For specific positions, with higher risk (miners, pilots, workers in chemical and other harmful production facilities, etc.) there are different rates for contributions.

There is minimal basis for social and health contributions for each position (mostly divided by sectors of economy). The maximum assessment base for social and health insurance contributions is BGN 3 000 BGN (app. EUR 1 534), increased with BGN 400 (EUR 205) compared to 2018

Tax rate for dividends or liquidation shares paid in favor of natural person is 5 %.

Tax rate applicable to the gross amount of interests, received from bank accounts, is 8 %.

Tax rate for amounts received after expiry of Life insurance, if its duration was more than 15 years, is 7 %

Wage related taxes in Bulgaria Minimum wage Average wage in private sector
Exchange rate BGN/EUR 1,95583 in EUR in BGN in EUR in BGN
  286 560 574 1122
TOTAL WAGE COST 340 119% 683 119%
Social security contribution - employer 40 14,12% 81 14,12%
Health insurance - employer 14 4,80% 28 4,80%
GROSS SALARY 286 100,00% 574 100,00%
Employees' contributions 39 13,78% 79 13,78%
Calculated personal income tax after employees' contributions 25 10,00% 50 10,00%
NET SALARY 222 78% 445 78%
Bulgaria
2 Tsar Osvoboditel Boulevard
BNP Paribas Office Building
1000 Sofia- Bulgaria
MILENA MLADENOVA
Head of Audit Services