Does Bulgaria tax foreign income?

Taxes on foreign income in Bulgaria are dependent on the resident status of the individual. This is also valid for corporate profit made abroad.. 

But, what does it mean?

Basically, Bulgarian individuals and Bulgarian-based companies, pay taxes on their income made not only within the limits of Bulgaria but also abroad. On the other hand, non-residents and companies that have a branch or office in Bulgaria, are only taxed on the income made in the territory of Bulgaria. This includes, for example, profits from renting property, offering services in Bulgaria, or performing buy and sell operations within the territory limits of  the country.

Taxable activities include all business operations, financing, leasing, and investing. 

In both cases, the tax is a flat rate of 10% on all income after deductions are made. 

Let’s discuss the Bulgarian tax system in more detail. 

How does the Bulgarian tax system work?

The National Revenue Agency oversees collecting taxes at the state level. The tax system in Bulgaria is formed of direct and indirect taxes. 

In the category of direct taxes, we find personal income tax, corporate tax, and withholding taxes. 

Among the indirect taxes, we find Value Added Tax (VAT) and excise taxes. 

The tax rate is 10% for Bulgarians regardless of their income level, where they live, or what activity they perform. The same is true for Bulgarian-based companies. We will discuss further the tax scheme for non-resident individuals and companies that have a branch or office in Bulgaria.

Direct taxes are paid yearly around the month of April, according to the natural year. Bulgaria has made a point of keeping the system simple and loophole-free, with a flat rate of 10% of taxes on corporate or personal income, after deductions are made. 

Withholding taxes are also 10% in most cases. This is paid to the state monthly and deducted directly from the employee’s salary. 

• Read also: Bulgaria Tax Identification Number: Complete Guide

Resident or foreign company in Bulgaria

How is a resident in Bulgaria defined?

• Someone with a permanent address in Bulgaria
• Someone who resides in Bulgaria for a period larger than 183 days in a year.

As we have already mentioned, Bulgarian-based businesses that perform activities within Bulgaria but also abroad, are taxed on their total income, regardless of where it was generated. 

However, a branch company is only subject to paying tax on the income made exclusively from operations in the territory of Bulgaria.

Counting with a reputable accountant in Bulgaria is a must for a company to deal with their tax returns and reports. And Accountancy Bulgaria can offer those services, and a lot more. Not only do they have the necessary experience to let you focus on your business while they take care of your accounting and financial growth, but they also have multilingual experts and a variety of services that will prove invaluable for your corporate venture in Bulgaria. 

Double taxations agreements

This measure was designed by Bulgaria to ensure they remain an attractive option for corporations looking to relocate, offering better circumstances to companies that operate internationally.

Bulgaria has agreements with over 65 countries in order to avoid double taxation. This means a relief for companies operating in different countries. 

These are the countries that have double taxation agreements with Bulgaria:

Albania, Algeria, Armenia, Austria, Azerbaijan, Bahrain, Belarus, Belgium, Canada, China, Croatia, Cyprus, Czech Republic, Denmark, Egypt, Estonia, Finland, France, Georgia, Germany, Greece, Hungary, India, Indonesia, Iran, Ireland, Israel, Italy, Japan, Jordan, Kazakhstan, Democratic People’s Republic of Korea, the Republic of Korea, Kuwait, Latvia, Lebanon, Lithuania, Luxembourg, Macedonia, Malta, Morocco, Qatar, Moldova, Mongolia, Netherlands, Norway, Poland, Portugal, Romania, Russian Federation, Spain, Singapore, Slovakia, Slovenia, South Africa, Sweden, Switzerland, Syria, Thailand, Turkey, Ukraine, the United Arab Emirates, the United Kingdom, the United States of America, Uzbekistan, Vietnam, Yugoslavia, Zimbabwe.

Benefits to open a company in Bulgaria

Many businesses have moved to Bulgaria in recent years. And this is no surprise.

Bulgaria has set up tax regulations and government proposals to attract foreign corporations to come to settle in the country and take advantage, not only of the beneficial tax laws, but also of the other aspects that make Bulgaria an excellent destination for a company looking to grow, develop, and maximize their profits. 

Part of this is to have a simple, quick, and efficient way to register a Ltd company in Bulgaria. In fact, the costs of registering a company in Bulgaria are affordable.

The requirements to open a company in Bulgaria are easily met (in some cases there is not even a minimum capital needed) and there are lawyers, notaries, and accountants who can help with the process, which only takes a few working days.

Read also: Bulgaria Salary Calculator: what you need to know

Does Bulgaria tax foreign income? Conclusion

So, the answer is both yes and no.

For Bulgarian residents and Bulgarian-based companies, yes, profit made abroad is taxed.

For non-residents or companies with a branch or office in Bulgaria, the answer is no, only income made within the territory of Bulgaria is taxed.