Tax Law (Bulgaria)

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The tax law in the Republic of Bulgaria includes the rules for the structure and functioning of the tax system. The Bulgarian tax system imposes three main groups of taxes on both legal and natural persons: direct taxes (such as corporate tax , income tax ), indirect taxes ( sales tax ), and council taxes and fees (such as inheritance tax ). The Income Authority is the main body in Bulgaria responsible for collecting taxes.

In Bulgaria, substantive tax law is governed by the laws of the various types of tax and procedural by the Tax and Insurance Procedure Code ( Bulgarian Данъчно-осигурителен процесуален кодекс ).

value added tax

The collection of sales tax according to Bulgarian tax law is regulated by the Sales Tax Act (UStG) ( Bulgarian Закон за данък върху добавената стойност ), its implementing regulation and Council Directive 2006/112 / EC of November 28, 2006 on the common VAT system.

All deliveries of goods or services against payment, the intra-Community purchase of goods by a taxpayer with the place of performance in Bulgaria as well as the import of goods are subject to this indirect tax. The VAT model under Bulgarian law follows the EU's common VAT system, according to which personal costs are taxed using the credit method (invoice method). With this method, the total value of the delivery is charged at every stage from the production of an object or service to its marketing for consumption, as the VAT is included in the final price of the object or service only once at the currently applicable tax rate .

Any person who carries out an independent economic activity within the meaning of Art. 3 Para. 2 UStG, regardless of its purpose and result, as well as every person who occasionally delivers a new vehicle within the Community is considered to be taxable.

registration

In order to participate in the taxation procedure according to the UStG, the taxpayer must be registered for VAT purposes. The registration is part of the general tax registration according to the tax and insurance process code. Until the registration, the taxpayer cannot make use of the rights and obligations of the UStG. Registration according to the UStG can be mandatory, optional and on the initiative of the income authority, in which the law stipulates some hypotheses of specific registration and deregistration.

VAT subject:

  1. Any taxable supply of goods or services:
  2. Intra-Community acquisition: Gaining control of an item and actual delivery of the item that is dispatched or transported from one member state to the territory of the country in which the supplier is a taxpayer who is registered for VAT purposes in another member state.
  3. Import of objects: Bringing in non-intra-Community objects - the import of objects as well as the release into free circulation according to an outward processing procedure.

Tax rate and tax amount

The usual tax rate of 20% is used for taxable deliveries, with the exception of those expressly to be taxed at the zero tax rate; the import of objects in the country and taxable intra-community acquisitions. The tax rate for accommodation in hotels and similar establishments, including holiday offers and rental of camping or caravan sites, is 9%. H. The tax amount is calculated by multiplying the tax base by the tax rate (Art. 67 UStG).

VAT return

The person registered under sales tax law prepares a sales tax return for each tax period, which is drawn up based on the information from the incoming and outgoing goods book. This requirement concerns the registration of electronic services provided by non-intra-Community residents. The person registered under VAT law who has provided intra-Community deliveries, brokerage services or deliveries of services according to Art. 21 (2) with the place of performance in another Member State within the tax period also submits a VIES declaration for these services for the corresponding tax period with the VAT return (Art. 125 Para. 1 and 2 UStG). In addition to the VAT return, the taxpayer also submits the incoming and outgoing goods book. The VAT return is also submitted in cases where the taxpayer has not made or received any deliveries, purchases or imports within this tax period. The returns and registers must be submitted by the 14th day of the month following the tax period for which they relate.

Corporation tax

According to the Corporate Income Tax Act ( Bulgarian Закон за корпоративното подоходно облагане ), the profit of all domestic and foreign legal entities whose main activity is in Bulgaria is taxable. The taxpayers are listed in Art. 2 of the law - this includes all domestic and foreign legal persons whose main activity is in Bulgaria or who draw their income from a source in Bulgaria. Furthermore, foreign organizationally and economically independent subjects who independently carry out business activities or control investments are also subject to taxation if the owner of the income cannot be determined. Corporate tax in Bulgaria is 10%. It is a uniform tax rate (" flat tax "). There is a difference in the method of taxation for domestic and foreign persons. Domestic legal entities are taxable on all profits and income received domestically and abroad, while foreign legal entities are only subject to taxation on their business activity in Bulgaria and the profits and income generated therefrom. The taxable annual profit must be reported by March 31 of the following year. Corporate tax in Bulgaria is payable annually. The law prescribes monthly or quarterly advance payments. An exception to this tax prepayment obligation applies in the following cases:

  1. Taxpayers whose net sales in the previous year did not exceed BGN 300,000;
  2. Newly established taxpayers in the year of establishment, with the exception of start-ups through conversion within the meaning of the Commercial Act.

