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 31^st 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