Only income of resident and non-resident legal entities is subject to withholding tax. Income of natural persons is regulated by the Income Taxes on Natural Persons Act.
Certain items of business and investment income of non-resident legal entities earned from sources in Bulgaria are subject to flat final income tax, which is normally levied by means of withholding.
The following income of non-resident legal entities is subject to withholding tax:
Withholding tax rates
Where the recipient of the payments resides in a country with which Bulgaria has a Double Tax Treaty, the tax rate could be reduced or an exemption could be available subject to the provisions of the respective treaty.
Withholding Liability and Payments
The tax shall be withheld by the resident payer from the income paid to non-resident legal persons, with the exception of income from transactions involving financial assets and the income from transactions involving immovable property situated in the country. The tax shall be remitted to the budget by the end of the month following the quarter of income accrual or of the decision for dividend distribution.
The tax shall be calculated and remitted by the recipient of the income where: (a) the payer of the income is not a taxable person under CITA ; (b) the income results from a transaction involving financial assets; or (c) income results from a transaction involving immovable property situated in the country.
Entities resident in the EU may declare tax deductible expenses and claim a corresponding refund of the withholding tax paid on a gross basis. The claim is annual and should be filed by the 31 st of December of the following year.
Tax treaty application
If available, double tax treaty relief may be applied by the income recipient directly if the income accrued for the calendar year does not exceed BGN 500 000.
In all other cases a non-resident can benefit from tax treaty relief only if an advance clearance is obtained from the Bulgarian revenue authorities under a specified procedure.