Bulgaria taxation
Bulgarian taxation brief review.Bulgaria tax law practical overview.


Bulgaria taxation

BULGARIA TAX LAW BRIEF REVIEW

There are two groups of tax liable persons under the Bulgarian law – physical persons and companies.

The Bulgarian law makes a difference between the physical persons who are local or are citizens of EU countries and those who are citizens of countries not part of the EU.

Between those two groups there is a sight difference which we will point out in a specific section :

SECTION 1. Taxes applicable from Bulgarian inland revenue for incomes of physical persons who are local or are citizens of EU countries or countries that belong to the EU economic area.

TAX FREE INCOMES

1. Incomes received from the sale or exchange of up to one residential property per year. It is not necessary for the owner to have lived in the property but it needs to be a residential property, not land. There is also no requirement for the term of possession of the property – this means it can have been bought at any time, even during the same year. Those rules play to investors who have bought a flats or limited property rights.

That is a great opportunity for property investors who bought for investment and resale as their incomes will not be taxed.

2. Incomes received from the sale or exchange of up to 2 residential properties as well as agricultural land or forests (there is no restriction on the number of land and forests) if the above properties have been possessed by the person for more than 5 years.

Apart from property incomes, there are also a number of other sources of income which are tax free. Some of these are the incomes from deals with public limited company shares traded on the Bulgarian stock exchange. Any interest gained on funds in personal savings accounts in Bulgarian banks or international bank branches in Bulgaria are also tax free.

WHAT IS CONSIDERED NOT AN INCOME (and thus means tax free profit)?
Bulgarian law doesn’t regard as an income the properties which are inherited or donated. The company shares received from non-monetary installments into trading companies are also not an income.
WHAT ARE TAXABLE INCOMES UNDER THE BULGARIAN LAW
The dividend tax rate is 5% and it is applicable for incomes received in the form of shared profit by all Bulgarian or foreign physical persons when the source of income is Bulgaria. This means that if a person owns (or has a share in) a company in Bulgaria and this company trades in the country and shares profit, the physical person owner (or shareholder) of the company is taxed with 5% dividend tax, which is collected and paid to the state by the Bulgarian company, which shares the profit.
Section II
Corporate incomes taxation is applicable to the net profits of Bulgarian companies from their trading activities. As long as Bulgarian companies are considered a local entities it doesn’t matter if the owner /share holders are EU or non EU citizens/.   This means that if you are a foreign person and you have established a company in Bulgaria in order to buy a house or land, when renting or selling the property on behalf of the company, you are entitled to pay corporate tax. I
Corporate incomes taxation is applicable to the net profits of Bulgarian companies from their trading activities. As long as Bulgarian companies are considered a local entities it doesn’t matter if the owner /share holders are EU or non EU citizens/.   This means that if you are a foreign person and you have established a company in Bulgaria in order to buy a house or land, when renting or selling the property on behalf of the company, you are entitled to pay corporate tax. I

1. The sales or exchange of more than 1 residential property per year.

2. The sale or exchange of agricultural land or forests no matter of their number if they are owned by the seller for less than 5 years. This is something that doesn’t apply for foreign persons as they cannot own land as physical persons and they need to set up limited companies./ Please read the section refer to company taxes in Bulgaria/.

3. Property rental incomes

4. Incomes of any jobs you are engaged in Bulgaria.

Incomes taxation of physical persons who are not local or are not citizens of EU countries or countries that belong to the EU economic area.

All incomes from the sale, exchange, rent or any other property right, which is paid for, received by persons who are not local and are not citizens of EU countries or countries in the EU economic area, are taxed. The tax rate is 10% and is due  to be paid to the  Bulgarian inland revenue agency till the 30 of March on the next year after the profit is gained.

3. Dividend tax

Corporate incomes taxation in Bulgaria

The tax rate is 10% and is calculated on the difference between the total incomes of the company for the year less the total expenditures. All Bulgarian companies submit tax declarations and pay their annual corporate taxes by March 31st each year.

There are no tax free corporate incomes and no matter how long the property is owned by the company, the company always pays taxes in case of property sale or rent.

IMPORTANT: All Bulgarian companies must submit tax declarations by March 31st no matter if they have traded or not – this is compulsory and all companies. In case the manager of the company those not stay permanently I Bulgaria you will need a trusty lawyer to sign the tax forms on his behalf and submit to the tax office and company registry agency.

Lawyers Bulgaria- solicitors department can provide professional advice and practical support regarding taxes, tax issues, preparing and submitting annual tax declaration.