Bulgaria at present practically has the lowest tax rates in Europe after the introduction of flat corporate and personal income tax rates of 10% in 2008. Over the last decade and a half, a number of countries, mostly in Eastern Europe, introduced flat-rate taxation.
Special Thanks to Deloitte Bulgaria
Personal income tax rate
A flat rate of 10% on the taxable income.
In general, individuals are considered Bulgarian tax residents if:
- They have stayed in Bulgaria for more than 183 days in any 12-month period; or
- The centre of their vital interests is in Bulgaria (determined in view of their personal and economic ties to the country, e.g., factors like permanent address in Bulgaria, family, employment, possession of property, etc.)
Generally, the taxable income includes monetary income, as well as benefits received in-kind (except non-taxable items and “in kind social expenses”).
Bulgarian tax residents are taxed on their worldwide income, while non-residents are taxed only on their Bulgarian-sourced income.
Certain types of income are exempt from taxation, including capital gains from the disposal of shares on a regulated Bulgarian/EU/EEA market, interest on deposits in EU/EEA based banks or branches of non-EU banks, income from disposal of certain real estate, etc.
Tax deductions apply in some cases, including:
- Mandatory social security and health insurance contributions
- Statutory deductions for freelancers, for rental income, etc.
- Voluntary personal insurance up to certain limits
- Certain donations and other specific situations (e.g., disabilities)
Applicable to certain sole proprietorships with annual turnover less than BGN 50 thousand (approximately EUR 25 thousand).
Tax returns and payment
The annual personal income tax return has to be submitted by 30 April of the following year (the tax year coincides with the calendar year). The tax has to be paid by the same deadline. A 5% reduction of the outstanding tax can be applied if:
- The annual tax return is filed and the tax is paid before 10 February of the following year; or
- The annual tax return is submitted electronically.
Individuals are generally not obliged to file annual tax returns if they have received only employment income for which the full tax due has been withheld, non-taxable income and/or income subject to one-off tax.