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Business and taxes

Business and taxes

Every person wishing to move to Bulgaria, stands before the question: what to do - to be employed or to start their own business. The gradual growth of the economy of Bulgaria and their continued interest from European investors create many options for business development. The Bulgarian legislation is already in a state of transition to EU standards, and national treatment for foreign firms is a sufficient legal guarantee for the smooth implementation of investment.Opening his own firm in Bulgaria has many advantages. Having your own company can purchase land, agricultural property, to enter into contracts for the leasing of cars or other assets, to buy goods in installments, to use certain services on an equal footing with Bulgarian citizens (for example, mobile communication). The company registration in Bulgaria is fairly quick and inexpensive process. Also important is the fact that it can be done remotely by proxy. 

Finally, the main advantage of opening a business in Bulgaria - the profit tax in Bulgaria is the lowest in Europe – 10% of the profits. A profit differs from turnover – regardless of the size of turnover of the company, if it has a lot of expenses, then the profit will be minimal, and hence will be minimal and the taxes it will pay.

Incentives for business development in Bulgaria

  • Predictable business environment in Bulgaria
  • Stable, growing a positive credit rating in national and foreign currency (Fitch, Standard&Poor's, Moody's, Japan Credit Rating Agency)
  • The possibility of exemption from VAT on the installment of equipment for investment projects over € 5 million
  • The annual depreciation rate of 30% for machinery and equipment, 50% for new equipment used in new investment projects or expanding and 50% for software and hardware
  • Bilateral treaties with 61-state on avoidance of double taxation
  • Agreement on the joint protection and promotion of foreign investments with 60 countries
  • The possibility of purchasing land with 100% of th foreign participation in the case of registering a company in Bulgaria, etc.

1 . Taxation of legal entities 

Corporate tax.
According to the law on corporate income tax all legal entities and unincorporated associations, which carry out commercial activities on the territory of Bulgaria shall be taxed at 10%. The purpose of this act - equating legal entities to unincorporated associations.

Local legal entities subject to tax all profits and income no matter where they are implemented.

Foreign legal entities are subject to corporate tax only on the activities carried out in the territory of the Republic of Bulgaria.

The value added tax (VAT).
This tax is regulated by the Law on value added (SDDS). The VAT rate is 20% and is mandatory for all implemented on the territory of Bulgaria of goods and services, except exempt from tax.

As from 01.01.2007, in the country there are following three modes to VAT, namely:
  • Delivery committed on the territory of the country;
  • Supplies to Bulgaria and the EU;
  • Deliveries between Bulgaria and the States that are not members of the EU.

2. The taxation of individuals.
  • Income from rental of real estate owned by foreign individuals, subject to a final tax on the total amount of income received in the amount of 10 %. Today it is one of the most small rates in Europe.
  • The income of foreign natural persons from the sale, exchange or other onerous transfer of real property subject to final tax of 10 % of the difference between the sale price and the purchase price of the property minus 10 % recognized on the law of costs.

Housekeeping services of household waste
This amount is usually determined by local authorities. Residential property payment is calculated proportionally to the carrying amount of objects. Another method of tax calculation is to determine the amount of waste. Non-residential properties are classified by type and quantity of waste containers. If, however, accurately determine the type and number of containers is not possible, the amount of payment determined in proportion to the carrying value of the property. Payment must be made with property taxes. Real estate owned by individuals is taxable, the value of which is determined by the value of the object. In Bulgaria, the owner of the property in January of each year must receive notification of the amount of the tax to real estate and information about the amount of the cleaning waste, which he in a specified time should be required to pay into the state Treasury.

Income tax
Given the taxation of income of individuals - both local and foreign. The law regulates the taxation of personal income, including the work of the individual entrepreneur.

All local residents, regardless of their nationality, who have permanent address in Bulgaria, or persons who reside in Bulgaria for more than 183 days in any 12-month period. Individuals-residents are taxed on income from sources in Bulgaria and abroad. Foreign individuals are taxed only on income from sources in Bulgaria.

The income from dividends and liquidation income from individuals - both local and foreign, are subject to taxation in accordance with this law. 
From 01.01.2008 Personal income is taxed at a single tax rate of 10%. 

The value added tax (VAT)
VAT rate in Bulgaria is 20%. VAT is charged on assets and services that have been rendered in the country and imported goods. A legal or natural person engaged in free practice, the turnover of which during the previous year exceeded 50 000 BGN shall be registered in the office for collecting the VAT. After that, these persons are obliged to charge 20% VAT on all their ongoing sales (excluding paid their earlier VAT).

If timely payment of the above taxes, foreign investors can convert income earned in Bulgaria, without any problems and claims with the state.

The tax on vehicles
For vehicles, the municipal Council determines the amount of the tax in the Ordinance under article 1, para. 2 in accordance with the engine power, adjusted by a factor that depends on the year of issue as follows:
  • up to 37 kW inclusive - from 0.34 to 1.02 levs. for 1 kW;
  • more than 37 kW to 55 kW inclusive - between 0.40 to 1.20 m. for 1 kW;
  • 55 kW to 74 kW inclusive - from 0.54 to 1.62 levs. for 1 kW;
  • over 74 kW up to 110 kW inclusive - from 1.10 to 3.30 levs. for 1 kW;
  • over 110 kW - from 1.23 to 3.69 levs. for 1 kW.
Depending on the year the tax is multiplied by the following factors:
A number of years, including the year of issue
  • More than 14 years 1
  • From 5 to 14 years, including 1.5
  • To 5 years, including 2.8

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