Corporate income tax
Corporate income tax in Bulgaria is 10% and is regulated by the Corporate Income Tax Act (CITA). The tax base for calculating the corporate tax is the tax profit.
Corporate income tax is levied on the taxable profit of local legal persons and foreign legal persons from a place of business in Bulgaria. Legal persons that are not registered in Bulgaria and do not operate in the country through a place of business, pay tax only on income derived from sources in Bulgaria.
Taxable persons are:
- local legal persons;
- foreign legal persons that are engaged in economic activity in Bulgaria through a place of business, make arrangements regarding the property on such a place of economic activity or earn income from a source in Bulgaria;
- sole traders and physical persons registered as tobacco producers and farmers who determine their taxable income in accordance with Art. 26 of the Personal Income Tax Act - for withholding tax in cases specified in the Personal Income Tax Act;
- physical persons who are entrepreneurs within the meaning of Art. 1, Par. 3 of the Commercial Act – in the cases specified in the Personal Income Tax Act;
- employers and contractors under agreements for management and control – for the tax on social spending;
- for the purposes of this Law, the unincorporated companies and insurance funds established pursuant to Art. 8 of the Social Security Code shall be treated as legal persons;
- for the purposes of taxation of income from a source in the Republic of Bulgaria, a taxable person is any foreign organizationally and economically distinct entity (trust, fund, etc.) that carries out business or performs and manages investments in case the owner of the income cannot be found.
The Corporate Income Tax Act gives the following definitions for:
Local legal persons – these are legal persons incorporated under Bulgarian law and companies incorporated under Council Regulation (EC) No. 2157/2001 and cooperatives established under Council Regulation (EC) No. 1435/2003, where they are based in the country and are entered in a Bulgarian register.
Foreign legal persons - according to Art. 4 of the CITA, these are legal persons that are not local.
Place of business – that is:
a) a specific location (owned, rented or used on other grounds), by which a foreign person carries out business in the country wholly or partially, such as a place of management, branch, commercial representation, office, bureau, plant, workshop (factory), store, stock trading, service, installation object, construction site, mine, quarry, drill, oil or gas well, spring or other object of extracting natural resources;
b) operating in the country by persons who are authorized to sign contracts on behalf of foreign persons, with the exception of the activities of representatives with an independent status within the Commercial Act;
c) permanent commercial transactions with place of performance in the country, even if the foreign person has no permanent representative or a fixed place.
Taxable persons who are subject to corporate taxation file an annual tax return form for the tax financial result and the annual income tax due.
The annual tax return form shall be filed not later than March 31st of the following year, at the territorial directorate of the National Revenue Agency where the taxable person is registered. The annual activity report shall be filed together with the annual tax return form.
Annual activity report is not filed by taxable persons that meet all of the following requirements:
- have not been active during the year;
- have not reported profit or loss for the year, according to the accounting legislation.
Taxable persons shall pay corporate income tax for the year by March 31st of the following year, after deducting the advance payments for the year.
Withholding tax is levied on dividends and liquidation quotas distributed by local legal persons for the benefit of:
- foreign legal persons, except where the dividends accrue from a foreign legal person through a permanent economic establishment in the country;
- local legal persons that are not merchants.
The tax rate withheld from the income from dividends is 5%.
No tax is deducted when dividends are distributed to: a local legal person that participates in the capital of the company as a representative of the state; a contractual fund; a foreign legal person that is a resident for tax purposes in a Member State of the European Union or of another country that is a party to the Agreement on the European Economic Area.
Withholding tax on the income of foreign persons
Withholding tax is levied on the following income of foreign legal persons that have no permanent economic establishment in the country:
- Income from financial assets and transactions with financial assets issued by local legal persons, municipalities and the state.
- Interests, including interests of payments under finance leases.
- Income from rent or other provision for the use of movable property.
- Author and license fees.
- Fees for technical services.
- Remuneration under franchising and factoring agreements.
- Remunerations for management or control of a Bulgarian legal person.
