Tax in Bulgaria: Complete Guide on BG Tax Rates [2023]

Recent years have seen Bulgaria in the light spot thanks to a myriad of reasons, among which are its stable financial system, government policies dedicated to attracting businesses, increasingly appealing tax rates, and a well-educated workforce with somewhat lower labour costs.

Additionally, Bulgaria is also a member of the European Union, making it easier for nationals of other countries in the EU to set up businesses. And when it comes to taxes, Bulgaria has earned the reputation of a tax haven, thanks to a simple system that charges a 10% flat rate on all corporate income. Not to forget, Bulgaria has also signed double taxation agreements with 67 countries, making it not only easy to register a company in this country, but also showing the potential to improve profitability for an enterprise. 

Speaking of it, one of the most interesting parts of tax in Bulgaria regards its rates . Let’s discover more about it and all the advantages about taxation for companies in 2023 with this complete guide made by Accountancy Bulgaria, one of the most reliable tax advisor company in Bulgaria.

Corporate tax in Bulgaria: the famous 10% flat rate

Bulgaria has been in financial conversations, especially as an option for companies to simplify their taxes through a system that has been designed with an emphasis on its simplicity, lack of complicated tax rules, and loopholes. And of course, the tax rate that Bulgaria charges on all corporations is pure income: just 10%.

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

Tax filing and payments

Like in many countries, Bulgaria requires companies to file taxes once a year, showing all their income and deducting all professional expenses.

If the taxes are presented properly and in a timely manner, there are few controls afterward. This is usually done in the Bulgarian language, and better administered and presented by a specialised accounting agency. 

None better, when talking about foreign businesses established in Bulgaria, than Accountancy Bulgaria. This accountancy company in Bulgaria has years of experience dealing with the accountancy needs of foreign companies within Bulgaria.

Worth to notice that in Bulgaria there is no need for tax prepayments (except if profits are over EUR 150,000), meaning that companies pay exactly the taxes they are due by the end of the month of June.

Other taxes in Bulgaria: Direct and Indirect taxes

Different taxes in Bulgaria can be either considered direct or indirect taxes.

Direct taxes in Bulgaria:

–        Corporate taxes on annual profit

–        Income taxes on income (for individuals)

–        Withholding tax

Indirect taxes:

–        VAT or value-added tax

–        Excise duties

We will discuss some of these taxes in Bulgaria.

Corporate taxes in Bulgaria

Corporate tax in Bulgaria is 10%. This is a flat rate that all Bulgarian companies must pay yearly, regardless of the fact that they are resident companies or foreign. 

The difference in these two cases is that Bulgarian, local resident companies, must pay taxes on their income generated in and out of the country. Foreign companies registered in Bulgaria, only pay taxes on their profit produced within the country.

Income tax

This tax only applies to Bulgarian residents. The tax rate is also 10%, regardless of their income level and if they are working in Bulgaria or in a foreign country.

Self-employment is also charged a flat rate of 10% in taxes.

Withholding tax

These are taxes that a company withholds from the employees’ salaries, and it is paid to the state. This tax is also a flat 10% rate.

VAT or value added tax

VAT works pretty much like in other European countries. This tax applies to all products or services sold or offered in Bulgaria or other EU countries. 

The standard VAT fee is 20%. With some exceptions (some temporary, others permanent), for example, hotel accommodation benefits from a 9% VAT. Some activities are even exempt from VAT, for example, the transportation of goods from another EU country.

VAT is an indirect tax because it’s the customer buying the product or paying for a service the one covering the cost, but it’s the provider company the one paying it to the VAT agency.

Value-added taxes are filed every month and it may result in a positive or negative balance. This may result in a payment or a refund. 

Read also: Bulgaria VAT: Rates, system and how it works in the Country

Double taxation agreements

Companies operating in multiple countries will find Bulgaria’s double taxation agreements a huge advantage and one of the appealing points to registering a company in this country.

Bulgaria has signed agreements with over 65 countries in order to avoid double taxation.

This not only provides some relief to companies in terms of taxes, but it also shows the commitment of the administration to maintain the favourable business environment and the fiscal benefits companies have in Bulgaria.