Accounting, Payroll, Tax & Legal since 1989

Accounting in Bulgaria

Considerations for all legal entities

● Companies in Bulgaria are subject to a corporate tax rate of 10% on their worldwide income. Tax returns must be filed and fully paid by 31 March. Failure to do so may incur up to 12% monthly interest on the outstanding amount
● Small and Medium Enterprises (SMEs) having an annual turnover of less than 153,358 EUR, are not required to pay for their corporate tax obligations in advance.
● Bulgaria follows the EU rules on VAT compliance, however, it is free to set its own standard VAT rate which must be above 15%.

Bulgaria VAT rates

● 20% goods or services
● 9% hotel accommodation
● 0% intra-community and international transport

All businesses with sales over 25,000 EUR must register for a VAT number and file its corporate VAT returns by the 14th of every month.

The Bulgarian tax office will require the appropriate forms to be completed and submitted with the following documentation:
● Tax and VAT registration from the country of residence
● Details of the taxable turnover in Bulgaria
● Articles of Association
● An extract from the company’s national trade register
● Declaration of absence of criminal record
● Tax losses can be carried forward for 5 years. There are no provisions regarding tax loss carry-back
● The total social security insurance contribution ranges from 32.7% to 33.4%. The base for the contribution is total income capped at 3 000 BGN per month.

Considerations for entities within the EU/EEA

● Dividends received by a Bulgarian company from another Bulgarian company are not taxed. When the dividends are not exempt, they are considered part of the global taxable profits which include the worldwide income for resident companies and the Bulgarian-sourced income for non-resident companies
● Legal entities resident within the EU/EEA region are taxed on their global business income

Considerations for EU/EEA non-resident entities

● In Bulgaria dividends are subject to a withholding tax of 5% rate when distributed to individuals or non-profit entities, as well as to non-residents as long as they are not members of EU or EEA. As long as Special Purpose Investment Vehicles (REITS) distribute the dividends or Non-EU/EEA foreign entities, then the dividends distributed to resident companies are not included in their taxable income. Capital gains from the disposal of shares in subsidiaries are subject to the flat corporate income tax worth 10% on the level of the Bulgarian holding company
● Non-resident legal entities in the EU/EEA doing business in Bulgaria are only taxed on their Bulgarian-sourced income

Dividend scheme in Bulgaria

● The Dividend Scheme for the Companies in Bulgaria is governed by the Corporate Income Tax Act
● Bulgarian companies are liable to pay 5% withholding taxes on its distributed dividends to all non-resident legal entities
● Bulgarian companies are fully exempt from withholding taxes if it distributes its dividends to EU or EEA-resident legal entities
● The shareholders of a Bulgarian company are not liable to withholding taxes if they are payers of corporate income tax in their resident state and do not benefit from any other tax exemptions. This stands true for non-resident shareholders who hold at least 15% of the shares in a Bulgarian company that distributes the dividends for at least two years
● As long as Special Purpose Investment Vehicles (REITS) distribute the dividends or Non-EU / EEA foreign entities, then the dividends distributed to resident companies are not included in their taxable income
● However, the dividend scheme poses various challenges to a non-Bulgarian resident shareholder since the person is liable to triple taxation from i) corporate income tax; ii) withholding tax; and iii) personal income tax

Other considerations

● Bulgaria signed double taxation treaties with more than 60 countries worldwide in order to avoid double taxation. This measure offers tax relief for companies operating in multiple countries. Along with the double tax treaties, Bulgaria also signed a number of exchange of information protocols in order to have a clear image of the legal entities requesting double taxation relief
● All Bulgarian companies are required to i) have their annual financial statements audited by a certified accountant; ii) file them with the Trade Registry by 31 March; and iii) complete filing their monthly VAT returns electronically within 14 days from the end of the taxable period

Legal and compliance

Company regulation

● All Bulgarian companies must have a registered address at all times
The Bulgarian Trade Register allows viewing of company details, including: i) company’s name and legal form ii) names and addresses of all shareholders and directors iii) the amount of paid up share capital and iv) annual financial statements
● All Bulgarian registered companies are required to keep records of their accounts and financial statements, as the Ministry of Finance and the Bulgarian National Audit Office has the right i) to conduct a corporate tax audit for up to 5 years back and ii) to request the company to provide additional proof of revenue
● VAT registration is mandatory for companies with taxable turnover of more than 50 000 BGN in VAT taxable supplies with a place of supply in Bulgaria in the past 12 months
● Annually, all companies must file their financial statements with the Trade Register. Public limited liability companies must present the same audited by a qualified and registered auditor
● The listing requirements and fees to register on the Bulgarian Stock Exchange are relatively lower than the rest of the EU

Staff regulations

● An employment contract must be signed and sent to the National Revenue Agency. A Bulgarian contract can be drafted in any language as long as it contains the mandatory implied terms. However, it is advisable to have a copy translated to Bulgarian
● The maximum probation period set by Bulgarian Labor Codex is 6 months. Bulgarian staff are entitled to receive at least 20 days of annual paid leave, plus 14 days of public holidays
● The minimum wage is fixed at €261 per month ebing the lowest in the EU as of August 2018
● In case of illness or injury, employees are entitled to 70% of their average daily gross wage for the first three days of absence. The remaining time is covered by the National Social Security Institute. An employee must have at least six months’ work experience to be eligible for the social insurance
● Employers have the authority to suspend their employees’ employment contract in case of public intoxication or drug use during business hours, negligent behavior at the workplace or any other disciplinary case listed in the Bulgarian Labour Code
● Conflicts between employees and employers are settled in accordance with the Act of Labour Disputes. This said, employers must implement the so called “social dialogue”, monitored by the General Labour Inspectorate.
● One month notice is required for dismissal of employees, except during probation periods

Other business regulations

● Bulgaria became a member of the European Union in 2007
● The country is one of the founding members of the Organization for Security and Co-operation which means that the country laws must adhere to the human rights guidelines set by the multi-country organization
● Bulgaria is a member of the World Intellectual Property Organization, which allows foreign businesses to apply for a patent or a trademark and give them similar intellectual property protection conferred to Bulgaria nationals
● Bulgaria has acceded to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Therefore, arbitration awards are enforceable in Bulgaria
● The most common way to settle a business dispute in Bulgaria with the help of district courts. There is a three-step court system with district courts at the lowest level, followed by provincial courts, which are then followed by administrative courts
● Bribing is punishable by the Bulgarian law with either one year of imprisonment or a fine up to 5 000 EUR
● Non-EEA nationals must register a Bulgarian company if they wish to purchase commercial or residential property in the country. However, EEA nationals may purchase the property directly without initially incorporating a local company

Important accounting dates in Bulgaria

● Monthly Deadlines

❖ 5th of every month is the deadline to submit all the accounting documents for the previous month
❖ 14th of every month is the deadline for the VAT declaration and paying the tax for the previous month
❖ 25th of every month is for declaring and paying insurance installments for the previous month

● Yearly Deadlines

❖ 31 January – declaration taxation of the annual Licence Tax for the current year
❖ 31 March – annual Corporate Tax Income Act and paying the owed tax
❖ 30 April – annual Personal Income Tax Act and paying the owed tax
❖ 31 July – submitting the annual financial statement

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