Bulgaria: Domestic Corporate Taxes

On this Page:

- BULGARIA SCOPE OF INCOME TAX
- BULGARIA INCOME TAX RATES
- BULGARIA CALCULATION OF TAXABLE BASE
- BULGARIA FILING REQUIREMENTS AND PAYMENT OF TAX
- BULGARIA WITHHOLDING TAXES
- BULGARIA PROPERTY TAXES AND CAPITAL GAINS
- BULGARIA SALES TAXES AND VAT

Bulgaria Scope of Income Tax

A legal entity with a base in Bulgaria is subject to tax on income derived in Bulgaria and also on other income received worldwide. For a branch or a representative office of a foreign company not domiciled in Bulgaria, tax is restricted to income derived within Bulgaria only. Tax exemption is possible for investment in depressed regions, subject to meeting certain criteria.

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Bulgaria Income Tax Rates

Corporate income tax in Bulgaria is charged at a flat rate of 10%. Companies in certain sectors, such as insurance and gambling, are subject to special corporate income tax rates.

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Bulgaria Calculation of Taxable Base

Other than partnerships that are not incorporated, all companies (business entities) must pay corporate income tax. Company expenses, including entertainment and gifts and bonuses to staff, are taxed at 25%. Genuine costs incurred to maintain the company’s revenue and profitability are generally allowed. Losses may be carried forward up to five years. Tax-deductible depreciation methods are prescribed by legislation.

Municipal tax of 10% is charged but can be deducted from the tax base before calculating corporate income tax liability.

Bulgaria Filing Requirements and Payment of Tax

The tax year is normally the calendar year for the purposes of reporting and payment. Companies must file their reports by March 31 in relation to the previous year and also pay any tax due by that date. Where a company has made a profit in the year just reported, it must pay monthly advance tax payments in the following year. New businesses must pay quarterly in advance; the quarterly amount is agreed with the tax authorities.

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Bulgaria Withholding Taxes

Certain income of non-Bulgarian residents is subject to 10% withholding tax, including income from interest, royalties, certain fees, property, and transfer of property (capital gains). Dividends are subject to 5% withholding tax, although exceptions apply where the dividends are by way of extra shares.

Bulgaria Sales Taxes and VAT

A business (entity or sole trader) must register for VAT if turnover exceeds BGN75,000. The standard rate of VAT is 20% whilst a special zero rate of tax applies to the supply of precious metals to the Bulgarian National Bank. There is also a reduced rate of 7% for certain taxable supplies in the tourism sector. It seems likely that the present government will reduce the VAT rate to 16% sometime during 2010.

VAT returns must be filed monthly and at the end of the tax year. Returns must be submitted within 14 days of the end of the tax period, at which time payment is also due. Certain exemptions apply, including goods in customs warehouses or free zones, financial and insurance services, and the lease of buildings.

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