It will just take some time and patience. Most countries impose such taxes at the national level, and a similar one can exist on a local or state level. The dividends tax is 5%. In 2014, there was a push to eliminate it, but it was voted down, suggesting that the system will not go anywhere anytime soon. Some Western Europeans view it as the Wild East and are quick to write it off without giving it a chance. The application to the Bulgarian Trade Registry for incorporating the EOOD: Bank statement showing that the minimum capital has been deposited. VAT registration can be compulsory, voluntary and on the initiative of the revenue administration, such that the law outlines several situations where specific registration and deregistration apply. The most common types are the limited liability company (OOD/EOOD) and the sole proprietorship. Your financial situation is unique, and the products and strategies we review and mention may not be appropriate for you. Objects of VAT taxation: objects of taxation are supplies of goods and services; intra-European Union acquisitions; importation of goods. Some say they make up half of the Bulgarian workforce. They offer a large range of services to small and medium-sized businesses, including multi-currency accounts, initial share capital accounts, loans, and lines of credit. In total the employee pays 12.9% and the employer contributes what corresponds to 17.9%. Visit our. The tax applies to the positive difference between how much you sell an asset and how much you paid for it. This is one of the lowest rates in Europe. If your Bulgarian company has been profitable, you may want to distribute the profits to the shareholders as dividends. All Rights Reserved. We set the monthly salary to BGN 650 because this number is the smallest base used to calculate national insurance contributions. Will anyone care if you spend a lot of time outside the country? Corporate income tax is also a flat 10%. The way to do this is to open an accumulation account ( ) with any bank in Bulgaria. The result is a total of circa 22.4% of tax and national insurance. For people who are launching their first business, those low costs can give you time to grow without the pressure of making ends meet. Taxes in Europe: Bulgaria. Bulgaria's Journey To A 10% Corporate Tax Rate - Forbes In that case, there is no law prohibiting you from opening an account with a foreign institution. According to Article 20 of the Act the rate of the corporate income tax is 10%. Dividends and liquidation proceeds payable by Bulgarian companies to foreign individuals are subject to Bulgarian withholding tax at the rate of 5%. Companies must submit their annual tax return no later than the 30th of June. How to proceed and what are the conditions attached? Taxation of Company Expenses The following company expenses are subject to tax at the rate of 10%: Representative expenses In-kind fringe benefits The expenses in-kind associated with company assets (owned, leased, etc. Capital Gains Taxation. Taxes in Bulgaria - Bulgaria Guide - Expat.com Bulgaria Corporate Tax Rate 2022 Data - 2023 Forecast - TRADING ECONOMICS companies established under Regulation (EC) No. You should email or call multiple banks to learn their requirements. Any declaration submitted in time by one heir benefits the other heirs as well. 29 LTFA). The overpaid amount of CIT can be offset against advance and annual payments due for the next period. They can be also referred to as income tax or capital tax. If youre a Bulgarian tax resident, youre required to file a tax return every year. Bulgaria country tax guide | CMS Expert Guide It gives the employee access to the public healthcare system, disability, sickness and unemployment benefits, among other things. In fact, Bulgarians despise notaries just as much as foreigners do theyre considered the epitome of red tape and bureaucrats gone mad. We strive to keep all content updated, but performance, fees, and rates listed here may have changed since the time of publication. If the owner can claim any deductions, the tax rate on personal income will be lower. However, the maximum period of the statute of limitations is ten years. The tax is annual. Value-Added Tax applies at a flat rate of 20% on virtually all goods and services. Dividends are taxed at a flat rate of 5% in Bulgaria. Dividends are taken out of the companys after-tax profits. Its far easier to get through the eye of the needle if you live and have your residential address in Bulgaria. In fact, as in most European countries, taxes apply to locals as well as foreigners. This is likely because Bulgaria is an EU member state and also because its not on any blacklists. The annual taxable income is to be declared up to 31 March of the next year. It may sound ridiculous that such a small amount of money is needed, but thats just how it is. Therein are also included sole proprietors in respect of taxes withheld at source on expenses, as well as in cases where they are subject to an alternative tax. Bulgarian companies are subject to a 10% corporate tax rate. In Bulgaria, its a simple 10% rate for both personal and corporate income taxes. Registering a company in Bulgaria is the same process for locals and foreigners. You can also get recommendations from fellow expats and narrow down a list of potential service providers. If youre looking to set up a company that does business internationally, many of those issues wont exist. 