01/04/2019
How To Understand The Bulgarian Tax System?
You know there is nothing lasts forever but taxes?
Easy! The Bulgarian tax system is quite comprehensible if you keep in mind few things. As in most European countries, taxes apply to locals as well as foreigners.
The fiscal year is equal to a calendar year. It’s useful so you may plan how to manage your money distribution and spend them in the best way.
According to the Bulgarian legislation to be considered for a tax resident you must reside in Bulgaria 183 days annually. You will be taxable in Bulgaria if you be able to prove vital interests is in Bulgaria. As usual in the tax office you will consider the location of your employment or freelancing, own business, residence permits, availability of property, family and others.
There are different types of taxes in Bulgaria.
Both state and local authority are collecting taxes. The most important taxes are collected on the state level. The list includes corporate taxes, VAT and of course social security and income tax.
On the local level, there are various fees, most of them related to properties, a.k.a. property taxes.
Tax limitation in Bulgaria is 5 years.
All income earned in Bulgaria is taxed on a flat rate of 10% – both corporate profit and personal incomes
VAT applies at a flat rate of 20% on virtually all goods and services – food, books, machinery, etc. No exception, unless 9% on tourism-related activities.
Social security is paid from every employee. At this moment the employee pays 12.9% and the employer contributes what corresponds to 17.9%.
Bulgarian state taxes are administered by the National Revenue Agency (NAP).
No matter if you own business or if you a citizen, each year you have to submit an annual tax return. Deadline for business is 31 of March and for personal – 30 of April.
The last day of March is the deadline to declare your profit (Do you remember about 10% rate of capital gains tax?) in the annual financial report before Commercial Register, a part of Register Agency. It is also relevant to foreign companies that are permanently established in Bulgaria, no matter where they have been incorporated.
Good news is that the Commercial register’s site has a quite good English version, but the information is presented very complicated, and in the application forms there is filled in only in the Bulgarian language. After the first visit on the website, you may think you need an excellent interpreter from bureaucracy.
So, as you already know how the essential state taxation works, it’s time to wade into the local tax. It’s similar to a small universe.
Why’s that?
The rate of local taxes and fees – properly, vehicle, inheritance, and others, are determined by the municipal council in your location. The most important are property tax and the waste fee which rates depends on the tax value. In fact, the rates are % and ‰ of it.
You can see the rates on the municipalities website where you live or intend to live.
In Bulgaria, there is no tax for agricultural land and forests.
Of course, there is a motor vehicle tax which rate is calculated depending on years of car, ecological status, and power. You can check your vehicle tax here.
You didn’t forget we talk about a small universe, don’t we?
You even may touch it, if you buy some property or build it. Various municipalities fees for plans, designs, drawings, building sketches, utility, etc. There so many different types of charges to change the name of the owner or to get building permission and time to finish the procedure. So, be patient.
The payment in the very last moment in Bulgaria is a cult. Be prepared for this.
It’s one of Bulgarians characteristic unless the oldest. Some others usually pay on the first day. The reason is the discount.
Some taxpayers in Bulgaria are eligible to tax discounts according to their income. Hence, they will pay less tax. It’s relevant in two cases.
For property tax and waste fee if you pay until 31 of January. Usually, this payment is in 4 equal annuities. You may declare and pay your income taxes also until the same date.
In both cases, the discount is 5% of taxes.
And, as a permanent resident in Bulgaria, you can take discounts too.
You can pay off all types of taxes in Bulgaria online through debit/credit cards or by bank transfer to the National Revenue Agency’s bank account number.
Otherwise, you can operate online on the National Revenue Agency’s website using your electronic signature – there few Bulgarian platform and apps specialized in e-identity or using Bulgarian ePay. The last one is an excellent idea in case you must pay local taxes, but not only these, epay’s website has a useful and straightforward explanation.
Also, you pay cash on the regional tax office without fees for the bank transfer to Revenue Agency
For most municipalities, the payment of the local taxes is made only by entering your Personal Identification Number if you are a foreigner (in Bulgarian – EGN) and to show the notice you received from the municipality in which the property is located.
The income tax is regulated by the Bulgarian personal income tax law. As we told the income tax rate is 10% and you have to submit an annual tax return.
If you work as an employee with only a labor contract, you are not required to submit a tax return. You must do it if you are freelancer or work both like employee and freelancer. In Bulgaria there are deductible activity costs as a personal expense rate for freelancing, depending on the type of freelancing activity performed. You can see the rates in your tax return.
Deadline for submitting a tax return and income tax payment is 30 of April.
2019 is the last year which taxable residents in Bulgaria must submit their tax return by their self. From 2020 the National Revenue Agency will do this for citizens and they will make the corrections using their tax personal identification code (PIC).
Whatever, the tax return must be completed in Cyrillic alphabet.
Note that some documents like a receipt for incomers may be requested on filing the tax return. As a receiver of money, you must ask for a payment document for every Bulgarian Lev.
And pay attention to keep these documents for at least 5 years.
Often tax officials do tax audit of someone’s incomes. Especially if you have paid more taxes and ask for them back.
The Bulgarian personal income tax act provides some tax reliefs. There are for people with reduced working capacity, for voluntary work, for donations, for young families, children with or without disabilities, www.bgcontabil.com
And don’t forget for double taxation treaties
Bulgaria has signed double taxation treaties with more than 60 countries in order to avoid double taxation for foreigners. The list of them you can see at the National Revenue Agency website.
