Tax rules and regulations can be confusing, especially for foreign investors entering a new country. Frequently asked questions we have received over the years include:

1. How much is the profit tax?
2. How much is the dividend tax?
3. Do I owe taxes if I pay a foreigner a sum of money?
4. How much is the excise tax?
5. How much is VAT and when is it due?
6. Is there a gambling tax? - and much more.

In this article we address the main uncertainties about taxation in Bulgaria, including corporate taxes, dividend taxes and income taxes. Our aim is to provide a clear and concise explanation of each aspect to help business owners understand their tax liabilities and make informed decisions.

Income tax

Income tax refers to the corporate tax that companies in this country have to pay on their after-tax profits. The rate of this tax is 10%.

How it is calculated: Profit before tax is calculated by subtracting all business expenses from revenue generated. This result is then multiplied by the tax rate of 10% to determine the profit tax payable. The remaining amount is the profit after tax.

It is important to note that certain types of income may be subject to different types of tax, such as alternative or withholding tax. It is always a good idea to consult an experienced accountant or tax professional to ensure that you are correctly identifying and calculating your tax liability.

Dividend tax

Dividend tax is a tax imposed on the amount distributed as dividends to shareholders. The rate of this tax is 5%.

Dividends are usually paid to shareholders pursuant to a dividend distribution protocol or a protocol for the acceptance of the annual financial statements at the end of the financial year. In order to determine how much dividend can be distributed, the company has to make an accounting closure of its accounts, prepare interim balance sheets and profit and loss accounts.

Dividend taxes do not apply to dividends paid to legal entities (such as other companies or non-profit organizations). In such cases, dividends can be distributed in full without any taxation.

Gift tax

Gift tax is a tax imposed on the amount donated to charities, hospitals, schools, and other qualified recipients. The rate of this tax is 5%.

The gift tax is usually paid by the person receiving the gift. However, in some cases where the receiver is unable to pay the tax (e.g., for minors or certain types of unincorporated entities), the tax may be paid by the donor.

There are exceptions to this tax, such as gifts made between lineal relatives (e.g. parents to children, grandparents to grandchildren), which are exempt from tax. It is always a good idea to consult an accountant or tax professional to ensure that you are correctly identifying and calculating your gift tax liability.

Other taxes

In addition to the taxes mentioned above, business owners should also consider other taxes, such as:

• Real estate tax:

  This tax applies to owners of real estate in Bulgaria and varies depending on the value of the property and location. It consists of two main components: a building tax and a municipal waste tax.

• Personal Income Tax:

  This refers to the personal income of business owners, which may be subject to different tax rates depending on the nature of the income and individual circumstances.

Understanding the tax system in Bulgaria can be challenging for foreign investors. However, it is important to stay informed about the different types of taxes applicable to your business and seek professional assistance when necessary to ensure compliance with tax laws and minimize potential penalties.

SYMAX has years of experience and qualified professionals in accounting, taxation and law to ensure your business is stable and prosperous. Contact us on the phone: +359 886 401 070 or via email stodorov@symax.bg and take the next step towards your business success.