217 (1) CITA by the taxpayer with an annual income tax return. The corporate income tax for 2022 can be retained only if the application form is filed in the period 1 January 2023-31 May 2023, there is an approval of the Bulgarian Investment Agency issued by 30 June 2023, and all the requirements listed in the corporate income tax law for provision of tax relief in the form of regional state aid are met. All income earned in Bulgaria is taxed on a flat rate of 10%. Income Taxes on Natural Persons Act in Bulgaria, COUNCIL DIRECTIVE 2006/112/EC of 28 November 2006 on the common system of value added tax, , , "Social security contributions rate bulgaria", Bulgarian National Revenue Agency website, https://en.wikipedia.org/w/index.php?title=Taxation_in_Bulgaria&oldid=1104289730, whose permanent place of residence is in Bulgaria, or, who spends inside the territory of Bulgaria more than 183 days in each period of 12 consecutive months, or, who resides abroad on assignment of the Bulgarian State, its authorities and/or its organizations, or Bulgarian establishments, and the members of their family shall also be local natural persons, or. The municipal council shall determine the rate of local taxes.[4]. The property tax in Bulgaria is paid annually and is determined by the municipality where the property is located. Company Registration Bulgaria - Corporate and Company Law - Mondaq Nota bene: the dividend tax is only 5%, so its worth thinking a little about how to structure your income as a business owner. The withholding tax on dividends and liquidation proceeds which were distributed in favor of foreign or national legal persons from a local company are subject to taxation in Bulgaria. Our assistance includes: advisory in the areas of corporate income tax, tax on expenses and withholding tax; review/preparation of annual. The Bulgarian banking scene is a mix of big foreign banks and several smaller local banks and credit institutions. As a small business owner or consultant, youll be looking for ways to reduce the amount of taxes you have to pay. In other words, taxes in Bulgaria are low for almost everyone. Heres everything you need to know about starting a company in Bulgarias with 10% personal and corporate tax rates. People who love nature will feel at home in Bulgaria. Tax returns Annual profit must be declared between 1 March and 30 June of the year following the financial (tax) year. In other words, it is not well-known for being a place where people can avoid paying taxes. Corporate taxation - Deloitte US This applies to salaried employees and the directors or managers of a Bulgarian company. In this guide, well run through everything you need to know about how to start a business in Bulgaria, the Bulgarian tax system for individuals and companies, and what the requirements are for tax residency. The documents will be in Bulgarian, so you should get an English copy of everything. The corporate tax rate in Bulgaria is 10% and the tax base is the annual profit of the company. 106 and Art. Thank you for supporting our mission to provide valuable information to our readers.Disclaimer:We make every effort to ensure the accuracy of the information on our website. Bulgaria's flat tax framework is undoubtedly exceptional from a EU perspective. Profits from CFDs and other over-the-counter instruments are taxed at 10% in Bulgaria. After youve decided on the company structure, your accountant will prepare and send you some necessary legal documents. The most modern and innovative accounting firms are still primarily catering to the local market. Bulgaria Global Payroll and Tax Information Guide - Payslip Dividends can be paid out in the year after the year in which the profits were generated, and corporate tax is paid. The minimum amount used to calculate monthly insurance contributions is BGN 650. This site uses cookies to collect information about your browsing activities in order to provide you with more relevant content and promotional materials, and help us understand your interests and enhance the site. If you spend more than 183 days in the country and have your vital interests there, youre considered a resident for tax purposes. Payment of tax liabilities and social security contributions should be made to four separate accounts: for tax liabilities, for general mandatory social security contributions, for supplementary mandatory retirement provisions, and for health insurance contributions. Violation of the LTFA provisions could lead to the imposition of a range of penalties. Tax rates in Bulgaria - International Trade Portal A taxable person is any person who independently carries out an economic activity, whatever the purpose and results of that activity, as well as any person who performs accidental onerous intra-European Union supplies of new transport vehicles. The main deductions available for individuals are: Capital gains and investment income are taxed at either 0% or 10% in Bulgaria, depending on the asset and where it is traded. To encourage the electronic submission of documents, the legislature has provided for a preference. As a normal employee, youre used to thinking of your salary as the only way to get paid. Theres no way around the formalities. 