Is Bulgaria Tax Free? All about Tax Refund and Saving Money

Bulgaria has a very friendly tax system. Making a priority of simplicity and transparency, this country’s tax scheme is considered one of the best in the world and with no doubt appealing to businesses and individuals alike.

Of course, this doesn’t mean that Bulgaria is tax free.

The tax rate for Bulgarians is 10% flat, regardless of their income and the location of the resident’s work. This means Bulgarian residents pay 10% tax on their income whether it’s in the country or abroad. 

Foreign companies only pay a 10% corporate tax on the profit made within the borders of the country. As you can imagine, with an attractive tax system as such, with no loopholes and complicated tax regulations, Bulgaria has become a tax haven and a favorite for European corporations. 

It’s worth noticing that Bulgaria has agreements about double taxation with over 65 countries. Making it even more interesting for a foreign company to set up a branch or franchise in Bulgaria.

But, in what cases is Bulgaria tax free? 

When talking about VAT, or added value tax, in some cases Bulgaria can be considered tax free. 

Let’s find out more in this guide by Accountancy Bulgaria, the company owned by the company advisor In Bulgaria Herman Van Der Mosen.

What is VAT?

VAT, short for Value Added TAX, is a consumer tax proportional to the value of the good or service in question. It’s one of the main features of the single market in Europe, and it guarantees fair trade within the European Union.

The standard VAT in Bulgaria is 20%. This applies to purchased goods and services. However, there are certain commercial activities that benefit from a lower tax or are even exempted from taxes completely. This is the case for tourist accommodation, which has a VAT of 9%, for example.

Read also: Company Registration in Bulgaria in only 5 simple Steps

Tax Free Shopping in Bulgaria

In Bulgaria, every foreign citizen (meaning non-EU citizenship) can purchase goods for 800 BGN or more eligible for VAT (value added tax) reclaim at the moment of leaving the country. The minimum eligible sum for VAT returns has been recently updated. 

There are certain conditions to make sure your VAT is returned when leaving the country. 

First of all, to claim a return of the value-added tax an original invoice is necessary to add to a form to be filled at the exit point of the country. The goods purchased must be for personal use and cannot be used or altered before departure. 

Additionally, the claim is only valid if the purchased goods are being exported within 3 months of the invoice date.

International airports in Bulgaria count with tax refund offices, and there are a few more at other border points. 

How to save money in Bulgaria?

Bulgaria has one of the lowest tax schemes in Europe. This, plus an enticing business environment and government support, makes it one of the most appealing countries for companies to settle. Additionally, Bulgaria is one of the EU countries with the lowest labor costs, making it a perfect place for companies looking for cost-effective options.

We have already mentioned the 10% flat rate of corporate taxes as a simple, straightforward system that makes it easy for companies, even – or especially – foreign businesses, to settle in Bulgaria and operate in a cost-effective way.

Wages and social contributions are among the lowest in Europe, and while this poses some challenges locally regarding the quality of life, or when it comes to retaining highly qualified employees, it can be used as a way of saving money for companies that find other European countries a lot more expensive. 

Another advantage for companies settling down in Bulgaria is that business costs are lower than in the rest of Europe. No doubt this has a huge impact on how competitive companies can remain in their industry, boosting higher profitability for the corporation.

Read also: Tax in Bulgaria: Complete Guide on BG Tax Rates

Conclusion

Even if Bulgaria is not completely tax free, still there are many advantages for enterprises establishing in the country. The most important ones are: 

• a flat corporation tax of 10%, which is lower than in the rest of Europe, 
• low wages and business costs, 
• double tax treaties with almost 70 countries, 
• bilingual and qualified workforce. 

Bulgaria is the perfect setting for companies to save money in their operations, a serious option to remain competitive in the global market and assure higher profitability. If you are looking for move your company to Bulgaria and need any support, Accountancy Bulgaria is here to help.