- Income from rent or other provision for use of immovable property in the country.
- Income from the disposal of immovable property in the country.
- Remuneration of foreign legal persons established in jurisdictions with a low tax regime, for services or rights except when the services or rights are actually granted.
- Penalties and damages of any kind accrued to foreign legal persons established in jurisdictions with a low tax regime, except for benefits under insurance contracts.
The tax rate on the income tax from interest, author and license fees is 5% (under the provisions of the CITA) and it is 10% on all other income.
Persons required to deduct and pay withholding tax shall declare the tax for the quarter by submitting a declaration form by the end of the month following the quarter. The declaration form shall be submitted to the territorial directorate of the National Revenue Agency where the payer of the income is registered or is to be registered.
The tax rate on all types of expenditures is 10%. The following expenditures, supported by documents, are subject to expenditure taxation:
- Representation expenditures related to the activity – taxable persons with this kind of tax are the persons that are liable to corporate income tax. Expenditure tax shall not be levied for costs of legal persons that are subject to alternative taxation. The tax rate for calculating the expenditure tax is the gross amount of expenses accrued for the month.
- Social expenditures on staff - taxable expenditures on social benefits provided in kind to workers, employees and persons employed under a contract for management and control (employed persons). Social benefits provided in kind include: the costs of contributions for optional supplementary insurance, health insurance and life insurance, and the costs of food vouchers.
Social costs that are not provided in kind, representing the income of a physical person, are taxable under the terms and provisions of the Personal Income Tax Act. Taxable persons are all employers and contractors under agreements for management and control.
- Costs associated with the use of vehicles that serve for management operations.
In certain cases, specified in Art. 208, 209 and 210 of the CITA, taxable persons are not subject to taxation.
Expenditure tax shall be declared in the annual tax return form and shall be paid by March 31st of the following calendar year.
Subject to taxation with an alternative to the corporate tax are:
- Budget entities (departments, municipalities, etc.). The tax rate is 3%, and for municipalities it is 2%.
- Gambling organizers pay tax on gambling activities, which is calculated on the basis of the bets obtained or the number of gambling devices. This tax is 15%.
- Persons engaged in maritime commercial shipping pay 10% tax on the business of operation of ships, which is based on the net tonnage of the daily exploitation of ships.
For activities outside those subject to alternative taxation, the above-mentioned persons are liable for corporate income tax.
Agreements for avoiding double taxation
When in a tax treaty or another international agreement ratified by Bulgaria there are provisions different from those of the CITA, the provisions of the relevant tax treaty or agreement shall be applied.
Taxable persons are entitled to a tax credit under the terms and conditions of the CITL for taxes paid abroad in case the provisions of an international treaty are not applied.
The tax credit is determined for each country and for each type of income individually and shall be limited to the amount of the Bulgarian tax on such profits or income.
In order to benefit from the advantages for the avoidance of double taxation, provided for in a contract, the foreign person must submit an application form to the tax administration, applying documents proving that the person:
- is a citizen of the Contracting State under the contract for the avoidance of double taxation;
- has acquired the income from sources in Bulgaria;
- does not have a permanent establishment of an economic activity or a fixed base in Bulgaria, to which the income is related;
- fulfills the special requirements for the applicability of the contract or of any of its provisions to persons specified in the contract, in cases where such special requirements are provided for in the contract.
Written evidence concerning the nature, the grounds for obtaining and the amount of the income must be attached to the application form.
Personal income tax
Taxation of personal income, including income from a sole trader, is governed by the Personal Income Tax Act (PITA).
Taxable persons under the PITA are:
- local physical persons - on income from sources in Bulgaria and abroad;
- foreign physical persons - on income from sources in Bulgaria;
- local and foreign persons required to withhold and pay taxes under the PITA.
The types of taxes on personal income are:
- tax on the total annual tax base – 10%
A tax on the total annual tax base is levied on the income of: employment; other business activities (a profession, trade, etc.); rental or other paid granting of rights or property for use; income from transfer of rights or property; income from other sources.