2017 - 2023 PwC. . Bulgaria - business attraction in the EU | No More Tax Usually, the directors and shareholders must be physically present in Bulgaria when the account is opened. All companies must pay tax on the basis of individually assessable profits and losses. the difference between the regular price of the service and the new higher price due to the gambling game). heirs by law, such that as of 2004, succession tax in Bulgaria does not apply to the surviving spouse and the lineal heirs; testamentary heirs, beneficiaries and legatees; stateless persons are subject to the succession tax for inherited estate on the territory of Bulgaria, if the person in question has been permanently resident within the territory of Bulgaria (Art. [3] Bulgarian state taxes are administered by the National Revenue Agency (NRA). Their fees are BGN 10 for account opening, BGN 20 in monthly fees, and BGN 5 per Euro transfer. You should use a professional tax advisor or accountant to help you with this, as the tax system can be complicated. After corporate taxes, the company has BGN 900,000 to distribute as dividends. 10% tax is how much youll pay on both personal and business income in Bulgaria, one of the lowest rates in Europe. Under the Ottoman control of Bulgaria, Christian citizens were subject to a tax called the dhimmi, levied by the Ottoman authority. There are third-party solutions for almost everything, and they work. The financial year for Bulgarian companies is the same as the calendar year. Subject to statement submission are also the taxes withheld at the source on income from dividends and liquidation shares accruing to the benefit of local legal persons who are not traders. Taxable persons, whose net income of sales for the preceding year does not exceed BGN 300,000; (Bulg: - ). Property, buildings, land, and other immovable assets are subject to a 10% capital gains tax when sold. Bulgaria - Corporate - Taxes on corporate income In contrast, others may be willing to open an account for foreigners living abroad. This safeguard system was recently shown to work when Corpbank failed in 2014. Your advisor will most likely recommend an OOD/EOOD for liability reasons and because the company is more flexible when it comes to ownership and management. Advertiser Disclosure: EuroNerd.com is dedicated to providing reliable and trustworthy information about Europe to our readers. These persons may nevertheless make quarterly advance contributions, such that in this case they would not owe interest if it appears that, in view of the profits realised, contributions would have had to be larger. By continuing to browse this site you agree to the use of cookies. We sometimes receive compensation from the companies mentioned on our site through advertising partnerships. Individuals Tax Guide Bulgaria. Plus, the credit is nearly only given to manufacturing companies, not those that sell services. Social security is paid by every employee. The World Bank classified Bulgaria's economy as an 'upper-middle-income economy'. Youll need to visit a notary for almost everything, which can be frustrating if you are used to signing things digitally. This results in a total effective tax rate of 14.8%. This registration forms part of the general tax registration under TIPC. The Bulgarian people are some of the most hospitable in the world, despite the hardships theyve faced over the years. The amount you pay yourself each month as a salary will be subject to social security and income taxes. This requirement does not apply to services performed electronically by persons who are not established within the European Union. Now that all of that is out of the way, here are some benefits that might just tip the scales in Bulgarias favour if youre pondering the idea. All accounts are protected by law by up to 100,000 per depositor per bank under the European Union Deposit Guarantee Scheme. This is by no means the case for all business owners, but we will assume it is here for simplicitys sake. In this example, we have a company owner/director who takes out a monthly salary from their company of BGN 650. Most banks will ask you to visit their branch in-person to open an account. VAT taxation under Bulgarian tax law is regulated by Value Added Tax Act (VATA) (Bulg: ), the Regulation for the Application of VATA (RAVATA) and Directive 2006/112 -COUNCIL DIRECTIVE 2006/112/EC of 28 November 2006 on the common system of value added tax. When it comes to taxes, Bulgaria is relatively simple. 19 ITNPA). A lower rate of 9% applies on only hotel services. That being said, there are still a few downsides of starting a business in Bulgaria that are worth mentioning. In cases where the payer of the income is a person who is not required to withhold and remit taxes, the tax return is submitted by the income recipient until the end of the month following the quarter. There are mountains, forests, and rivers close to the major cities. Its website and documentation are available in both English and Bulgarian. The general rule is that you are considered Bulgarian tax residents if: you spend more than 183 days in the country in a calendar year, have a fixed residential address in the country, and have vital interest ties to Bulgaria. However, the app is in Bulgarian only. The tax is levied on the consumption thereof and the group of turnover taxes. A limited company cannot be registered with the authorities before there is proof that the share capital exists. A new addition is that the declaration is submitted for the taxes due and not the withheld and