Taxation

The Bulgarian tax system is centralized. The local authority defines the local taxes and fees. 

Direct Taxation: Individuals

Under Personal Income Tax Act (PITA) tax liable persons are individuals - residents and non-residents, and corporate explicitly enumerated therein. Residents are liable for their world-wide income. Non-residents are considered those individuals who do not fit the above criteria for residents. Non-residents are liable only for their income derived from Bulgarian sources. The total annual income, after the respective adjustments are made, is taxed in accordance with an annual progressive scale.
 

Direct Taxation: Corporations  

Under the Corporate Income Tax Act (CITA) all companies and partnerships (including non-incorporated partnerships) are liable to corporate income tax. The corporate income tax rate is 10 % (it was 19.5 % in 2004). Bulgarian resident entities are taxed on a worldwide basis. Other entities are taxed on their Bulgarian-source income.

Tax Exemptions:

Companies engaged in production, including production under inward processing, enjoy 100% exemption of the corporate income tax in case they meet all of the following requirements:

1. Assets of the company which are obligatory declared under the Tax Procedure Code are entirely located within the administrative boundaries of the municipalities with unemployment exceeding 50% the average of the country for the previous year.

2. 80% of the annual average number of the employees working under labor contract has a permanent address in the municipality under item 1.

3. In the calendar year of exemption the company does not have any due tax or obligatory social security liabilities or any interests on such liabilities.

Double Taxation Treaties:

Bulgaria has signed double taxation treaties with various countries: Albania, Armenia, Austria, Belarus, Belgium, China, Croatia, Cyprus, Czech Republic, Denmark, Finland, France, Georgia, Germany, Greece, Hungary, India, Indonesia, Republic of Ireland, Japan, Kazakhstan, Luxembourg, Macedonia, Malta, Morocco, Moldova, The Netherlands, Norway, North Korea, Poland, Portugal, Romania, Russian Federation, Spain, Singapore, South Korea, Sweden, Switzerland, Syria, Thailand, Turkey, Ukraine, United Kingdom, Vietnam, Yugoslavia, Zimbabwe.

Indirect Taxation: VAT

Any person (legal or physical, resident or non-resident) who has a taxable turnover of at least BGN 50,000 during the preceding twelve months is obliged to register for VAT purposes by filing a standard registration form within 14 days after the end of the calendar month in which the above threshold is reached. Under the VAT Act, such non-registered persons are subject to mandatory VAT registration. Voluntary registration is possible for persons with taxable turnover over BGN 50,000 for a period no longer than the last 12 months before the current one. Group or divisional registration is not allowed.

20% applicable to taxable supplies, including import of goods and services. A zero rate is applicable to exports.