- tax on the annual tax base – 15%
A tax on the annual tax base is levied on the income of the business as a sole trader, as well as the income of physical persons registered as farmers or as tobacco growers, which are taxed similarly to sole traders.
- final tax – 10%, 7% or 5%.
A final tax is levied on specifically listed income accrued/paid in favor of foreign persons from sources in Bulgaria, if not realized through a fixed base in the country, as well as certain types of income received by local physical persons. Tax rate of 5% applies to income from dividends and liquidation shares for the benefit of local and foreign physical persons. Tax rate of 7% applies to taxable income on long-term life insurance contracts (where the term is 15 years or more). For other income subject to taxation under the PITA, the tax rate is 10%.
When in a tax treaty or other international agreement, ratified by Bulgaria, there are provisions different from those of the Tax Act, the provisions of the relevant tax treaty or agreements shall be applied.
- Physical persons file an annual tax return form. The tax return form shall be filed by April 30th of the year following the year of acquisition of the income. The tax should be paid by April 30th of the year following the year of acquisition of the income. On certain types of income, the tax is deducted in advance on monthly or quarterly installments.
An annual tax return form shall be filed by local and foreign physical persons who received income in the preceding year that:
- is subject to taxation on the total annual tax base, including income from employment under § 1, item 26, letters "f" and "j" of the Supplementary Provisions of the PITA;
- is subject to taxation on the annual tax base – income from business as a sole trader and income from other business activities under Art. 29a of the PITA;
- is subject to taxation with a license tax under the Local Taxes and Fees Act.
Local physical persons shall declare:
- Acquired income from a foreign source during the year from dividends, liquidation shares and the taxable income from additional optional insurance, optional health insurance and life insurance.
- Owned shares and participating interests in companies, places of business, fixed bases and immovable property abroad.
- Provided/received loans.
Foreign physical persons who are local persons for tax purposes in the Member States of the European Union or other countries that are parties to the Agreement on the European Economic Area may choose to recalculate the final tax on income under Art. 37 of the PITA. This choice shall be exercised by submitting an annual tax return form under Art. 50 of the PITL and the return form shall include any income, subject to declaration by the foreign physical person.
An annual tax return form in not necessary to be filed by physical persons who received only:
- income from employment;
- income that is not subject to taxation;
- income that is subject to final taxation.
An annual tax return form shall not be filed also in cases where a person is registered as a sole trader, but over the last year they have not carried out business, they have not acquired any income to be declared and there are no circumstances that they are obliged to declare (immovable property abroad, received and granted loans, etc.).
Value Added Tax
The imposition of value added tax (VAT) is governed by the Value Added Tax Act (VATA).
Under this Act, a taxable person is any person who independently carries out any economic activity, whatever the purpose and results.
VAT rate is 20% and applies to:
- any paid taxable supply of goods or services, except those specified in the Law, which are subject to a tax rate of 0%;
- imports of goods within the country;
- any paid intra-Community acquisition with place of performance within the country.
Reduced rate of 9% applies to accommodation in hotels and similar establishments, including holiday accommodation and letting out of places for camping lots or caravans.
A zero tax rate applies to:
- the supply of goods dispatched or transported from a place in the country to a third country or a territory outside the European Community by or on behalf of the supplier;
- certain supplies related to international transport;
- delivery related to processing of goods;
- delivery related to duty free trade;
- delivery of services provided by agents, brokers and other intermediaries.
- Main transactions that are exempted from VAT are:
- delivery related to health;
- delivery related to social care and insurance.
Exempted from VAT are:
- supplies for the transfer of property rights over land, except the land located under buildings; the creation or transfer of limited property rights over land (except for the right to build, which is not subject to VAT until the issuance of a building permit) and granted land on lease or rent.
- supply of buildings or parts thereof that are not new, the supply of the adjacent land, and the creation and transfer of other property rights over them.
