- Direct taxation
- Personal taxation
- Indirect taxation
- Customs duties
- Local taxation
- Submitting a tax return
- Set up of companies
Companies registered in Bulgaria are liable for corporation tax. Companies not registered in Bulgaria but with operations in the country only pay tax on earnings generated in Bulgaria.
The corporation tax is 10% and is regulated by the Corporate Income Tax Law.
Corporation tax is also paid by local non-trading legal persons on any profits they make on transactions subject to Article 1 of the Commercial Law or from the rental of movable or immovable property.
Who is liable for corporation tax?
- Bulgarian legal entities and commercial entities.
- Bulgarian legal persons who are not traders pay tax on any profits they make on transactions subject to Article 1 of the Commercial Law or on the rental of movable or immovable property.
- Bulgarian unincorporated companies.
- Foreign entities trading in Bulgaria through a commercial location.
- Foreign unincorporated entities trading in Bulgaria through a commercial location
The following pay tax which substitutes corporation tax:
- Budget-funded enterprises (departments, local authorities, etc). The tax rate is 3 % (2% for local authorities).
- Gaming and betting organisers pay a gaming tax on the basis of the bets made or the number of gaming machines operated. The rate of taxation is 15 %. The tax for the use of gaming machines is based on the number of machines.
- Persons carrying on merchant shipping pay 10% tax on their vessel operations based on the net vessel tonnage per day of operation.
- Certain revenue of foreign legal entities and unincorporated companies generated in Bulgaria is taxes at source. The rate is 10 %.
A 5% tax is levied on dividends and shares in liquidation distributed by local legal entities to:
- foreign legal entities, with a few exceptions
- local non-trading legal entities, including local authorities.
Tax is not deducted at source where the dividends and liquidation shares are distributed to:
- a local legal entity participating in the company as a representative of the state;
- a mutual fund;
- a foreign legal entity which for tax purposes is a local entity from the EU or the EEA, except for hidden profit distributions.
The following are subject to tax at 10 %:
- social benefits in kind provided to employees and contract workers;
- costs of presentation for the company's activities;
- costs of operating vehicles for management purposes.
Tax on natural persons, including activities carried on as a sole trader, is regulated by the Law on Income Tax on Natural Persons.
Persons subject to tax under this law are:
- local natural persons, on income from sources in Bulgaria and abroad;
- foreign natural persons, on income from sources in Bulgaria.
Types of tax payable on income by natural persons are:
- tax on the total annual tax allowance - 10%
- tax on the total annual tax allowance for trading as a sole trader - 15%
- final tax.
A final tax of 5% or 10 % is levied on the bulk of the income of foreign natural persons from sources in Bulgaria, as well as some other income obtained by local natural persons.
Where a taxation agreement or any other international agreement ratified by Bulgaria contains provisions which differ from those of tax legislation, the provisions of the tax agreement or convention takes precedence.
"Exports" and "imports" per se do not exist on the European market. When goods are traded and transported between two different EU countries, there are two types of transaction:
- Intra-community supplies or acquisitions where both parties to the transaction are VAT registered.
- Indirect sales where VAT registered persons supply goods to persons who are not registered for VAT, in another EU Member State.
- Supply of goods for assembly and installation where goods from a supplier in another EU Member State are supplied for the purpose of assembly or installation.
Customs duties are applied to goods imported, while goods exported are treated as zero-rated and subjected to a tax credit.
The VAT Law provides for a registration threshold of BGN 50 000. Anyone with a turnover below this threshold may also voluntarily register for VAT.
The VAT basic rate is 20%. There is a lower rate of 9% for accommodation provided by the hotelier.
The right to a tax credit may be exercised during the tax period in which it arises, or in any of the twelve subsequent one-month periods.
Registering for VAT
Registering for VAT is compulsory or optional.
- Any taxable person with a taxable turnover of BGN 50 000 or more during the 12 months prior to the current month must apply to register for VAT within 14 days of the end of the tax period during which the turnover was generated.
- Any taxable person receiving services that have place of performance on the territory of the country, which are taxable and for which the tax is demandable from the recipient
- Any taxable person residing on the territory of the country, that provides services having place of performance on the territory of another country
Optional registration - generally - any taxable person who does not meet the requirements for compulsory registration for VAT may register for VAT.
The person required to or entitled to register then registers by submitting a standard application form to the competent Territorial Office of the National Revenue Agency.
Applications may be submitted:
- in person if the taxable person is a competent natural person or sole trader;
- by an authorised representative of a legal person or cooperative, an unincorporated company or an insurance fund;
- by an accredited representative.
Applications can be filed online in accordance with the Tax and Social Security Procedure Code.
Applications should state the grounds for registration, and include the documents provided in the regulations on the implementation of the law.
The date of registration under this law is the date of issue of the registration certificate.
Registering a foreign entity not established in Bulgaria. The following must register for VAT:
- Foreign persons who operate on permanent premises in Bulgaria from which they carry on commercial activities and who meet the obligatory or voluntary registration conditions set out in the law.