Nevertheless, these persons can make quarterly payments without interest should it turn out that, in view of a profit generated, the payment amounts should have been higher.

Corporation tax return

The corporation tax must be declared by March 31 of the year following its occurrence. The tax return must be submitted to the district office of the National Revenue Agency responsible for the registration of the taxpayer. Taxpayers submit a tax return after submission. To promote the online submission of documents, the legislator has provided appropriate discounts. If the taxpayer submits his annual tax return and management report online by March 31 of the following year and he pays the corporation tax within the same period, he will receive a reduction of 1. H. of the corporation tax to be paid, but up to the amount of 1000 Leva (Art. 92 Para. 5 KStG).

Withholding tax

Withholding tax is colloquially referred to as “dividend tax”. Withholding tax is used to tax dividends and liquidation proceeds that have been distributed by a domestic legal person in favor of foreign or domestic legal persons. All income of foreign legal persons that arose in a company with a focus on domestic activity or that stems from the disposal of assets is subject to withholding tax. Withholding tax is final. The tax rate for income from dividends and liquidation proceeds is 5%. For other non-commercial income, such as B. Rent, copyright, etc. the tax rate is 10%.

Withholding tax return

Withholding tax must be declared quarterly by the end of the month following the quarter. The withholding taxpayers according to Art. 194 and 195 explain the tax to be paid for the quarter according to the template. A new change consists in the declaration of the due and not the withholding taxes paid and paid. The declaration must be submitted to the District Directorate of the National Revenue Agency responsible for the tax debtor (if the tax debtor is not subject to registration - to the District Directorate of the National Revenue Agency - Sofia). Withholding taxes on income from dividends and liquidation shares that benefit non-merchants resident in the country must also be declared. If the payer of the income is not obliged to pay the tax, the recipient of the income is obliged to submit the return by the end of the month following the quarter.

Payment of withholding tax

The tax must be paid by the end of the taxable quarter of the following month (Art. 202 Para. 1 and 2 KStG). The tax due is to be paid to the NEA district directorate responsible according to the registration or to which the payer of the income is to be registered. If the payer of the income is not subject to registration, the tax must be paid to the District Directorate of the National Revenue Agency - Sofia (Art. 202 Para. 3 and 4 KStG). The overpaid tax will be reimbursed by the district directorate of the National Revenue Agency where the tax is payable. It should be noted here that if the tax has not been properly remitted and paid, it must be paid jointly and severally by the person liable for this income.

Tax on expenses

Declaration and payment

The tax on expenses must be declared by the taxpayer with an annual tax return in accordance with Art. 217 (1) KStG. It is payable by March 31 of the following year.

The main group of taxpayers consists of legal persons resident in the country and foreign resident legal entities with a domestic permanent establishment. This also includes sole proprietorships, provided they are subject to withholding tax, tax on expenses and alternative tax. For the purposes of taxation, Bulgarian tax law defines the following persons as “legal person resident in the country” under Art. 3 KStG:

  • legal persons registered under Bulgarian law (for tax purposes, companies without legal personality, insurance funds according to the KVGB and legal persons with non-economic activities are treated equally - for domestic income);
  • companies established in accordance with Regulation (EC) No. 2157/2001 and cooperatives established in accordance with Regulation (EC) No. 1435/2003 , provided their registered office is in the country and entered in a Bulgarian register.

Profits and income from all sources in Bulgaria and abroad of legal entities resident in the country are subject to taxation. With regard to the income earned and taxes paid abroad, the corresponding agreements on avoiding double taxation or input tax deduction within the meaning of the KStG apply.