- letting out a building or a part thereof to house a physical person who is not a trader. Transferring of ownership right over a regulated land within the meaning of the Spatial Planning Act, with the exception of adjacent land to buildings that are not new, which is not an exempted supply and VAT is due for it.
VAT shall be declared and paid monthly. The tax return form and the monthly tax payment shall be made by the 14th day of the following month. The tax under the VATA becomes chargeable in respect of taxable supplies, as the taxable person should deduct the tax at the time of delivery of the goods or services.
The Value Added Tax Law introduces the concept of "intra-Community supply of goods", which actually replaces the legislative framework of exports, as far as being addressed by merchants of EU Member States. Intra-Community supply of goods is the supply of goods transported by or on behalf of the provider /a VAT registered person/ or the recipient from the territory of a Member State to the territory of another Member State, where the recipient is a taxable person or a non-taxable legal person that is VAT registered in another Member State. Intra-Community supply of goods is also the delivery of a new vehicle dispatched or transported by or on behalf of the supplier or the recipient from the territory of a Member State to the territory of another Member State, regardless of whether the recipient is a taxable person or a non-taxable person. Intra-Community supplies, as defined in Art. 7 of the VATA, with exception of the exempted intra-Community supplies, are taxed at a zero rate. On intra-Community acquisitions, the recipient of the goods pays VAT at a 20% tax rate and has the right to deduct tax credit for the tax charged.
The tax on Intra-Community acquisitions becomes chargeable on the 15th day of the month following the month in which the goods or services have been delivered. Any VAT registered person, in respect of which payment of tax is required, must levy the tax and issue a tax document stating the tax on a separate line in the document.
Local taxes and fees
Local taxes (including patent tax, building tax, property tax, vehicle tax, donation tax, tourist tax etc.) are fixed by local councils under the Law on Local Taxes and Fees. They are different for each region and are collected by the municipalities. The main local taxes are:
Physical persons, including sole traders carrying out activities listed in Annex No. 4 of the Law on Local Taxes and Fees (patent activities), are subject to an annual patent tax for their income from these activities, provided that:
1. the turnover of the person for the preceding year does not exceed BGN 50,000, and
2. the person is not registered under the VAT Law, except for registration for intra-Community acquisition under Art. 99 and Art. 100, Par. 2 of the same Law.
Persons are not taxable pursuant to the Personal Income Tax Law for income from patent activities conducted.
Tax return forms for the license tax and changes in circumstances related to the tax calculation shall be submitted to the municipality on the territory of which the site is located, at which site the patent activity is done or where the permanent address of the person is – for activities not performed from a site or a permanent place.
The deadline for filing the tax return form for the license tax is January 31st of the current year and thereafter - just before the start of the activity. Changes in circumstances relating to the calculation of the tax shall be declared within 7 days after the occurrence of the relevant circumstance.
Patent tax is paid in four equal installments: January 31st, April 30th, July 31st and October 31st for the respective quarters of the year.
Property tax is levied on buildings and land within the construction limits of the residential places and settlements located throughout the country, and landed properties outside them, which landed properties according to the development plan are intended for the use stated in Art. 8, Par. 1 of the Spatial Planning Act and after change of the use of the land, as required under a special law.
Landed properties occupied by streets, roads of the national and municipal road networks and the rail network next to limiting construction lines are not subject to taxation. Lots occupied by water bodies, state and municipal property, as well as farmland and forests are not subject to taxation, with the exception of built-up land – for the actual built-up area and its adjacent terrain.
Taxable persons are the owners of taxable real property.
For newly constructed or otherwise acquired property, the owner or respectively the holder of the restricted property rights shall notify in writing within 2 months the municipality in which the property is located by filing a tax return form for levying of annual property tax. For a property that is a main residence, the tax is due with 50% discount.
The municipal councils, through ordinances, fix the amount of tax in the range of 0.1 to 4.5 per thousand of the tax evaluation of the property.
Property tax is paid in two equal installments at the following times: from March 1st to June 30th and until October 30th of the year for which it is due.
