Bulgarian Tax Code – 4 Major Taxes
Tax 1: “Corporate Tax”
Rate: 10 %
Subjects: Business entities – “Ltd.”, “Corporations”, “Stock Firms”, etc.
Basis: Annual Corporate Income
Bulgarian Corporate Tax is the lowest one within The EU with its flat rate of only 10 %. That economic stimulus measure was introduced by the government of the country several years ago and proved its efficiency by being a major driving force for the progress and prosperity of the business environment in the state. Being literally the “Europe’s Tax Paradise”, Bulgaria succeeded in attracting large number of foreign investments in the recent years. Besides, the nature of that specific tax rate (income-size-non-dependent rate) resulted in the economic boost behind the latest stability of the state, confirmed with very high credit ratings by all world credit agencies. Subjects to that tax are all entities registered as business ventures in Bulgaria, applying it on their annual income according to their Annual Financial Reports and Tax Returns.
Tax 2: “ Personal Income Tax”
Rate: 10 %
Subjects: Individuals – “Individuals”, “Sole Owners”, “Self-Employed”
Basis: Annual Individual Income
Bulgarian Personal Income Tax is regarded as being one of the lowest nowadays – with only a 10 % tax rate. Subjects to that tax are individuals with income gained as a result of certain activity (exception – stipends and pensions). Regardless of whether the income derives from labor or civil contract relations, the income must undergo the imposition of that tax. Besides, that tax is applicable to entities with distinct individual features registered as “Sole Owners” or “Self-Employed” as well. The small size of that tax contributes to the wealth of individuals preserving more available funds for consumption.
Tax 3: “Dividend Tax”
Rate: 5 %
Subjects: Corporative Management
Basis: Corporative Management Corporate Income
The dividend tax gets payable upon distribution of the corporations’ management corporate income. Bulgaria’s dividend tax is fixed to 5 % which represents an advantageous figure for all corporations developing and executing their activity in the country. That acts as a stimulus within the tax code by attracting a great number of foreign companies that are willing to setup their business in a state that gives the opportunity for lowering their tax burden.
Tax 4: “VAT”
Rate: 20 %
Subjects: General and Business Purchases/Sales Deals
Basis: Individuals and Corporative Purchases/Sales
The VAT tax is one of the major taxes in every single state’s tax code all over the world.
Bulgaria gives a great opportunity in terms of low tax rates including its VAT rate fixed to 20 %. Its low figure compared to many other EU states plays its essential role in the country’s progress and the GDP increase in the recent years.
A few specific features should be clarified when it comes to VAT application in Bulgaria:
• Registration – The VAT registration procedure represents a relatively sophisticated process that requires professional assistance for prompt and successful outcome. Most companies count on competent accountancy firms to execute the procedure on behalf of them.
• Timeline – Although some delays might appear, the usual timeline parameters for the VAT registration are up to three weeks. That, of course, can be attained provided that a professional experienced representative deals with the specific procedure.
• Obligation – The VAT registration is not a mandatory procedure if your company does not meet the relevant requirements. If the company’s annual turnover does not exceed a certain fixed amount, you will not have to undergo that registration change. This, of course, does not stand for your being unable to execute it, should that be your ultimate goal. Each single business venture is free to acquire VAT registration in Bulgaria in order to benefit from the latter.
• Monthly Responsibility – After acquiring VAT registration in Bulgaria your company is obliged to fill in and provide monthly VAT reports to the National Revenue Agency. They represent templates that must present in the most accurate manner the VAT relations of the company throughout the particular month.
• VAT Payment Obligation – You must pay your VAT on a monthly basis in Bulgaria. That requires that you return to the state accounts the VAT tax credit you have taken vantage of throughout the month. You must do this promptly and accurately in order to avoid any penalties. For that purpose it is recommendable that you hire a professional accountancy company that could control and execute this on your behalf.
• VAT Returns – In case you have bought more products and services than you have sell throughout the month, you have the opportunity to demand your overall VAT refund from the state. VAT payments to companies get executed once in three months, thereby re-paying the VAT tax you have the right to get back.
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