paid taxes at the source. The statement of tax withheld at the source is performed quarterly by the end of the month following the quarter. The amount of the transport vehicle tax is determined by the municipal council in compliance with the terms, conditions and limits set by the LTFA (according to Art. Corporate Income Tax Companies and partnerships are liable to pay corporate income tax at the rate of 10%. Employment income In many European countries, proving this is by presenting a bank statement that shows that the money is there. For example, a gross salary of 2,000 BGN will result in net (take home) salary of 1,552 BGN. In case there is more than one heir, the tax is due in accordance with their share, and the taxable amount depends on the degree of kinship and the size of the inherited share. The tax legislation in Bulgaria includes the principles of establishment and functioning of the tax system. Bulgaria being a member of the EU means that you have access to the European SEPA network for online banking and payments. However, this is starting to change. The United States taxes non-resident citizens no matter where they live, but they can get credits for the foreign taxes that they have paid. Payslip saves us time so we can focus on our business growth. Simple Tax Guide for Americans in Bulgaria - Taxes For Expats Aside from typing, I enjoy tinkering with off-grid projects and hopping on my bike to find new adventures. After the end of the Soviet era, large privatization took place and the turnover tax was replaced with an ordinary Value-Added Tax. When the tax year ends, we imagine the company has a profit of BGN 1,000,000 after all expenses have been paid, including the directors salary and insurance contributions. We estimate that the effective tax burden for business owners in Bulgaria can be as low as 14.8%. 3 of CITA states that "local" are: Tax relief for persons with reduced working capacity (Art. Just make sure you do your research before buying anything. These credits can reduce the effective corporate tax rate, but they are probably not worth the hassle for most companies. The tax base for determining the corporate profit tax is the tax that is determined by Bulgarian CIT Act as a positive financial result. owners of buildings constructed on state or municipal land; person who was given a right of use - in rem (in deed); person who was given a right of use - concession (concessionaire); users of restituted property that has been restored to the owners, but cannot be used by them (for a period of 5 years). Residents of Bulgaria are subject to taxation on income earned both in Bulgaria and abroad. Advance payments to the tax agency are made on a quarterly or monthly basis, depending on the companys size. However, the bureaucratic wheels are still not used to the idea that people outside Bulgaria might have a business there. Company Tax. However, gains made from selling shares and funds on a regulated stock exchange in an EU/EEA member state are exempt from taxation, according to the Bulgarian Personal Income Taxes Act 13(3). Visit our. Corporate tax is payable by 31 March . Furthermore, subject to taxation are the foreign organizationally and financially independent entities which are engaged in an independent business activity or investment control, provided that the owner of the income cannot be determined. The tax obligations, tentative taxes, tax reliefs and the taxation regime of legal persons and their incomes are regulated by the rules of the Corporate Income Tax Act (Bulg: ). The difference between an OOD and an EOOD is that an OOD has multiple shareholders, while an EOOD has a single shareholder. Monthly accounting fees are typically around EUR 50 100, depending on the size of the business, and a virtual business address is around EUR 110 per year. Payslip's workflow automation, enables Phorest to manage our payroll provider process - data driven, real time and transparent. The different types of taxpayers are enumerated in Article 2 of the Act - this includes all resident and foreign legal persons whose main activity is in Bulgaria or who derive their income from a source in Bulgaria. The price for incorporating a company in Bulgaria we received from the leading online legal platform is EUR 350. Small companies with a revenue below BGN 300,000 (2022 number) also do not have to make advanced payments. Income earned by organisers of gambling games for which the bet is included in the price of a phone or other telecommunication service is subject to 15% alternative tax, applied on the increase in the price of the phone or other telecommunication service (i.e. When selecting a stock brokerage, make sure they provide access to real exchange-listed securities and not CFDs if you want to take advantage of the exemption as mentioned above. for recalculation and refund of withholding tax - for more information see below. Modes of Transportation. retail markets, wholesale markets, fairs, sidewalks, squares, and street roadways use. You should not interpret the content on this website as an offer to buy or sell particular securities, goods, services, or investments. Euro 1), formed by the shares of its shareholders. Failure to submit a statement of acquisition of real estate or declaring incorrect data so as to reduce the tax to a lower rate, is punishable with a fine - from BGN 10 to BGN 400 for natural persons and from BGN 100 to BGN 