Taxation in Bulgaria
Bulgaria’s taxation framework is an intricate system that is fundamental to the country’s economic strategy, striking a balance between generating revenue and promoting growth and investment. It includes various taxes, each regulated by a complex assortment of rules and rates. To navigate this landscape effectively, businesses, investors, and individuals must possess a comprehensive understanding for effective financial management and compliance.
Taxation system
Bulgaria’s taxation system is structured to harmonize with national fiscal policies and international commitments, providing a coherent yet flexible approach to taxation. It may include a mix of flat rates, progressive scales, and specific exemptions that correspond to the nation’s economic interests and social goals. Grasping the complexities of these tax mechanisms is essential for maximizing financial results, maintaining compliance, and utilizing available opportunities within the legal framework.
Capital gains tax
Capital gains are subject to annual taxation at a flat rate of 10% for Bulgarian tax residents and a 10% final withholding tax for non-residents. Some exemptions related to capital gains are covered under the section on Exempt income below.
Corporate taxation
In Bulgaria, corporate tax is set at a uniform rate of 10% on the taxable income of companies, regardless of whether they are resident or non-resident. Resident companies are liable for tax on their global income, whereas non-resident companies only pay tax on income earned from sources within Bulgaria. Similarly, branches of non-resident companies are subject to the same tax rate. There are no additional taxes, and Bulgaria does not enforce an alternative minimum tax. The tax framework is simple and includes provisions for multinational groups as outlined in the EU’s ‘Pillar Two’ directive.
Personal income taxation
In Bulgaria, the personal income tax rate is a uniform 10%, which applies to all taxable income irrespective of its level. This tax is imposed on individuals based on their global income if they are residents of Bulgaria. Self-employed individuals are also subject to this same flat rate. Dividends are taxed at a lower rate of 5%, while specific capital gains are taxed at either 0% or 10%, depending on the category of the asset.
Dividend taxation
In Bulgaria, dividend income is typically taxed at a flat rate of 5% for individuals, regardless of residency status. Dividends exchanged between companies based in Bulgaria are not taxed. Companies receiving dividends from entities in the EU/EEA are likewise exempt from tax. Non-resident companies that receive dividends may incur withholding tax, usually set at 5%, unless a relevant tax treaty provides for a reduction.
Property tax
In Bulgaria, property tax rates are set between 0.01% and 0.45% based on the higher value of either the gross book value or the tax value for non-residential properties. The same rate range applies to residential properties, with the specific rates being determined each year by the municipality. Property taxes are assessed by local authorities, which have the flexibility to establish precise rates within the specified range.
Inheritance taxation
In Bulgaria, inheritance tax is applied at rates between 0.4% and 6.6%, depending on the heir’s relationship to the deceased and the value of the inherited assets. This tax is collected at the municipal level, with each municipality setting its own rates within this range. Typically, direct heirs, including children and spouses, are exempt from paying inheritance tax.
International taxation
Bulgaria implements a corporate income tax of 10% and a personal income tax of 10%. Companies that are residents are taxed on their global income, whereas non-resident companies are only taxed on income sourced from Bulgaria. The country adheres to international tax standards and utilizes double tax treaties to prevent double taxation. Non-residents face withholding taxes on certain income types, including dividends, interest, and royalties, generally set at 5% or 10%, although these rates may be lowered through tax treaties.
Cryptocurrency taxation
In Bulgaria, the taxation of cryptocurrency adheres to the general national tax principles since there is no dedicated legislation for crypto-assets. Individuals are taxed on cryptocurrency transactions according to the Personal Income Tax Act at a flat rate of 10%, unless the activity is deemed professional, in which case a tax rate of 15% applies. For corporations, a corporate income tax of 10% is imposed. All transactions involving the conversion of crypto into fiat currency, other crypto-assets, or goods and services are treated the same for taxation.
VAT system
In Bulgaria, a standard VAT rate of 20% is typically levied on the majority of goods and services. A lower rate of 9% is applicable to hotel accommodations and certain other services, including books, baby items, and restaurant services, provided specific conditions are met. Exports and intra-community supplies within the EU are subject to a 0% rate. VAT is determined based on the taxable amount, and the country adheres to the EU VAT directives.
Our taxation solutions
In a tax landscape that is continuously changing, professional advice is crucial. Our firm provides a range of specialized tax solutions customized to address the various requirements of individuals, companies, and investors in Bulgaria. Our services aim to simplify the complexities of the tax code, reduce liabilities, and guarantee complete compliance with regulations.
- Personal tax advisory: Tailored advice to minimize tax exposure while ensuring legal compliance.
- Corporate tax strategy: Comprehensive planning to maximize tax efficiency and leverage incentives.
- Capital gains optimization: Expert guidance to manage and reduce taxes on capital gains.
- International tax planning: Advanced strategies for optimizing cross-border tax outcomes.
- Cryptocurrency advisory: Compliant tax strategies for both individual and corporate crypto activities.
- Inheritance and estate planning: Strategic planning for efficient wealth transfer and reduced inheritance taxes.
- VAT compliance: Full-service support for VAT registration, reporting, and optimization.
Book a consultation
In the intricate realm of taxation, expert guidance can have a substantial impact. Reach out to us today to arrange a consultation with our group of tax specialists. We will collaborate with you to create a personalized tax strategy that meets your goals and guarantees complete adherence to Bulgaria’s regulatory environment.
Disclaimer
Tax laws and regulations are continually evolving and can differ depending on personal circumstances. The details provided here are intended for general guidance and might not represent the latest updates. It is strongly advised to seek the assistance of a qualified tax professional for specific and current advice tailored to your situation.