Bulgaria Tax & Business Guide - Deloitte

Basic facts
Population 7.6m Inflation 7.2% (2006)*
Main languages Bulgarian GDP per head US$4,100*
Currency Lev (BGN) GDP growth 6.1% (2006)*
Economic communities EU, WTO
GDP sources 8.9% agriculture, 30.1% industry, 61.0% services
*Economist Intelligence Unit estimates.
Political environment

Bulgaria is a parliamentary democracy. The government consists of a coalition of the Bulgarian Socialist Party, the Simeon II National Movement and the Movement for Rights and Freedoms. The administration is headed by the prime minister, currently Sergei Stanishev, who is also the leader of the Socialist Party. The president is currently Georgi Parvanov.

Bulgaria joined the EU on January 1st 2007.
Foreign trade and investment
Exports US$14.6bn (2006)* Imports US$20.8bn (2006)*
*Economist Intelligence Unit estimates.

Leading export markets: Italy, Turkey, Germany and Greece.

Major exports: Clothing and footwear, iron and steel.

Exports are shifting away from consumer goods. Petroleum exports have soared.

Foreign investment is granted full national treatment and provided with institutional support if determined to be a priority investment project.
Business and financing
Business forms Limited liability company, joint stock company, joint enterprise

The most common type of organisation for foreign investors is a limited liability company. Other forms are companies limited by shares (joint stock companies), joint enterprises, business associations, general partnerships, limited partnerships and sole proprietorships.
Labour environment
Unemployment rate 9.6% (2006)* Minimum wage BGN 180 (monthly)
*Economist Intelligence Unit estimate.

The minimum wage was raised to BGN 180 per month on January 1st 2007.
Taxation
Corporate tax
Standard rate 10%

Resident companies are taxed on their worldwide income; non-resident companies pay tax only on Bulgarian-source income. Companies are generally treated as resident if they are registered under Bulgarian law. A flat rate of 10% applies. Profits distributed by resident companies to resident corporate shareholders are excluded from taxable income of the recipient company.
Individual tax
Progressive rates up to 24%

Resident individuals are taxable on worldwide income; non-residents pay tax only on Bulgarian-source income. An individual is deemed to be resident if the individualÌs centre of vital interests is in Bulgaria (which is strongly indicated by a permanent address in the country) or if the individual stays in Bulgaria for more than 183 days in any 365-day period.

Income tax rates rise progressively to a top rate of 24%. Dividends distributed to individual shareholders of Bulgarian companies are taxed at source at a flat rate of 7%.
Capital gains
Generally taxed as income

Capital gains are taxed as income. Gains on shares listed on the Bulgarian stock exchange are exempt, subject to meeting certain requirements.
Indirect tax
Standard rate 20%

Value-added tax (VAT) applies to most transactions. Exports and intra-community supplies are zero-rated. Exemptions include financial and insurance services, education and health services, land sales (that do not qualify as regulated land plots) and old buildings (with or without adjoining land).

Registration is compulsory for businesses with a taxable turnover of over BGN 50,000 in any previous period not exceeding 12 months. Registration is also compulsory for intra-community acquisitions exceeding BGN 20,000 for the year if the company/individual is not registered on other grounds. Registration may occur on a voluntary basis regardless of the turnover.

A non-resident company making supplies in Bulgaria must register for VAT through an accredited representative.
Tax administration and compliance
Tax year Calendar year

Companies make monthly advance payments of tax, based generally on the adjusted taxable profits of the previous year. Where a loss was incurred in the previous year, quarterly advance payments are due based on pre-tax earnings in the relevant quarter of the current year (except for the last quarter). A final payment of tax is due on March 31st following the tax year. Where advance tax paid exceeds the final liability, it may be offset against the following yearÌs corporate tax liability.

Employment income of individuals is taxed by withholding.
Additional tax information
Withholding taxes Dividends 7% (0% on dividends paid to companies resident in the EU subject to certain requirements); Interest and Royalties 10%. Withholding rates may be reduced by provisions in an applicable tax treaty.
Tax treaties Bulgaria has concluded more than 50 tax treaties.
Dividends Dividends paid between resident companies are exempt.
Revenue protection There are transfer-pricing and thin-capitalisation rules.
Groups There is no group taxation.
Incentives Agricultural production and investment in certain regions with a high level of unemployment.
Other taxes Inheritance and gift tax, Real estate tax, Customs duties.