1,000 for legal entities. How do we keep the wheels turning? The minimum share capital is BGN 2 (around EUR 1). The largest banks in Bulgaria are well-capitalised institutions with branches in multiple countries. These taxes are payable by the 31st of March following the end of the tax year. The period for payment of the tax is until the end of the month following the quarter in which the tax liability arose (Art. It is a flat tax. These are just ideas, so it is important to talk to a certified accountant or tax planner to see what would work best for you. 18 ITNPA). For instance: The taxation regime of transport vehicles in Bulgaria is regulated in Art. By submitting your email address, you acknowledge that you have read the Privacy Statement and that you consent to our processing data in accordance with the Privacy Statement. In general, corporate income is subject to corporate income tax (CIT) at a flat rate of 10%. The social safety net is very weak, and you will likely have to rely on your own resources or the kindness of friends and relatives. This means that you do not have to pay any taxes on your assets, such as property or savings. The whole process usually takes less than two weeks. You can find other offers online in the range of EUR 500 800. Imports: introduction of non-European Union goods - import of goods and placing goods in free circulation after outward processing. tax and/or social security liabilities) to one of the four accounts of the NRA, the one with the earlier payment date will be settled first. This is great for the Bulgarian people, but it means you might have to pay a bit more than you were expecting to hire the right people for your team. You need to open a so-called accumulation or accumulative account with a bank to deposit and prove the share capital. You dont need to jump through all kinds of hoops to get them to work like you would in other low-tax countries. The same flat 10% applies to most personal income, such as salaries, royalties, and rental income. bgcorporate.com The main group of taxable persons are local legal entities and foreign legal entities by place of business within the country. This includes deposits, savings, stocks, and other valuables. There are several allowances and deductions available that can reduce your tax bill. During the year, the director receives a net monthly salary of BGN 650, equal to BGN 504.39 after taxes. Bulgaria - The Legal 500 I. Corporate profit tax does not apply to the collective investment schemes, national investment funds, corporations with special investment purpose and gambling organizers. For foreigners, its not too hard to move your tax residency to Bulgaria. Property taxes are relatively low, and Bulgaria has no wealth tax. Eastern Europe has a certain reputation, and perhaps its not all undeserved. Please keep in mind that the content on our website is for informational purposes only and should not be considered investment or any other type of advice. For example, if you buy EUR 10,000 worth of an ETF listed on a German stock exchange, and after 2 years its worth EUR 12,000, when you sell it, you will not have to pay any taxes on the EUR 2,000 profit. Withholding tax Bulgaria taxes foreign income at a 10% flat rate. Some deductions can help reduce the amount of taxes you have to pay. They offer a wide range of business banking products and services, including foreign currency accounts in EUR, USD, and other denominations. Online gambling games are exempt from the alternative tax (and are subject to standard CIT instead), as are a significant part of the other land-based gambling games (i.e. The fast-growing economy, the low taxes, and the skilled workforce are just some reasons. If use of privately owned automobile is authorized or if no Government-furnished automobile is available. For legal and tax considerations the following two types of Bulgarian legal entities are predominantly incorporated: a limited liability company (abbreviated as "OOD" or "EOOD" type of company 1) or a joint-stock company (abbreviated as "AD" or "EAD" type of company 2 ). For newly incorporated companies, the first tax year is from the date of incorporation until the end of the calendar year. If you go to Burgas, Varna, or Plovdiv, youll find that prices are almost half of those in Sofia. The flat tax rate has been in place since 2008. corporate income tax returns; review/preparation of withholding. Bulgaria - Corporate - Other taxes - Worldwide Tax Summaries Online After registering your Bulgarian company, you will need to close the accumulation account. The succeeded estate includes the movable and immovable property owned by the decedent and the rights over such property, as well as their other property rights, receivables and liabilities at the time of opening of the succession, unless otherwise provided by legislative statute. The situation for US citizens is more complicated. The main tax for Bulgarian businesses is the corporate income tax, which has a rate of 10% - one of the lowest in Europe, the main reason why many investors choose to open a business in the country.Other taxes include the payroll tax, the real . The largest banks are European institutions with a subsidiary presence in Bulgaria, such as UniCredit Bulbank (Italy), DSK Bank (Hungary), United Bulgarian Bank (Belgium), and Postbank (Greece, the Netherlands).
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