A Guide to Bulgarian Taxes 2018
Contents: I. Corporate Tax Corporate income tax: 10% Witholding…
Contents:
I. Corporate Tax
II. Personal Income Tax
III. INTRASTAT
IV. Withholding taxes
Withholding tax is due on the following types of income when accrued to a non-resident entity:
The withholding tax rates may be reduced under an applicable tax treaty.
Entities resident in the EU may declare tax deductible expenses and claim a corresponding refund of the withholding tax paid on a gross basis. The claim is annual and should be filed by 31 December of the following year.
The tax should be withheld by the resident payer and remitted to the budget within:
If available, double tax treaty relief may be applied by the income recipient directly if the income accrued for the calendar year does not exceed BGN 500 thousand (approximately EUR 255 thousand).
In all other cases a non-resident can benefit from tax treaty relief if an advance clearance is obtained from the Bulgarian revenue authorities under a specific procedure.
V. One-off tax on certain expenses
The tax rate is 10% on the accrued expenses. Both the respective expense and the one-off tax applicable to it are deductible for corporate income tax purposes.
VI. Transfer pricing rules
The Bulgarian transfer pricing rules require that taxpayers apply arm’s length prices in their related party transactions. Arm’s length prices are those which unrelated parties would have agreed in similar circumstances. This requirement is imposed both to cross-border and domestic transactions.
Largely based on the 1995 OECD Guidelines, the Bulgarian transfer pricing rules envisage 5 methods for determining arm’s length prices:
A taxpayer is obliged to prove the arm’s length character of its related party transactions during a tax audit by applying one of the above methods. The legislation does not include specific requirements as to the format and contents of transfer pricing documentation which taxpayers can produce as evidence for arm’s length pricing. However, a transfer pricing manual released by the Bulgarian revenue administration in February 2010 mentions the items that would appear appropriate to include in the documentation.
The manual contains a set of other useful guidelines relating to different transfer pricing topics. For instance, with respect to intra-group services, the manual suggests specific profit mark-up ranges that have proved customary for Bulgaria.
VII. Personal income tax
In general, individuals are considered Bulgarian tax residents if:
Generally, the taxable income includes monetary income, as well as benefits received in-kind (except non-taxable items and “in kind social expenses”). Bulgarian tax residents are taxed on their worldwide income, while non-residents are taxed only on their Bulgarian-sourced income.
Certain types of income are exempt from taxation, including capital gains from the disposal of shares on a regulated Bulgarian/EU/EEA market, income from disposal of certain real estate, etc.
Tax deductions apply in some cases, including:
The annual personal income tax return has to be submitted by 30 April of the following year (the tax year coincides with the calendar year). The tax has to be paid by the same deadline. A 5% reduction of the outstanding tax can be applied if:
Individuals are generally not obliged to file annual tax returns if they have received only employment income for which the full tax due has been withheld, non-taxable income and/or income subject to one-off tax.
VIII. One-off tax on certain income
One-off tax is due on income received by non-resident individuals from:
One-off tax is due on dividends and liquidation quotas distributed to a Bulgarian resident by a non-resident entity.
EU resident individuals may declare deductable expenses and claim a corresponding refund of the one-off tax paid on a gross basis under certain conditions.
IX. Social security and health insurance
Up to approximately 32,7% paid by both the employer and the employee in a certain ratio. This includes:
The gross remuneration less statutory deductions in some cases. The insurance base is capped at BGN 2600 monthly.
Foreigners may be exempt from social security contributions in Bulgaria or the contributions they make may be recognized in their home country under an applicable bilateral or multilateral social security agreement.
XI. Value Added Tax (VAT)
The Bulgarian VAT legislation is based on the EU VAT rules and Directive 2006/112/EC.
Entities are obliged to register for Bulgarian VAT purposes if they have performed:
Entities established in an EU Member State performing supply of goods with installation 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.
In order to register for VAT purposes foreign entities have to appoint a local fiscal representative, except when they have a registered branch in Bulgaria. The requirement does not apply to EU based entities.
Foreign entities not established and not VAT-registered in Bulgaria performing certain supplies to local businesses will not have to register for VAT purposes. The VAT will be self-charged by the local customer.
Please note that certain specific conditions may also apply.
Monthly VAT returns are filed and the tax is due by the 14th of the following month. The tax period is a calendar month.
Intrastat is a system for collecting statistical data about intra-community movement of goods between Bulgaria and the other EU Member States. All entities VAT-registered in Bulgaria have to file Intrastat returns if the thresholds for incoming (“arrival”) and outgoing (“dispatch”) intra-community movement of goods between Bulgaria and the other EU Member States are exceeded.
The thresholds triggering the obligation to file Intrastat returns for 2018 are (thresholds are updated annually):
The thresholds triggering the obligation to file Intrastat returns for 2019 are:
The deadline for filing Intrastat returns is the 14th day of the month following the month of arrival or dispatch of the goods.
2. Other taxes, duties and fees
Between 0.01% – 0.45% annually on the higher between the gross book value and the tax value of the immovable property (on the tax value for residential property). The exact rate is determined by the municipality in which the real estate is situated.
Determined by each municipality. Generally levied on the gross book value of the real estate. Alternatively, it may be determined on the basis of the number and volume of waste containers used.
Between 0.1% – 3% on the higher of the sales price or the tax value of the transferred real estate / on the insurance value of cars. The exact rate is determined by each municipality.
Depending on the type and characteristics of the vehicle. Applies to cars, ships and airplanes. The tax rate is determined by each municipality within ranges stipulated in the law.
Between 3.3% – 6.6% on the value of the donation. The exact rate is determined by each municipality. Lower rates and exemptions apply to donations between relatives.
Bulgaria applies directly the customs legislation and the Common Customs Tariff of the EU. Customs duties on imports from non-EU countries are usually percentage rates calculated on the basis of the customs value (the transaction value increased by certain costs). Reduced or even zero duty rates apply on imports from countries granted preferential tariff treatment by the EU. In addition, the duties for certain imports can be suspended upon action of the businesses. Goods can be imported in Bulgaria under customs procedures with economic impact – customs warehousing, inward processing, processing under customs control, temporary importation, outward processing.
N.B! The information contained herein is intended to provide general information on Bulgarian taxes and it is not intended to be relied upon as the sole basis for any decision which may affect you or your business.