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Bulgaria

Druzhestvo s ogranichena otgovornost (Limited Liability Company)

Taxes

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 a EEA regulated securities market may be tax-exempt if

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 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 an 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. The 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, 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 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

Country details

Bulgaria
BGN
Sofia
Europe
b g , t r - B G
7148785

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 is concentrated in cities, mainly in its capital Sofia and to a lesser extent the Plovdiv and Varna. Bulgaria is well-known for its ski resorts in winter, its thermal water springs and its 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 of tourist 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 burden in the European Union and get residency, and even citizenship, is possible through incorporation and/or investment.

Tax treaties

Country Type Date Signed
Switzerland DTC  2012-09-19
Sweden DTC  1988-06-21
Canada DTC  1999-03-03
Slovakia DTC  1999-11-12
Hungary DTC  1994-06-08
France DTC  1987-03-14
Georgia DTC  1998-11-26
Austria DTC  2010-07-20
South Africa DTC  2004-04-29
Lithuania DTC  2006-05-09
Belgium DTC  1988-10-25
Czech Republic DTC  1998-04-09
Qatar DTC  2010-03-22
Croatia DTC  1997-07-15
Italy DTC  1988-09-21
Azerbaijan DTC  2007-11-12
Romania DTC  1994-06-01
Kazakhstan DTC  1997-11-13
Indonesia DTC  1991-01-11
Estonia DTC  2008-10-13
Guernsey TIEA 2015-06-11
Albania DTC  1998-12-09
Luxembourg DTC  1992-01-27
Russian Federation DTC  1993-06-08
Turkey DTC  1994-07-07
Denmark DTC  1988-12-02
Finland DTC  1985-04-25
Morocco DTC  1996-05-22
Cyprus DTC  2000-10-30
Ukraine DTC  1995-11-20
United Kingdom DTC  1987-09-16
Lebanon DTC  1999-06-01
Latvia DTC  2003-12-04
Singapore DTC  1996-12-13
Greece DTC  1991-02-15
Portugal DTC  1995-06-15
Poland DTC  1994-04-11
Slovenia DTC  2003-10-20
United Arab Emirates DTC  2007-06-26
Netherlands DTC  1990-07-06
India DTC  1994-05-26
Japan DTC  1991-03-07
Germany DTC  2010-01-25
Bahrain DTC  2009-06-26
China DTC  1989-11-06
Malta DTC  1986-07-23
Korea, Republic of DTC  1994-03-11
Israel DTC  2000-01-18
United States DTC  2007-02-23
Norway DTC  1988-03-01
Ireland DTC  2000-10-05
Spain DTC  1990-03-06
Former Yugoslav Republic of Macedonia DTC  1999-02-22

Procedures

We can help you incorporate a Druzhestvo s ogranichena otgovornost in Bulgaria.
Please, contact us to request a free, no obligation consultation.

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