- 1 Bulgaria Taxation Corporate Income Tax in Bulgaria
Corporate Income Tax in Bulgaria
Corporate income tax rate is 10% on the profit.
Taxable entities – Companies and partnerships established under Bulgarian law
Permanent establishments of non-resident entities in Bulgaria
Taxable Profit – Financial result adjusted for tax purposes
Accounting Rules – IFRS or local Bulgarian GAAP (for small and medium-sized enterprises).
Tax Loss can be Carried Forward – Tax losses can be carried forward over the next five consecutive years.
Tax Returns and Payment – The annual corporate tax return has to be submitted by 31st March of the following year.
The tax year is the calendar year – The corporate tax has to be paid also by 31st March. Quarterly or monthly advance instalments are due during the year.
Value Added Tax (VAT)
The Bulgarian VAT legislation is based on the EU VAT rules and Directive 2006/112/EC.
Bulgarian VAT Rates
20% for domestic supplies, intra-community acquisitions and importation from non-EU countries
9% for hotel accommodation services.
With the right to deduct input VAT on intra-community supplies, exports to non-EU countries, international transport of goods and passengers, certain supplies related to international transport, sale of duty free goods under certain conditions, certain transactions related to international trade, specific supplies under international treaties, etc.
No right to deduct input VAT on transfer or rental of land or rights in rem over land (except for building land and land adjacent to new buildings), the transfer of old buildings or parts thereof, rental for residential purposes to individuals (an option to tax these transactions is available); financial and insurance services; gambling; certain services related to health, education, religion, culture, etc.; other specific supplies (e.g., importation of certain goods and up to a limit).
VAT Registration in Bulgaria
Entities are obliged to register for Bulgarian VAT purposes if they have performed:
Transactions with a place of supply in Bulgaria for which the VAT should be charged by the supplier exceeding BGN 50 thousand (approximately EUR 25.6 thousand) for the last 12 months;
Intra-community acquisitions exceeding BGN 20 thousand (approximately EUR 10.2 thousand) during the calendar year;
Distance sales in Bulgaria exceeding BGN 70 thousand (approximately EUR 35.8 thousand) during the calendar year.
Entities established in an EU Member State performing supply of goods with premises in Bulgaria to customers non-registered for VAT purposes are obliged to register irrespective of their taxable turnover.
Foreign entities, which receive services with a place of supply in Bulgaria for which the recipient has to self-charge Bulgarian VAT, are obliged to register irrespective of their taxable turnover.
Any entity may apply for voluntary VAT registration. However, if voluntarily registered, such entity will not be able to deregister for two years following the year of registration.
VAT Returns and Payment in Bulgaria
Monthly VAT returns are filed and the tax is due by the 14th of the following month. The tax period is a calendar month.
European sales list (VIES) returns have to be filed monthly by the same deadline if intra-community supplies of goods or certain services have been performed during the respective month.
Withholding Tax in Bulgaria
Withholding tax is due on the following types of income when accrued to a non-resident entity:
Dividends and liquidation quotas;
Interest, royalties, franchising and factoring fees;
Technical (including consultancy) and management services fees;
Income from hiring out movable or immovable property;
Capital gains from transfer of real estate;
Capital gains from disposal of financial assets issued by resident entities or the State and municipalities (exemption for capital gains from disposal of shares on a regulated Bulgarian/EU/EEA market);
Service fees and remuneration for the use of rights (unless actually received); penalty or damages payments (except for insurance compensation) accrued to entities tax resident in low tax jurisdictions.
Withholding Tax Rates
5% on the gross amount of dividends and liquidation quotas (0% for distributions to EU/EEA entities);
5% on interest and royalties accrued to related party legal entities resident in the EU (under certain conditions);
10% on the gross amount for all other taxable income.
The withholding tax rates may be reduced under an applicable tax treaty.
Distribution of Dividends
Subject to 5% withholding tax when distributed to individuals, resident non-profit entities and non-residents (except for EU/EEA entities). Dividends distributed to resident companies are not included in their taxable income except for dividends distributed by:
Double Taxation Treaties
Currently Bulgaria has 68 tax treaties in force (DTTs) and are already in force. Those include DTTs with all EU Member States.
Generally the Bulgarian DTTs follow the OECD Model Convention. However, some of the oldest treaties with developing countries signed before 1990 are based on the UN model while the DTT with the USA is based on the US Model Income Tax Convention.
Important note: DTTs do not apply automatically in Bulgaria. In order for taxpayers to benefit from the provisions of a DTT, they have to follow a specific procedure set in the local legislation. This procedure includes the collection of some documents evidencing tax residency and real beneficiary status. Preliminary approval from the Bulgarian tax authorities is needed for a DTT to apply to income exceeding BGN 500,000 (approx. EUR 256,000) accrued on an annual basis to a single foreign person.
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