In general individuals are considered Bulgarian tax residents if:
Resident natural persons are liable to taxes on any income acquired from sources inside and outside the Republic of Bulgaria. Non-resident natural persons are liable to taxes on any income acquired from sources inside the Republic of Bulgaria.
Any person, who has a permanent address in Bulgaria but whose centre of vital interests is not situated in the country, shall not be a resident natural person.
The annual taxable income is defined as an aggregate of the total income received by the individual during the calendar year with the exception of income which is non-taxable by virtue of a law and any income specifically excluded from annual income which is taxed separately under specific rules.
Tax deductions apply in some cases, including:
Personal Income Tax Rate
A flat rate of 10% is applied on all taxable income
Certain types of income are exempt from taxation, including capital gains from disposal of shares on a regulated Bulgarian/EU/EEA market, income from disposal of certain real estate, etc.
Tax Returns and Payment of Taxes
Natural persons who are subject to Bulgarian taxation are obligated to file an annual tax return. The obligation to submit an annual tax return does not apply to persons who have received only: (a) employment income for which the full tax due has been withheld; (b) non-taxable income or (c) income subject to a final tax (as set out below). The tax return must be filed before the 30 th day of April of the year following the year in which the income has been received.
All taxes due should be paid by the same date. Certain items of income are also subject to advanced tax payments through the year on monthly or quarterly basis.
Wage Withholding Taxes
Salaries and other payments due for employment are included in the calculation of annual taxable income and are subject to personal income tax. The employer is required to withhold income tax from the wages of the employees on a monthly basis. The law provides specific rules for determining the taxable amount for tax on income from labor relationships. The wage withholding tax is charged at the flat tax rate of 10 %.
Certain items of income are not included in the calculation of annual taxable income but are taxed separately with a ‘Final Tax’.
Final Tax is due on certain income received by non-resident individuals from:
Final Tax is also due on dividends and liquidation quotas distributed to a Bulgarian resident by a non-resident entity.
EU resident individuals may declare deductible expenses and claim a corresponding refund of the final tax paid on a gross basis under certain conditions.
Final tax rates
The final tax rates may be reduced under an applicable tax treaty. If no such treaty exists with the respective country pursuant to the Income Taxes on Natural Persons Act resident natural persons are allowed foreign tax credit against identical or similar foreign taxes levied abroad by the respective competent authorities.
Businesses of Individuals/Sole Traders
A specific provision with respect to sole traders provides that the tax basis of a registered sole trader is the taxable profit calculated in accordance with the tax rules applicable to corporations. This provision applies to the income from economic activity of a natural person who is a merchant within the meaning given by the Commerce Act but is not registered as a sole trader. The taxable income referred to herein excludes the accounting financial result formed by activities:
The annual taxable amount of a sole trader shall be determined by debiting the contributions for social and health insurance from the taxable income referred to herein for the tax year.
Mandatory Insurance Contributions
The base for mandatory insurance contributions is gross remuneration less statutory deductions in some cases. The insurance base income is capped at BGN 2400 (approximately EUR 1225) monthly. The rates are between 30.7% - 31.4% paid by both the employer and the employee in a certain ratio. This includes:
Foreigners may be exempt from social security contributions in Bulgaria or the contributions they make may be recognized in their home country under an applicable bilateral or multilateral social security agreement.