With the fiscal reform in 2007 in Bulgaria, the Bulgarian state aimed at boosting entrepreneurship and creating a simplified, functional tax system that is friendly to foreign (and not only) investments.
And it seems to have achieved it. Today in Bulgaria, the following tax scales apply:
- Natural Persons’ tax of 10% (flat tax) on net profits
- Company tax rate of 10% (flat tax) on net profits
- Dividend tax 5%
- 20% Value Added Tax (VAT) and zero for intra-Community transactions.
- potential loss transfer to the next fiscal year, up to five years
In Bulgaria there are two kinds of independent companies:
- Those under VAT system (registered in the VIES system)
- Those that are not in VAT system (not shown and not registered in the VIES system)
The companies that are obliged to join VAT system are those which have:
1. Turnover over BGN 50,000 (~ € 25,000)
2. Intra-Community transactions in excess of BGN 20,000 (~ € 10,000)
3. Distance sales over 70,000 BGN(~ € 35,000)
Excise duty is required:
- Tobacco products,
- Luxury cars,
- Heating oil
Municipal councils determine, within the framework of the law, the exact amount of municipal taxes and fees:
- City tax on all properties from 0.5% to 2%
- Municipal property transfer tax from 1.3% to 2.6%.
Bulgaria has signed an agreement to avoid double taxation in relation to income and capital taxes. (Law 2255/1994, Government Gazette 195 / 18.11.1994).
Apart from the already low taxes, the state offers additional tax exemptions (under certain conditions) to companies that have invested in deprived areas, i.e. in areas where unemployment in the previous year was clearly higher than the country average.
-Exemption up to 100% of corporate tax (10%) for industrial units located in regions with unemployment exceeding at least 35% of the average. This exemption applies for five years irrespective of the development of unemployment.
-Reduction of corporate tax by up to 10% on the value of fixed assets (with the exception of passenger cars) provided that the investment takes place in an area where the unemployment rate is 50% higher than the national average.
-Enterprises recruiting registered unemployed benefit from a special discount, i.e. deduction from wage earnings and employers’ contributions of up to 12 months.
-Exemption from corporation tax for legal entities engaged in technical cooperation programs funded by the Community programs PHARE and ISPA.