Bulgaria, located in Southeastern Europe, is known for its rich history, stunning nature, and increasingly attractive opportunities for businesses. With a strategic location linking Europe with Asia and a burgeoning economy, Bulgaria presents vast opportunities for potential investors and entrepreneurs. A key element of doing business in any country is understanding its tax system. In Bulgaria, the system is a combination of proportional and progressive taxation.
Tax Authority
The Bulgarian National Revenue Agency (NAP) is the entity responsible for collecting taxes in the country. It falls under the supervision of the Ministry of Finance.
Corporate Tax
One of the most appealing aspects of doing business in Bulgaria is the country’s corporate tax. Set at a flat rate of 10%, it is one of the lowest in the European Union. This rate applies to both resident and non-resident companies for their taxable profits.
Value Added Tax (VAT)
The standard VAT rate in Bulgaria is 20%, with reduced rates of 9% applied to certain goods and services such as hotel accommodations. Foreign entrepreneurs should note that companies must register for VAT once their annual taxable turnover exceeds BGN 50,000.
Personal Income Tax
Just like the corporate tax, Bulgaria’s personal income tax is set at a flat rate. Its value is 10%, regardless of the amount of income. This tax applies to worldwide income for residents and Bulgaria-sourced income for non-residents.
Property Tax
Property tax in Bulgaria varies from 0.01% to 0.45%, and it is based on the tax valuation of the property. For buildings and plots located within the boundaries of settlements, the tax rates may vary.
Social Security Contributions
In Bulgaria, both employers and employees contribute to the social security system. The total contribution ranges from 32.3% – 33.4% of the employee’s gross salary, of which the employer contributes between 17.9% – 18.92% while the employee pays 13.78%.
Double Taxation Treaties
Bulgaria has signed several double taxation treaties with various countries to prevent the same income being taxed in two countries. These agreements also provide a number of reductions or exemptions from taxes.
Overall, Bulgaria’s tax system is characterized by simplicity and lower rates compared to many other European countries. As a EU member country with a stable economy, it offers promising opportunities for business growth and development. This, along with a straightforward tax regime, makes Bulgaria particularly attractive for entrepreneurs looking to expand their operations. However, professional advice is recommended to navigate the nuances of the country’s taxation and legal requirements efficiently.
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