Country code – BG
Legal Basis – Civil law (German/Roman)
Legal framework – Bulgarian Commercial Code
Company form – Limited Liability Company (Druzhestvo s ogranichena otgovornost, OOD)
Liability - The liability of the shareholders for the company is limited to the amount of their capital contributed.
Capital – The registered capital is composed of the capital contributions that must be of an amount of at least BGN 2. Capital contributions must be fully paid.
Members – A Bulgarian company may be incorporated by one or more natural persons or legal entities, residents or non-residents. Details of the members are disclosed publicly.
Manager – A company must have at least one manager, who must be an individual, resident or non-resident.
Secretary – Bulgarian companies may appoint a secretary, but it is not mandatory.
Registered Address – A company must have a registered office in Bulgaria.
General Meeting – Single-member LLCs are not required to hold a general meeting. Companies with 2 or more members are required to convene an annual general meeting.
Electronic Signature – Permitted.
Re-domiciliation – Inward/outward re-domiciliation is not allowed.
Compliance – Bulgarian companies must file annual financial statements and an annual report with the Commercial Register. However, SME can file simpler financial statements.
SMEs are not required to appoint an auditor and file audited accounts.
All Bulgarian companies are required to file an annual tax return and pay their corporate taxes up to June 30.
- Shareholders not disclosed
- Directors not disclosed
- Corporate shareholders permitted
- Corporate directors permitted
- Local director required
- Secretary required
- Local secretary required
- Annual general meetings required
- Redomiciliation permitted
- Electronic signature
- Annual return
- Audited accounts
- Audited accounts exemption
- Exchange controls
- Civil law (German) Legal basis
- 1 Minimum shareholders
- 1 Minimum directors
- BGN 2 Minimum issued capital
- BGN 2 Minimum paid up capital
- BGNEURAny Capital currency
- Anywhere Location of annual general meeting
- 2018 AEOI
Tax residency – An OOD is tax resident in Bulgaria if it is incorporated under Bulgarian law.
Basis – Corporate income tax is levied on worldwide income.
Tax rate – The corporation tax rate is 10%.
Capital gains – Capital gains are subject to the corporate tax standard rate. Capital gains resulting from the sale of shares in listed companies on an EEA regulated securities market may be tax-exempt.
Dividends – Dividends are subject to corporate tax. A tax exemption may apply if dividends are distributed by EU/EEA companies if the distribution is not treated as a tax-deductible expense by the distributing entity.
Interests – Interests are subject to corporate income tax.
Royalties – Royalties are subject to corporate income tax.
Withholding Taxes – Dividends paid to individuals or non-resident entities are subject to 5%. An exemption applies on dividends paid to EEA resident entities.
Interests and royalties paid to non-residents are subject to a 5% unless the rate is reduced under a tax treaty or the EU interest and royalties directive applies.
Technical service fees paid to a non-resident are also subject to 10% withholding tax.
Foreign-source income – Foreign-source income is generally subject to corporate income tax. A tax credit for foreign tax paid may be available, either via the provisions of a DTT or via a unilateral tax credit (which amount may not exceed the amount of tax that would be payable in Bulgaria)
Losses – Losses may be carried forward 5 years, The carryback of losses is not allowed.
Inventory - Inventory valuations are usually made at the lower of cost or market value. In general, the book and tax methods of inventory valuation will be acceptable. Last in first out method (LIFO) is not allowed for taxation purposes.
Anti-avoidance rules – Transfer pricing rules are applicable to all types of transactions between related persons, which must be conducted at arm’s length according to the OECD’s principles. Usually, there are no documentation requirements.
Thin capitalization rules apply where the liabilities of a company exceed three time its equity, and interest expenses incurred may not be deductible.
There are CFC rules in Bulgaria.
Labor taxes – Employers and employees must pay social insurance contributions up to 19.62% and 13.78% of gross salary, respectively. The total amount payable is capped at BGN 2,600 per month.
Tax credits and incentives – There are tax credits, incentives, and deductions for companies conducting agricultural activities, the hiring of long-term unemployed, handicapped or elderly persons, and investing in regions with high unemployment.
Personal income tax – Tax residents in Bulgaria are individuals who reside 183 days in Bulgarian territory in a tax year, or have a permanent address in Bulgaria, or have its center of vital interests in Bulgaria.
The criterion of the center of vital interests prevails for the one of permanent address. That is, someone who has a permanent address in Bulgaria, but whose vital interest center is in another country, may not be considered a resident for tax purposes.
Tax residents are subject to tax on their worldwide income at a flat rate of 10%. A tax credit for foreign tax paid is usually available.
Dividends and interest are subject to a final tax of 5% and 8%, respectively.
Capital Gains are taxed at the standard PIT rate. Being exempted those gains derived from companies listed in the Bulgarian or a European regulated stock exchange, and those from properties held 3 years (1 property) or five years (other 2 properties).
Other taxes – V.A.T. standard rate is 20%. Reduced rates of 9% apply to certain goods and services.
Bulgaria levies a real property tax of between 0.01% and 0.45% on the tax value of the property. There is an inheritance and gift tax of between 0.4% and 6.6%, depending on the relationship of the beneficiary. There are no net worth and transfer taxes.
- Offshore Income Tax Exemption
- Offshore capital gains tax exemption
- Offshore dividends tax exemption
- CFC Rules
- Thin Capitalisation Rules
- Patent Box
- Tax Incentives & Credits
- Property Tax
- Wealth tax
- Estate inheritance tax
- Transfer tax
- Capital duties
- 10% Offshore Income Tax Rate
- 10% Corporate Tax Rate
- 10% Capital Gains Tax Rate
- 10% Dividends Received
- 5% Dividends Withholding Tax Rate
- 5% Interests Withholding Tax Rate
- 5% Royalties Withholding Tax Rate
- 0 Losses carryback (years)
- 5 Losses carryforward (years)
- FIFOAverage cost Inventory methods permitted
- 453 Tax time (hours)
- 14 Tax payments per year
- 13.78% Social Security Employee
- 19.62% Social Security Employer
- 10% Personal Income Tax Rate
- 20% VAT Rate
- 53 Tax Treaties
The Republic of Bulgaria is a country located to the southeast of the European continent, member of the European Union. It borders Romania to the north, Serbia and the Republic of Macedonia to the west, Greece and Turkey to the south and the Black Sea to the east.
Although being a relatively large country, its population is just over 7 million inhabitants. Most are concentrated in cities, mainly in its capital Sofia and to a lesser extent the Plovdiv and Varna. Bulgaria is well-known for ski resorts in winter, thermal water springs and almost 200 km of Dead Sea’s beaches.
Its official currency is the Bulgarian Lev (BGN), pegged to the EUR at a 1.95:1 ratio, but it is foreseen that will join Eurozone in the coming years. Its main economic sector is the industry, mainly steel, chemical, and textile. Bulgaria produces a significant amount of products and raw materials such as iron, copper, gold, bismuth, coal, electronics, refined petroleum fuels, automobile parts, firearms and construction materials.
Tourism is another important sector and the fastest growing, about 13.6 million tourists visited the country in 2016. Regarding the agriculture, Bulgaria is a top world producer of tobacco and raspberries and has large agricultural lands of wheat, maize, barley, rye, rice, cotton, and sunflower.
Bulgaria has one of the lowest tax burdens in the European Union and obtaining residency, and even citizenship is possible through incorporation and/or investment.
Tax treaties Map
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