ACCOUNTING AND AUDITING IN BULGARIA

ACCOUNTING

FOR ALL ENTITIES

  • A corporate tax of 10% is imposed on Bulgarian companies, to be paid on all of their global income by March 31st of each financial year. Companies failing to abide face up to 12% monthly interest
  • Companies with a yearly revenue of less than 153,358 EUR do not need to pay corporate tax in advance
  •  EU VAT compliance rules are followed, but Bulgaria is allowed to set their own VAT rate that must remain above 15%. The standard rate is 20%

VAT IN BULGARIA

  • 20% on goods and services
  • 9% on hotel accommodation
  • 0% on intra-community and international transport 

Companies need to register for VAT if their revenue exceeds 25,000 EUR monthly. VAT returns must be filed by the 14th day of each month. 

Along with the necessary forms, the following documentation must be presented to the Bulgarian tax office:

  • Articles of association
  • Country of residence tax registration
  • Taxable revenue in Bulgaria
  • National trade register extract
  • Absence of criminal record

FOR ENTITIES FROM THE EEA

  • Withholding tax does not apply when dividends are paid by an EEA (including Bulgaria) based company to an EEA resident entity
  • Global income of all EEA resident (including Bulgaria) companies is taxed
  • Profits made from selling shares on EEA (including Bulgaria) stock markets are tax-exempt

FOR ENTITIES FROM OUTSIDE THE EEA

  • A 5% withholding tax applies for dividends paid to EEA non-residents, unless a Double Taxation Agreement is applicable
  • Royalties, license fees and interest paid to EEA non-resident entities are subject to 10% withholding tax, unless a Double Taxation Agreement is applicable
  • Only the Bulgarian-sourced income of non-EEA companies is subject to taxation

OTHER NOTES

  • If dividends of a non-EEA entity are distributed to an EEA resident entity by Special Purpose Investment Vehicles (REITS), they are not included in the recipient’s taxable income
  • Withholding tax does not apply for dividends of an EEA resident shareholder of a Bulgarian subsidiary tax IF the shareholder owns 15% or more of the shares of the subsidiary, the subsidiary issues dividends a minimum of two years, and the shareholder pays corporate income tax in their state of residency
  • Bulgaria has a ratified Double Taxation Agreement with more than 60 countries
  • Bulgarian companies must have their financial statements audited by a certified accountant
  • Financial statements have to be submitted to the Trade Registry by March 31st
  • VAT returns have to be filed within 14 days after the taxable period ends

REGULATIONS

COMPANY REGULATIONS

  • A registered address is required at all times of all Bulgarian businesses
  • Financial records and statements must be kept. The Ministry of Finance and the National Audit Office have the authority to audit a company’s corporate tax records 5 years retrospectively and to ask for proof of revenue
  • If the taxable revenue of a company exceeds 50,000 BGN for 12 consecutive months, they are obliged to register for VAT
  • Financial statements have to be submitted to the Trade Register each year. Public limited liability companies need to have their statements audited by a registered auditor
  • Registering fees and requirements of the Bulgarian Stock Exchange are lower than in other EEA countries

PERSONNEL REGULATIONS

  • Employment contracts are to be registered at the National Revenue Agency. Contracts may be written in any language, a Bulgarian copy is recommended
  • The minimum wage in July 2020 is 311.90 EUR per month
  • The Bulgarian Labor Code specifies that the probationary period may last 6 months at most
  • Personnel must be granted an annual paid leave of a minimum of 20 days, plus public holidays
  • When illness or injury occurs, the employer covers 70% of the employee’s wages for the first three days. The rest of the sick leave is covered by the National Social Security Institute. An obligatory six months of work (and social security payments) must be completed before the employee is eligible for sick leave compensation
  • The employer can terminate the employment contract in case of negligent behavior, disciplinary issues or if alcohol or drug use occurs during working time
  • Disputes between the two parties are settled according to the Act of Labour Disputes
  • Except for probationary time, to terminate a contract, a month’s notice must be given to the employee

OTHER REGULATIONS

  • Business disputes are mostly settled through district courts, more difficult cases reach provincial courts or even administrative courts
  • Bribing is punished with a year of incarceration or a fine of up to 5,000 EUR
  • In order to obtain commercial or residential property in Bulgaria, non-EEA entities need to register a company in Bulgaria. EEA entities can obtain the property without additional conditions
  • Foreign businesses can obtain patents, trademarks or other intellectual property protection in the same manner as Bulgarian nationals

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 instalments for the previous month 

YEARLY DEADLINES 

  • 31 January – declaration taxation of the annual License 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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