Tax year in Bulgaria is the calendar year. Non-Bulgarian residents are taxed on income and gains derived from Bulgarian sources only.
Municipality tax (equivalent of ?stamp duty?) is 2%, paid when the Notary Act is signed, based on the property value stated in the document.
The taxes for the year are due from 1st January but you have until 31st March to pay without incurring a penalty.
However, there will be a discount of 5% if the taxes are paid by the 31st January. Also, that may assist in applications for visas in future as a proof of paying taxes punctually.
Transactions with land and lease of property for residential purposes are exempt from Value Added Tax. All other real estate transactions are subject to VAT at the uniform rate of 20%. The buyer/lessee is entitled to a VAT refund, provided that it is registered for VAT purposes.
After the tax payment, the foreign person may request a refund of the difference between the tax paid and the one due under the relevant double taxation agreement. In such cases, the foreign person has to prove that he is a resident of the country with which Bulgaria has signed such an agreement, and that he has no establishment or fixed base within Bulgarian territory related to the respective income.
Any income derived by an individual from the conduct of business on the territory of Bulgaria is considered to be from a Bulgarian source. A person is considered to have carried out business on the territory of the country where he has a permanent establishment or a fixed base in Bulgaria; he has assigned or performed an assignment on the territory of the country, whether in person or through a procurator, agent or in some other way.
Any income under an employment contract or derived from rendering services is considered to have been derived from a Bulgarian source where labour has been extended or services have been delivered on the territory of the country, regardless of the source of payment for the labour extended or services rendered.
Incomes, not specified by PITA as tax exempt, are considered taxable.
In December 2003, Parliament provided that licensed special investment purpose companies will be exempt from corporate tax. Companies setting up in areas with high employment also pay 0% tax.
The tax year runs from 1st January to 31st December and company tax returns must be in by 31st March and taxes must be paid within 15 days of submitting the declaration. Monthly advance tax payments are obligatory and calculated on the basis of the previous year?s declared profit. The amount paid in April is then the difference between the advance tax paid and the actual profit declared.
Dividends are taxed at 15% at the source (the paying company or partnership), which is the final tax on this kind of income (except when the dividends are distributed to local commercial companies). Stock dividends are not taxable.
Real Estate Taxes
Capital gains tax is payable on the sale of property.Municipality tax (equivalent of ?stamp duty?) is 2%, paid when the Notary Act is signed, based on the property value stated in the document.
Purchasing property tax
Apart from corporate tax, no other direct taxes are levied on the transfer of real property. The transfer is, however, subject to notary and municipal fees. The notary fees are paid on the higher of the market price or the book value of the property at varying rates. In addition, 2% of the market value of the property is paid to the municipality in which the real property is situated.Tax estimation price and purchase price
The tax estimation price is for the purposes of real estate taxation and could be much lower than the actual asking price which the buyers are paying, so due to this practice there might be a difference between the price you are paying and the price written in the title deed. Even if the buyer wishes the purchasing price to be written in the title deed, we cannot guarantee that this will be accepted by the vendors.Local municipal taxes
Local municipal taxes ? very low, often around 5 Euro per year (check locally): Owners of real estate in Bulgaria are liable to pay an annual tax on the value of the real estate. The rate varies depending on whether the real estate is used for residential or commercial purposes. The rate for residential property is fixed by the local authorities. For commercial buildings, the rate is 0.15%. The tax is payable at the beginning of each year. These taxes are usually up to the equivalent of ?150 per year, and are lower in rural areas.The taxes for the year are due from 1st January but you have until 31st March to pay without incurring a penalty.
However, there will be a discount of 5% if the taxes are paid by the 31st January. Also, that may assist in applications for visas in future as a proof of paying taxes punctually.
Other taxes in Bulgaria
VAT
VAT is chargeable on the sale of real estate in Bulgaria at a rate of 20%. This is usually included in the purchase price of the property.Transactions with land and lease of property for residential purposes are exempt from Value Added Tax. All other real estate transactions are subject to VAT at the uniform rate of 20%. The buyer/lessee is entitled to a VAT refund, provided that it is registered for VAT purposes.
