Tax Optimization Is an Art

Bulgarian Tax System

Bulgaria has a standard tax system to the ones effective in the other members of the European Union. The main sources of tax in Bulgaria are the Corporate Tax, the Withholding Tax, the Alternative Taxes, the Personal Income Tax and the Value Added Tax.

Basic concept by which the Bulgarian tax system is guided in designing and implementing the taxation regime include adequacy (the tax rates are measured to generate only as much revenue as it is needed to for provision of essential public services), simplicity (easy to understand taxation process), effectiveness (minimized administrative burden of the tax collection), neutrality (tax regimes do not favor any group or sector over another), convenience of payment (to be paid at times convenient to the taxpayer), equity (the Bulgarian tax system equally burdens all individuals or entities in similar economic circumstances) and restricted (for specific purposes and for limited period).

As part of the economic policy, tax policy in its essential elements is aimed at supporting economic growth and budgetary stability through reducing the tax and social security, stimulating investments and simplifying the tax system and its effective administration.

Foreign legal entities are subject to Bulgarian corporate tax only if they perform business activity in Bulgaria through a permanent establishment. Foreign legal entities are also subject to withholding tax on certain income from sources in Bulgaria, as far as such income is not attributed to a permanent establishment.

The personal income tax is regulated by the Personal Income Tax Act that covers taxation of all wages, salaries, benefits, etc. resulting from employment. It also covers distributions of dividends and liquidation shares. The basic principle of PITA is that personal income is taxed only when actually received.

Bulgaria is an active member of the European Union since 2007 and as such applies the regulations set out by the European Union. Cooperation between the tax authorities of Member States remains a key element of European fiscal policy. Direct taxation is regulated almost entirely through bilateral agreements, while the EU Treaty contains some provisions and harmonization in indirect taxation.

Supervision and control over the import, export and transit of goods to, from and through Bulgaria, the collection of duties, implementation of administrative regulations and criminal investigations in cases terms and conditions provided in the Criminal Procedure Code are responsibilities of the Customs Agency, which is a centralized administrative structure under the supervision of the Minister of Finance.

Statements and tax returns, declarations of taxation at the corporate level and statements of income taxation of individuals must be submitted in the offices of the National Revenue Agency.

Please contact us to receive your free copy of Corporate Income Tax chapter from The Complete Tax Guide by