Income tax

The taxation of the income of natural persons resident in the country and foreign residents, including their income from their activity as merchants, is regulated in the Income Tax Act for Natural Persons (EStGnP) ( Bulgarian Закон за данъците върху доходите на физическате лицическате Bulgaria). With regard to the income of sole traders in Bulgaria, the EStGnP refers to the corporate income tax law. Income generated from commercial activities is taxed in accordance with the provisions of the Law on Local Taxes and Duties. The EStGnP has been in force since January 1, 2007 and from January 1, 2008, far-reaching changes have been made to it - the then effective tax progression has been replaced by the proportional tax. As a general principle, all incomes of natural persons resident in the country, including from sources from abroad (taxable world income), are taxed, and that taxes are only levied on foreign residents for their income from Bulgaria (principle of territoriality ). Citizenship does not play a role in the delimitation of people residing in the country and abroad. According to Art. 4, a person resident in the country, regardless of their nationality:

  1. who has a permanent residence in Bulgaria or
  2. stays on the territory of Bulgaria for more than 183 days within a period of 12 months, or;
  3. has been posted abroad by the Bulgarian state, its authorities and / or organizations, Bulgarian companies including family members;
  4. whose center of life is in Bulgaria. The center of life is in Bulgaria when the center of life interests is in the country. Various factors such as: B. where is the family, the assets, where is the person employed and etc. considered.

The subject of the tax collection is the income from employment and non-employment relationships of natural persons, income from rent, disposal of real estate or transfer of rights. The tax is levied annually. The "flat tax" (or flat tax) of 10% on income introduced in Bulgaria resulted in advantages such as:

  • A reduction in the tax burden on the wealthier, which should lead to increased consumption, savings and investment, thereby stimulating economic growth;
  • Increase in tax collection through the relieved and simplified enforcement procedure;
  • Bringing the shadow economy to light, as tax and insurance evasion can be more expensive than its performance per se;
  • Incentive for the interests of foreign investors through the low tax rate,

as well as disadvantages - mainly for the employed with lower incomes, who bear a greater burden than the higher earners and for the household due to the existing potential risk.

Tax breaks

The law stipulates tax breaks in the following cases:

  1. Tax relief for people with reduced employment (Art. 18 EStGnP);
  2. Tax relief for personal contributions to voluntary social security and insurance (Art. 19 EStGnP);
  3. Tax relief for personal contributions during contribution periods upon retirement (Art. 20);
  4. Order of claiming tax breaks (Art. 21)
  5. Tax relief for donations;
  6. Tax relief for young families, for which Art. 22a has been added to the law;
  7. Tax break for children;
  8. Tax relief for children with disabilities.

Local taxes in the Republic of Bulgaria

The municipal authorities need municipal taxes to provide more comprehensive and high quality care for their citizens and services that are tailored to local needs. The following municipal taxes are included in the municipal budget: real estate tax, inheritance tax, gift tax, real estate transfer tax, vehicle tax, trade tax, and other statutory municipal taxes.

The amount of local taxes is determined by the local council in accordance with the Law on Local Taxes and Duties (KStAG) ( Bulgarian Закон за местните данъци и такси ), within the framework regulated by law by the Bulgarian Parliament. By the end of the year, the municipal council will set the exact amount of taxes for the next year by ordinance. Changes within the year are not permitted.

Municipal taxes on the territory of the Republic of Bulgaria include:

  1. Household waste disposal fees;
  2. Fees for the use of markets, specialist markets, trade fairs, sidewalks, squares and trams;
  3. Fees for crèches, kitchens, kindergartens, specialized social services, camps, dormitories and other community social benefits;
  4. Fees for technical services;
  5. Administrative service fees;
  6. Fees for the purchase of tombs;
  7. Dog ownership fees;
  8. other statutory fees.

The municipal taxes are paid in cash to the municipal administration tills or to the appropriate municipal account. The violation of the provisions of the KStAG can lead to the imposition of a number of sanctions. If the declaration of purchase of a property is not submitted in due time or if the information is incorrect, which has resulted in a lower tax, private individuals will be fined from BGN 10 to 400 and legal entities from BGN 100 to 1000.