Income Taxes at Fixed Rates
Income from dividends, interest, royalties, rents, capital gains and others paid to foreign residents is subject to a 15% withholding tax.Rental Income
A flat 20% deduction is available against the rental income received. If the rental income is paid to a non-Bulgarian resident, 15% tax is withheld at source.Tax Returns and Compliance
Tax returns should be filed by 15th April following the tax year in question. Taxes are payable within 30 days of filing the Return.Wealth Tax
There are no wealth taxes in Bulgaria.Social Security and Healthcare Contributions
Employees are liable to pay social security contributions at a rate of 8% and employment fund contributions at a rate of 1%. In addition, healthcare contributions are payable at a rate of 1.5%. Contributions are payable monthly and are calculated on employment income only, up to a limit of around BGN 850 per month.Taxation issues
Double Taxation
Changes to taxation rules in 2003 provided that the income of a foreign person who is resident in a state with which Bulgaria has signed an agreement on avoiding double taxation, but who has earnings in Bulgaria, will be declared as subject to taxation under the terms and procedure of the respective Bulgarian tax law.After the tax payment, the foreign person may request a refund of the difference between the tax paid and the one due under the relevant double taxation agreement. In such cases, the foreign person has to prove that he is a resident of the country with which Bulgaria has signed such an agreement, and that he has no establishment or fixed base within Bulgarian territory related to the respective income.
Any income derived by an individual from the conduct of business on the territory of Bulgaria is considered to be from a Bulgarian source. A person is considered to have carried out business on the territory of the country where he has a permanent establishment or a fixed base in Bulgaria; he has assigned or performed an assignment on the territory of the country, whether in person or through a procurator, agent or in some other way.
Any income under an employment contract or derived from rendering services is considered to have been derived from a Bulgarian source where labour has been extended or services have been delivered on the territory of the country, regardless of the source of payment for the labour extended or services rendered.
Tax Exempt income
The following are considered tax exempt: incomes derived from the sale or exchange of certain types of immovable property (flats, houses or villas) or means of transport, subject to certain conditions; incomes derived from the sale or exchange of movable property except for the means of transport as per the preceding bullet, as well as the sale of shares, quotas and other equity interest in a commercial company, etc; compensations received as a result of statutory pension, health and social security insurance, as well as other certain compensations; interest accrued on deposits in local commercial banks and branches of foreign banks, the interest and expenses on court-awarded claims, as well as incomes derived from investments of the insurance reserves on life insurance, marriage and children's insurance and life insurance, if connected with an investment fund; cash and non-cash income from social financial aid and the unemployment compensations and subsidies; financial aid granted by social funds and organisations; subsidies from the state in respect of children and payments determined by court to support a child; student grants for Bulgarian resident individuals for their education in the country and abroad; prizes from the lottery and other games of fortune; salaries and emolument of foreign diplomats pursuant to the Vienna Convention on Diplomatic Relations; company profits distributed as new quotas and shares in commercial companies, as well as the profits distributed as an increase in existing quotas and shares' par value; rentals from agricultural land; and incomes derived from transactions with public companies' stocks and trading rights on public companies' stocks, made on the regulated Bulgarian stock market.Incomes, not specified by PITA as tax exempt, are considered taxable.
Capital Gains of immovable and certain movable property
The tax base in case of sale or exchange of immovable and certain movable property is the difference between the selling price and the higher price between the factual and updated price paid for the acquisition of such property. This rule applies to certain types of vehicles (e.g. aircraft, sea vessels, and cars). For any other type of movable property the tax base is the difference between the selling price and the re-valued price for the acquisition of such property.Company Taxation
Corporate tax has been reduced to 15% for 2005. If this government carries on for a second term this may be reduced further, but if the Socialist Party gets in it will not be reduced and may even be increased in subsequent years.In December 2003, Parliament provided that licensed special investment purpose companies will be exempt from corporate tax. Companies setting up in areas with high employment also pay 0% tax.
The tax year runs from 1st January to 31st December and company tax returns must be in by 31st March and taxes must be paid within 15 days of submitting the declaration. Monthly advance tax payments are obligatory and calculated on the basis of the previous year?s declared profit. The amount paid in April is then the difference between the advance tax paid and the actual profit declared.
Dividends are taxed at 15% at the source (the paying company or partnership), which is the final tax on this kind of income (except when the dividends are distributed to local commercial companies). Stock dividends are not taxable.