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Peculiarities of the tax system in Bulgaria

Despite the fact that almost all European countries are committed to the unity of laws and integration in the areas of economic and social policies, tax systems of European countries do not differ by unity.


Russian analysts of the consulting company "Texart Group researched the tax system 38 European countries with developed market economies, and weak, still "wobbly" after the collapse of the socialist States.


Some of the investigated countries are already EU members, others are candidates for membership in the single currency area, but in the meantime, in most States, United Europe, you may encounter drastic differences in tax systems and the principles of taxation.


If you are going to live abroad and operate your business, you should carefully review the tax code of the country: what size of income tax in this country; the amount of tax "at the source"; VAT; what are the taxes levied on the income of individuals and their property, and more.


We offer to your attention an analytical report with detailed information about the economy, the characteristics of the market, as well as tax rates and the criteria for levying taxes in each country of Europe.




In 2002, the European Commission recognized Bulgaria as a country with market economy. Low interest rates provide an inflow of foreign capital, and the tax to incomes of physical persons – one of the lowest in Europe. However, the country has a weak infrastructure and high debt in all industries.


An EU member since 2007.




The income tax


Classical tax system (the tax is paid from the operating profit and profit distribution to shareholders).

Income tax levied on Bulgarian companies which are tax residents and who receive income regardless of its origin. In respect of non-residents taxable income derived from sources in Bulgaria. Nonprofit organizations also pay tax in terms of profits received from investments and entrepreneurial activities. A tax resident company is considered to be registered in accordance with Bulgarian legislation or Regulations of the European Union (Technical regulations (EC) No. 2157/2001 and No. 1453/2003) with the condition actual location on the territory of Bulgaria and recording company in the register of legal entities.

The capital appreciation (capital gains) is considered as part of the profit and taxed at the General rate.

The tax rate on income from 2007 is 10%.

In Bulgaria, there is legislation on transfer pricing, based on the standards of OECD Guidance On transfer pricing for multinationals and tax authorities").

In Bulgaria there are no provisions relating to the taxation of controlled foreign companies.



Withholding tax


Dividends distributed by resident other resident companies are tax-exempt, neither at the source of payment, nor the receiving company. In the case of payment to resident individuals or non-residents (individuals or companies), the rate of withholding tax is 5%.

Not taxed at source, interest payments addressed to the residents (both companies and individuals). However, from 1 January 2014, banks (including branches of foreign banks) are required to hold 8% tax in respect of payments to individuals on deposits.

In respect of interest payments to the address of the resident applies a 10% rate of tax at the source of payment.

Payments on royalties to non-residents are subject to taxation at source at the rate of 10%. In some cases, royalty payments are subject to VAT. Thus, a recipient of cross-border intellectual services (for example, transfer of intellectual property rights), is the VAT withheld at source.





The VAT rate in Bulgaria is 20%. The tax is payable in respect of the supply of goods and services. From January 1, 2007 (date of accession of Bulgaria to the EU in respect of VAT may apply as a national (Zakon za danak varhu dobavenata stoinost) and EU legislation (EU Directive 2006/112).

Reduced VAT rate of 9% applies to services for organization travelers. A zero rate applies to exports of goods, international transport services, and the supply of gold to the Central Bank.



Taxation of incomes of physical persons


The tax to incomes of physical persons-residents of Bulgaria shall be payable in respect of their income regardless of the country of origin. Non-residents also pay tax on income earned from a source in Bulgaria. The tax-relevant payments related to income from employment, business activities (including payments for royalties, dividends, etc.), rental and other income (interest payments, prize money).

The tax rate on income is 10%.

Dividends are taxed at the rate of 5%, interest payments at the rate of 8%. In this case, as for the resident and non-resident, in respect of interest payments received on deposits in Bulgarian banks or branches of foreign banks in Bulgaria in 2015 the rate will be reduced to 6%, and in 2016 it is planned to decrease to 4%.

Rate in respect of payments on royalties is 10%, with the possibility of applying the 40% deduction.



The real estate tax of individuals


Property tax is a local and paid by physical persons owning immovable property on the territory of Bulgaria. The order of payment and tax rate are determined by the instructions of the municipal authorities, the rate can range from 0.01% to 0.45% of the property value. If real property is the primary residence of the person, the tax is reduced by half, as against persons with disabilities is 75%.



The text prepared by the Russian consulting company TaxArt Group LLC specifically for Banki.ru



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