Taxation in Bulgaria

In this article we will present to you the taxes in Bulgaria which we believe you will find quite useful, whether you have decided to by a property to live in or for investment purposes.

Corporate Income Tax Rate - 10%

- Exemptions:
• Special purpose investment companies - 0%
• Collective investment schemes, admitted to public offering in Bulgaria, and licensed investment companies of the closed-end type - 0%

Capital Gains Tax Rate - 10%

- Exemptions:
• Capital gains derived from sale of shares through the Bulgarian Stock market or a regulated market in an EU/EEA member state - 0%

Debt:equity ratio - 3:1

Tax loss carry-forward - 5 years


Withholding Tax

Dividends - 5%

- Exemption:
• Dividends paid to legal entities which are tax residents in an EU/EEA member state - 0%

Interest and Royalties - 10%

- Exemption:
• As of 1 Jan 2011 interest and royalties paid to associated companies* that are tax residents in an EU member state - 5%

• Interest and Royalties paid to associated parties before 31 Dec 2010 - 10%

• Interest and Royalties paid to associated parties after 31 Dec 2014 - 0%

Special features

Transfer Pricing Documentation requirements:
• In 2010, the NRA issued TP Guidelines (based on the OECD TP Guidelines)

VAT

General rate - 20%

Reduced rate - 9% (for hotel accommodation, restaurant and catering services (excluding spirits), books, including electronic delivery, baby food and clothing, services for the use of sports facilities, general tourist service, including excursions)

Refund period - 2 months under certain conditions

Individual taxation

Personal Income Tax- 10% (flat rate taxation)

Mandatory Social Security Contributions

Employer: - 17.4%
Employee: - 12.9%
Maximum monthly taxable base - BGN 2,000.

Other taxes

Real estate annual tax - 0.01%- 0.45%

Transfer tax - 0.1%- 3.0%

• The rate is set by each municipality according to the location of the real estate. The taxable base can be the market price, specifically determined tax value or the gross book value.
• No tax for agricultural land and forests.

Other
Taxes on certain expenses (e.g. Social Security benefits), Vehicle tax, Donation tax, Inheritance tax.

*Associated parties – the case when a company has a minimum of 25% in the capital of another company or when a third company has a minimum of 25% both in the capital of the other two companies. This association has to be maintained for uninterrupted period of at least 2 years

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