Taxation in Bulgaria
Bulgaria offers the lowest rates of taxes within the entire European Union
Most of the European Union member countries apply progressive tax rate on Income and Corporate taxes. In some jurisdictions you are obligated to pay half of your income as tax to the government. A negative example of the extremely high tax rate on personal income is Belgium where the annual income in excess of 37750 is taxed 50%. On the other hand, you will pay only 10% flat tax rate in Bulgaria either you make 1000 euros annually or 1,000,000 euros. The corporate tax in Belgium is 33.99%, compared to the 10% flat tax rate in Bulgaria. Furthermore, the tax on dividends in Bulgaria is only 5% compared to the 25% default dividends tax in Belgium, if no exemption or reduced rates apply.
Apart from the lowest tax rates in Bulgaria you benefit from the low cost company formation in Bulgaria starting from only 299 EUR for a Single Person Private limited (EOOD) company.
You may also consider the appointment of a Bulgarian nominee director to assist you in running your business in Bulgaria and to justify the place of the effective management of your Bulgarian company.
EU-nationals can apply for a Bulgarian certificate for long-term residence and Bulgarian ID card for EU-nationals.
This makes Bulgaria a very attractive destination for IT entrepreneurs and professionals who would like to benefit from the lowest tax rates in Bulgaria within the entire European Union.
General overview of the Taxation in Bulgaria
Corporate Income Tax Rate – 10%
- 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%
- 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
Dividends – 5%
- Dividends paid to legal entities which are tax residents in an EU/EEA member state – 0%
Interest and Royalties – 10%
- 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%
General rate – 20%
Reduced rate – 9% (for hotel accommodation)
Refund period – 2 months under certain conditions
Personal Income Tax- 10% (flat rate taxation)
Mandatory Social Security Contributions
Employer: – 17.4%
Employee: – 12.9%
Maximum monthly taxable base – BGN 2,600.
Other taxes in Bulgaria
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.
Any person resident in Bulgaria for more than 183 days in a calendar year will be considered tax resident of Bulgaria. Liability for tax is on income derived within Bulgaria and worldwide. Non-residents are only taxed on that portion of income derived from Bulgarian sources. Certain local (municipal) taxes apply for the provision of local services.
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