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TAXABLE PERSONS
Taxable persons are resident and non-resident individuals earning income from sources in Bulgaria, and resident and non-resident persons required to withhold and remit taxes.
A “resident individual”, regardless of nationality, is a person:
• anyone with a permanent address in Bulgaria, or
• who is present in Bulgaria for more than 183 days in any twelve-month period, or
• a person posted abroad by the Bulgarian State, by bodies and/or their organisations or by Bulgarian enterprises, and members of that person’s family; or
• Whose centre of vital interests is in Bulgaria.
A person with a permanent address in Bulgaria whose centre of vital interests is not in the country is not a resident individual. Where a double taxation convention applies, residence status may be affected by the treaty's provisions.
Resident individuals are liable to tax on income from sources both within and outside the Republic of Bulgaria, while non-resident individuals are liable to tax on income from sources within the Republic of Bulgaria.
Bulgarian legislation contains detailed rules on when an activity or investment is sufficiently connected with Bulgaria to give rise to Bulgarian taxation.
Taxable income
Annual taxable income is defined as the aggregate of all income received by a person during the calendar year, except income that is exempt by law and income expressly excluded from annual income and taxed separately under specific rules.
Taxable income and the taxable amount are determined separately for each source of income under the specific procedures laid down by law. The aggregate annual tax base is the total of the annual taxable amounts determined for each income category according to its source, less statutory tax reliefs.
The total annual taxable amounts are charged at:
• Personal voluntary social insurance contributions paid during the year up to a total of 10 per cent of the aggregate annual taxable amounts, together with any personal voluntary health insurance contributions and life insurance premiums or payments made during the year up to a total of 10 per cent of the aggregate annual taxable amounts;
• Donations made during the year within specified limits and subject to certain conditions, etc.
Taxes
A significant amendment to the taxation of the income of
individuals is that the progressive rate, which depended on annual taxable income and ranged from 20% to 24%, is replaced by a fixed rate of 10%, regardless of the amount of taxable income.Thus, in general, the tax on the total annual taxable base is determined by multiplying the total annual taxable base by a tax rate of 10%.
Certain items of residents' or non-residents' income are not included in annual taxable income and are subject to special taxation rules concerning rates and the tax base. Some applicable rates have been reduced since 1 January 2008. Dividends are therefore taxed at 5% instead of 7%; income from supplementary voluntary social insurance, voluntary health insurance and life insurance at 7%; and income received by individuals from the sale or exchange of movable property under certain conditions is taxed at 10% instead of 15%.
4.4. Exemptions
Taxability does not apply to:
• income received during the tax year from the sale or exchange of:
(A) a
residential property, if acquired more than three years before the sale;
(B)
Up to two properties, and any number of agricultural and forest properties, provided that more than five years have elapsed between acquisition and sale or exchange;
• income from the sale or exchange of movable property, except for:
(A) means of transport by road, air and water, provided that the period from acquisition to sale or exchange is less than one year;
(B) works of art, antiques or collectors’ items;
(c) Shares, interests, compensation instruments, investment vouchers and other financial assets, as well as income from foreign exchange trading;
(D) movable property delivered to persons authorised to collect, transport, recover or dispose of waste in accordance with the Waste Management Act;
• interest payable on current accounts and deposits with any domestic commercial bank, branch of a foreign bank and national mutual assistance funds established in an EU Member State;
• interest and discounts on Bulgarian government, municipal and corporate bonds, etc.
Salary withholding tax
Salaries and other amounts due in connection with employment are included in annual taxable income and are subject to personal income tax. The employer must withhold provisional tax from employees' salaries each month. The law provides specific rules for determining the tax base for income from employment relationships. Payroll withholding is subject to the 10% flat tax.
Where an employee has received only employment income during the relevant year, they are not required to file a tax return. If payroll withholding exceeds the annual tax liability, for example because the employee worked for only part of the year, the refund is calculated and made through the employer.
4.6. Final taxes
Taxation of income of non-resident persons.
Certain items of income are excluded from annual taxable income but taxed separately by a final tax. This treatment applies to the following income items:
(A) compensation for lost profits and damages of that nature;
(b) scholarships in Bulgaria and abroad;
(C) interest payments, including interest within payments under a lease agreement, etc.
The provisions determining income that is not subject to tax do not apply to the items discussed here. However, no final tax is levied on such items where they are exempt under those provisions and accrued or paid to non-resident individuals established for tax purposes in a Member State of the European Union or another Member State of the European Economic Area.
The tax rate is 10%.
• Income of resident and non-resident individuals.
Unlike the tax legislation in force before 1 January 2007, income from dividends and shares in liquidation surpluses received by resident and non-resident individuals is not subject to the withholding tax that the legal entity distributing the dividend or liquidation surplus share was required to deduct. Under the current Personal Income Tax Act, income from dividends and shares in liquidation surpluses accruing to resident or non-resident individuals from a source within Bulgaria, and to resident individuals from a source outside Bulgaria, is subject to a final tax.
The tax rate is 5%.
• Under certain conditions, a final tax is charged on the gross amount of taxable income from supplementary voluntary social insurance, voluntary health insurance and life insurance. The tax rate is 7%.
• A final tax will be levied on the gross amount of income received by the individual on the sale or exchange of movable property.
The tax rate is 10%.
Income tax returns and tax payment declarations
An individual must submit an annual income tax return. The obligation to file an annual return does not apply to persons who received exclusively:
• employment income,
• Non-taxable income;
• income subject to a final tax;
• income received by non-residents on which final tax has been charged.
The return should be submitted before 30 April of the year following the year in which the income was received.
The tax must be paid no later than 30 April of the year following the year in which the income was received. Certain income items are also subject to advance tax payable during the year on a monthly or quarterly basis