- Foreign persons not established in Bulgaria but which carry on taxable supplies in Bulgaria and which meet the obligatory of voluntary registration conditions set out in the law.
- Foreign persons must be registered through an accredited agent (with the exception of branches of foreign entities, which are registered under the general procedure).
Applications to register for VAT must be addressed to the competent Territorial Office of the NRA. This sets in motion a check as to whether there are grounds to register for VAT, resulting in the issue of a VAT registration certificate, or a justified refusal.
The Agency does not charge a fee for issuing and authenticating documents and certificates.
Customs duties are regulated by the Excise Duties and Tax Warehouses Act.
Customs duty / Excise / is payable on the following products:
- alcohol and alcoholic beverages;
- tobacco products;
- energy products and electricity;
- coffee and coffee extracts;
Customs duty may arise for imported non EU goods.
Customs offices are operated by the Customs Service.
Local taxes are taxes and charges levied by local authorities, such as taxes on vehicles, buildings and patents. These differ from one region to another and are collected by the local authorities.
Submitting a tax return
If you are subject to corporation tax under the Corporate Income Tax Law, you or your representatives have to submit an annual tax return declaration to the local office of the National Revenue Agency corresponding to the company's place of registration. You can send it via the Internet or by post, and it has to include an annual statistical report.
Deadlines for submitting returns and paying tax:
- Submitting the return: 31 March of the following year
Payment of corporation tax after offsetting advance corporation tax:
- 31 March of the following calendar year.
Set up of companies
The primary legal act governing the types, corporate structure and governance as well as the requirements for the establishment of commercial companies in Bulgaria is the Commerce Act 1991. The Commercial Register Act 2008 regulates the requirements and procedure for registration in the commercial register of commercial legal entities operating under Bulgarian law and of changes in the corporate status of such entities. The Public Offering of Securities Act 1999 sets forth the general legal framework of public companies.
Bulgarian law recognizes the following types of commercial companies exhaustively listed in the Commerce Act:
(i) general partnership;
(ii) limited partnership;
(iii) limited liability company (“LLC”) or one-person-owned limited liability company;
(iv) joint stock company (“JSC”) or one person owned joint stock company;
(v) company limited by shares.
A joint stock company can be publicly listed or private. Under Bulgarian law, joint stock companies are the only type of companies that may become listed, provided that they have conducted an initial public offering or have a registered share issue for the purposes of trading on a regulated securities market.
The minimum share capital required by the Commerce Act for incorporation of an LLC is BGN 2.
The minimum share capital required by the Commerce Act for incorporation of a JSC is BGN 50,000 (fifty thousand). However, special legislation may require higher minimum share capital for carrying out certain types of activities, for example banking or insurance activity.
In addition to the five types of commercial companies mentioned above, business may also be conducted in one of the following organisational forms:
(i) sole trader;
(iv) trade representative office (“TRO”);
Under Bulgarian law, sole traders, partners in general partnerships and unlimited partners in limited partnerships and in companies limited by shares have unlimited personal liability to the company’s creditors. The shareholders’ exposure in limited liability companies and joint stock companies as well as the liability of limited partners in a limited partnership and in a company limited by shares is capped at the amount of their shareholding in the company’s capital.
Establishment of a Company.
Under Bulgarian law there are no restrictions as to the size of the foreign participation in the capital of a Bulgarian company and, therefore, up to 100% of the registered capital of a local company can be held by foreign persons.
All types of commercial companies and all branches of foreign commercial companies are incorporated by way of registration in the commercial register administered by the Registry Agency functioning under the authority of the Ministry of Justice. This is a one-stop shop registration and it serves for all commercial, tax, social security, statistics and other public purposes. Upon its registration in the commercial register a newly incorporated company or branch receives a unique unified identification number, which serves to identify the company throughout its entire existence.
The requirements for the registration of each particular type of commercial company or branch are set forth in the Commerce Act, while the registration procedure and applications and documents relevant to each particular type of commercial company or to branch, in the Commerce Register Act.
The registration procedure currently takes one to five business days. The amount of the state fees due is bound to the legal type of company and it varies form BGN 80 to BGN 1700.
The incorporated company or branch becomes a capable legal entity as of the date of its entry in the commercial register.
Unlike commercial companies and branches of foreign commercial companies, a TRO of a foreign company is established by means of registration in the commercial register held by the Bulgarian Chamber of Commerce and Industry (the “BCCI”) and is subject to secondary registration in BUSLTAT Regsiter, a united national administrative register also held by the
Registry Agency under the BULSTAT Register Act 2005.
Where a license or permit is required by virtue of special laws for the performance of a specific activity, such activity may be performed after obtaining the respective license or permit. By way of example, activities subject to licensing/ permit regime include banking, insurance, gambling, trade in medicines, trade in tobacco, etc.
Bulgarian National Bank
Bulgarian National Audit Office
Bulgarian Stock Exchange
Council of Ministers of the Republic of Bulgaria
Financial Supervision Commission
Ministry of Finance
National Assembly of the Republic of Bulgaria
National Social Security Institute
National Statistical Institute
National Revenue Agency