Tax on property acquisition by donation or for a consideration
Subject to taxation are possessions acquired by donation, and also real estates, limited property rights on them and motor vehicles acquired for a consideration. Subject to taxation in the amount of gift tax are gratuitously acquired property and forgiven loans. Property acquired by donation between lineal relatives and between spouses is not subject to taxation.
The tax is payable by the acquirer of the property, and in case of a swap – by the person acquiring the property at a higher value, unless otherwise agreed. In case it is agreed that the tax is owed by both parties, they shall be jointly liable.
The tax base is the assessment of the property in BGN at the time of the transfer, and in case of acquisition by prescription – at the time of issue of the document evidencing the ownership, which is subject to registration.
The tax is payable at the local municipality of the property, and in other cases – by a permanent address or by the seat of the taxable person. The tax is payable on the transfer of property, limited real rights on real estates and vehicles, and upon acquisition by prescription – at the time of issue of the document evidencing ownership, which is subject to registration. Upon gratuitous acquisition of property, the persons receiving the property shall submit a tax declaration and pay the tax within two months of its receipt.
Upon acquisition of property for a consideration, the tax is determined by the municipal council in size from 0.1% to 3% of the value of the property being transferred. Upon donation of property and in the case of other gratuitous acquisition of property, the tax is levied on the assessment of the property being transferred in the following amounts: 0.4% to 0.8% in case of donation between siblings and their children, from 3.3% to 6.6% in case of all other donations.
Transport vehicle tax
Transport vehicles subject to taxation are:
- vehicles registered for use on the road network in the Republic of Bulgaria;
- vessels registered at the Bulgarian ports;
- aircrafts registered in the public register of the Republic of Bulgaria for civil aircrafts.
The tax is paid by the owners of the vehicles. The tax rate depends on the type and characteristics of the vehicle.
The transport vehicle tax is paid in two equal installments at the following times: March 1st to June 30th and until October 30th of the year for which it is due. There is a discount of 5% for those who paid from March 1st to June 30th for the whole year,
For vehicles acquired or registered for operation in the current year, the tax is paid within two months from the date of acquisition or respectively the date of registration for movement, amounting to 1/12 of the annual tax for each month until the end of the year, including the month of acquisition or respectively the date of registration for movement.
Tourist tax is levied on overnight stays. Under the Law on Tourism, taxable persons are those offering accommodation and they shall pay the tax in the budget of the municipality in which the accommodation is located.
Tax must be stated separately in the document issued by the taxable person to the person enjoying the overnight stay. Taxable persons shall submit a declaration form by January 30th of each year for charging tourist tax for the preceding calendar year.
The municipal councils determine the amount of tax in the range of BGN 0.20 to BGN 3.00 per night, according to the settlements in the municipality and the category of accommodation.
In addition to taxes, the municipalities collect some fees for provision and maintenance of public services such as garbage fee, fee for use of sidewalks, squares, streets, etc., fees for various technical and administrative services.
For more details on the payment of local taxes and fees, one may contact the division of the municipal administration at the location of the property or by permanent residence /regarding the tax on vehicles/.
Local taxes and fees may be paid in cash to the divisions of the municipal administration or by a bank transfer. If payment is made by a bank transfer, the payment order must contain the payment code for the particular type of tax or fee.
Physical persons and companies can get current tax and insurance information through the Information Centre of the National Revenue Agency. Read more HERE.
Contact the offices of the National Revenue Agency (NRA)
E-mails of the NRA:
firstname.lastname@example.org – general information
email@example.com – only for digitally signed correspondence
The working time of the service salons in all offices of the NRA is every weekday from 9:00 to 17:30 without interruption. Citizens are admitted until 17:30 and their servicing cannot last more than two hours after the official working time.
For information on the property tax, garbage fee, patent tax, transport vehicle tax, inheritance tax, and tax for owning a dog in Sofia City, see phones of the municipal structures in Sofia.
List of banks that operate the accounts of the National Revenue Agency
Payment can be made from any bank by filling out a transfer order /receipt for payment from/ to the budget.