Road tax

The vehicle tax is applied to legal and natural persons who own vehicles and are authorized to operate on the Bulgarian road network, ships registered in the registers of Bulgarian ports, and aircraft registered in the State Register of Civil Aircraft. For vehicles not registered in road traffic in the country, the two-month period begins to run from the date of their registration. The specific amount of the vehicle tax is determined by the municipal council under the conditions, provisions and limits provided by the KStAG (according to Art. 1 Para. 2 KStAG), for example:

  • For passenger cars, the tax is determined depending on the engine power, corrected with a factor for the year of construction.
  • For buses, the tax is determined according to the number of seats.
  • For trucks with a gross vehicle weight of up to 12 t, a fixed amount is paid per ton or part thereof.
  • For motorcycles, the tax is set in absolute terms depending on the engine's displacement.

The taxation of vehicles in Bulgaria is regulated under Art. 52 - 61 of the Law on Local Taxes and Duties (KStAG).

Property tax

In Bulgaria the property tax is still called "building tax" and with it the buildings and land located on the territory within the residential areas and settlements, as well as the land located outside these areas are taxed. The tax is payable regardless of the use of the property. If there are several owners, the tax must be paid proportionally. According to Art. 11 of the Law on Local Taxes and Duties, the following persons are liable for tax:

  • the property owners;
  • the owner of a structure erected on state or municipal land;
  • the user, in whose favor a real right of use (with notarial certification) has been established;
  • the user for whose benefit a right of use - concession (concession holder) - has been established;
  • the users of restituted properties that have been awarded to the owners but they cannot use them (for a period of 5 years).

The following are exempt from the tax:

  • Land on which there are roads, roads from the state and municipal road and rail network to the mandatory building lines;
  • Land on which water bodies are state and municipal property;
  • agricultural soils and forests, with the exception of built-up areas - for the actually built-up area and the associated area;
  • Properties with a tax estimate of up to 1680 BGN inclusive.

Inheritance tax

In accordance with the Bulgarian Law on Local Taxes, inheritance tax in Bulgaria is subject to inheritance tax on the estate received from Bulgarian nationals as part of legal or testamentary succession in the country or abroad, as well as the estate of foreign nationals in the country. The estate includes the chattels and real estate belonging to the testator and rights to such objects as well as his other real estate rights, claims and liabilities at the time of the inheritance, unless the law provides otherwise. The liabilities and the tax exemptions set by Bulgarian law are deducted from the estate, or if inherited by the state.

The following tax exemptions are provided under Art. 38:

  • Assets for the benefit of the state and municipalities;
  • Household items;
  • deceased's pensions not paid;
  • Foreign property of Bulgarian citizens for whom inheritance tax has been paid in the relevant state, etc.

Taxpayers are:

  • the legal heirs, since since 2004 the surviving spouse and the heirs have been fully exempt from inheritance tax;
  • testamentary heirs and legatees;
  • Stateless persons are subject to inheritance tax for the heirs received on the territory of Bulgaria, provided that their habitual residence is also in the country (Art. 29 KStAG).

The inheritance can be refused by the heirs with a unilateral declaration and in the event of a refusal the heir does not have to pay inheritance tax. The succession is expressly to be entered in writing and in a special book at the district court. The legal, testamentary heirs, legatees or their representatives are obliged to submit a tax return to the municipality within a period of 6 months by calculating the period in different ways - from the date of inheritance or becoming known of the inheritance. Exceptions to this are inheritances of which the heirs became aware after the six-month period has expired. In this case, the deadline for submitting the declaration is one month. The declaration submitted by one heir is also issued in favor of the other heirs. Failure to submit the declaration will be punished as an administrative offense.

literature

Web links

Individual evidence

  1. ^ Website of the National Revenue Agency, Bulgaria
  2. ↑ Данъчно-осигурителен процесуален кодекс (Bulgarian)
  3. ↑ Закон за данък върху добавената стойност (Bulgarian)
  4. ↑ Council Directive 2006/112 / EC of November 28, 2006 on the common VAT system (PDF)
  5. ↑ Закон за корпоративното подоходно облагане (Bulgarian)
  6. ↑ Закон за данъците върху доходите на физическите лица (Bulgarian)
  7. ↑ Закон за местните данъци и такси (Bulgarian)