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:
|Transfer pricing in Bulgaria|
|Arm’s lenght principle||since 1989|
|lack of documentation|
|tax shortage||late payment interest|
|Related parties||50% <||direct or indirect control or personally related|
Level of attention paid by Tax Authority:
Exchange rate BGN/EUR : 1,95583
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|
|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 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|
|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%|
|Calculated personal income tax after employees' contributions||25||10,00%||50||10,00%|