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Tax in Bulgaria(Blevins Franks Tax Advisory Service)The following is an extract from the booklet, Legal, Financial & Property services in Bulgaria, written and published by solicitor John Howell of John Howell & Co. Introduction The tax year in Bulgaria is the calendar year. Residents of Bulgaria are subject to taxes in Bulgaria on their worldwide income and gains. Non-Bulgarian residents are taxed on income and gains derived from Bulgarian sources only. You are treated as resident in Bulgaria if either: you are permanently domiciled in Bulgaria; or you spend more than 183 days in Bulgaria within any 365 day period ending in the tax year in question; Foreign experts are taxed on their Bulgarian source income alone regardless of the amount of the number of days they spend in Bulgaria. Permanent Resident’s Permit A permanent resident’s visa is available to individuals who have lived permanently in Bulgaria for more than 10 years. This is reduced to six years if you have business interests in Bulgaria. Spouses and children of holders of permanent resident’s permits are also eligible. Allowances From 2005, the following allowances are available against taxable income, depending on the number of children the taxpayer has:
Income Taxes at Fixed Rates For residents of Bulgaria, withholding taxes of 15% are levied on dividends, and 20% on taxable interest. Income from dividends, interest, royalties, rents, capital gains etc paid to foreign residents is subject to a 15% withholding tax. Rental Income A flat 20% deduction is available against the rental income received. If the rental income is paid to a non-Bulgarian resident, 15% tax is withheld at source. Tax Returns and Compliance Tax returns should be filed by 15th April following the tax year in question. Taxes are payable within 30 days of filing the Return. Capital Gains Tax Capital gains are usually taxed as income, however the following assets are exempt: • The
taxpayer’s main residence provided it has been his/her main residence
for at least 3 years Wealth Tax There are no wealth taxes in Bulgaria. Real Estate Tax Owners of real estate in Bulgaria are liable to pay an annual tax on the value of the real estate. The rate varies depending on whether the real estate is used for residential or commercial purposes. The rate for residential property is fixed by the local authorities. For commercial buildings, the rate is 0.15%. The tax is payable at the beginning of each year. These taxes are usually up to the equivalent of €150 per year, and are lower in rural areas. VAT VAT is chargeable on the sale of real estate in Bulgaria at a rate of 20%. This is usually included in the purchase price of the property. Restrictions on Foreign Ownership of Real Estate in Bulgaria A foreign investor can invest in property in Bulgaria either directly or through a Bulgarian company. Only individuals resident in Bulgaria can acquire title to land. Foreign residents may be required to obtain permission from the Council of Ministers in Bulgaria to buy real estate in border areas or in high security zones, as defined by the Government. Inheritance and Gifts Tax Residents of Bulgaria are liable to inheritance tax on property situated in both Bulgaria and overseas. Non-residents of Bulgaria are liable to inheritance tax on property situated in Bulgaria. It is the recipient who pays the tax. From 2005, inheritances received by the surviving spouse and direct relatives will be exempt. Brothers, sisters, nieces and nephews who inherit will pay inheritance tax of 0.7% on amounts received above BGN 250,000. All other beneficiaries pay inheritance tax at rates of up to 20%. Gifts tax is payable at fixed rates depending on the relationship between the donor and the donee. Spouses and direct line inheritors are exempt. Gifts between brothers and sisters are taxable at 0.7%, and 5% for all other beneficiaries. Social Security and Healthcare Contributions Employees are liable to pay social security contributions at a rate of 8% and employment fund contributions at a rate of 1%. In addition, healthcare contributions are payable at a rate of 1.5%. Contributions are payable monthly and are calculated on employment income only, up to a limit of around BGN 850 per month. For advice on these matters please contact Jane Hayward at: Blevins Franks Tax Advisory Service Ltd, Barbican House, 26-34 Old Street, London EC1V 9QQ. Email: jane.hayward@blevinsfranks.com Internet: www.blevinsfranks.com ©Blevins Franks January 2005
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