Capital gain tax in Bulgaria: investing in shares and financial instruments in Bulgaria

When talking about investing in shares and financial assets in Bulgaria, there is a lot to discuss as there are many advantages to this type of investment. Especially when it comes to capital gain tax.

Financial transactions must be completed through a company as an intermediary, also known as a broker. In order to invest in the Bulgarian Stock Exchange and benefit from the capital gain tax Bulgaria, it is necessary to open an account with a local broker. 

Additionally, we cannot fail to mention the dire need for a reliable accountant in Bulgaria, to keep track of all required documentation and tax reports either as an individual investing in these financial instruments, or a corporation. No other better than Accountancy Bulgaria, based in Sofia, not only they will be able to comply with all the requirements for tax reports, and audits, but they can also advise you on the best strategies to maximize the chances of making a successful investment.

Defining financial instruments 

According to the definition from the Markets in Financial Instruments Act, financial instruments are securities and other different instruments like options, futures, swaps, etc.

What is capital gain tax?

Capital gain tax is the tax rate applied to the gain produced from buying and selling shares and other financial assets. 

Capital gain tax in Bulgaria is calculated the same way for all financial instruments: the taxable amount is determined by the difference between the sale price and the purchase price. The tax rate is 10%.

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How does capital gain tax work in Bulgaria?

Capital gain tax Bulgaria is 10% rate. However, capital gains from the sale of financial instruments through the Bulgarian Stock market or another regulated market in a different EU member state or a state from the European Economic Area Agreement, are exempt from taxation, making the Bulgarian capital gain tax system very attractive.

Some exemptions need to be taken into consideration for those looking to invest in Bulgaria. 

Tax or no tax on capital gain Bulgaria?

As we mentioned, according to the ITNPA the transactions in financial instruments admitted to trading in a regulated market (in Bulgaria, another member of the EU or the EEA), are nontaxable.

There are however some exceptions worth mentioning for any individual interested in capital gain tax Bulgaria.

• Income from trading shares. In this case, capital gain tax is a rate of 10%.
• Income generated from trading with bonds. The same tax rate is applied.
• Other financial instruments. The tax rate of 10% is applied in these cases too. It should be mentioned that in the case of options, taxation is only carried out when transactions with options are made. 
• Forex. Foreign exchange transactions are also taxed at 10%. Expenditure on foreign exchange trading is not tax deductible.

This is all very similar for corporations investing in shares, bonds, options, or other financial instruments. The earnings from transactions with said financial instruments are considered corporate earnings and therefore taxed at a 10% flat rate.

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Conclusion

Either individuals or corporations investing in trading shares, bonds, options, or other financial instruments are subject to a capital gain tax rate of 10%. The exemption applies to tax-exempt gains and non-recognized losses (like gains and losses that come from financial instruments admitted to trading on a regulated market and offered to the public in the state, in another Member State of the European Union or Contracting State of the European Economic Area Agreement (Art. 44 CITA).

Any profit generated from transactions of financial instruments (also traded in regulated markets in Bulgaria or other recognized EU/EEA markets) is also exempt from withholding tax at the source (Art. 196 CITA).

Make sure to count on the guidance and support of a company like Accountancy Bulgaria to deal with capital gain tax Bulgaria and starting a business in the country.