Bulgaria is a country located in Southeast Europe that offers a favorable tax system for both individuals and businesses. In this article, we will explain how the taxation system works in Bulgaria, whether the country offers any double taxation agreements, the main taxes expats need to be aware of, any special tax breaks that could apply to expats, how and when to file a tax return as an expat, and the tax exit procedures for anyone leaving Bulgaria to move abroad.
The Taxation System in Bulgaria
Bulgaria operates a flat tax system, which means that all individuals and companies pay the same tax rate regardless of their income level. The flat tax rate for both individuals and companies is 10%.
Double Taxation Agreements
Bulgaria has signed double taxation agreements with several countries to avoid double taxation for individuals and companies. These agreements ensure that income is not taxed twice in both countries, which can result in a significant tax burden for taxpayers. Some of the countries that have signed double taxation agreements with Bulgaria include the United States, the United Kingdom, and Germany.
Main Taxes in Bulgaria
As mentioned earlier, Bulgaria operates a flat tax system, and the tax rate for both individuals and companies is 10%. However, there are other taxes that expats need to be aware of, including social security contributions, value-added tax (VAT), and local taxes.
Social security contributions
Social security contributions are mandatory for all employees and employers in Bulgaria. The contributions are based on the employee’s gross salary and are calculated as a percentage of the salary. The employee contributes 13% of their gross salary, and the employer contributes an additional 17.9% of the employee’s gross salary.
Value-added tax (VAT)
Bulgaria has a VAT system that is similar to other EU countries. The standard VAT rate is 20%, and it is levied on the supply of goods and services in Bulgaria. There are also reduced VAT rates of 9% and 0% for certain goods and services.
Local taxes
Local taxes in Bulgaria vary depending on the municipality. Some municipalities levy a local tax on property, while others levy a tax on businesses.
Special Tax Breaks for Expats
There are several tax breaks available for expats in Bulgaria. One of the most significant tax breaks is the flat tax rate of 10%, which applies to both individuals and companies. Bulgaria also offers tax incentives for businesses operating in certain sectors, including technology, innovation, and research and development.
Filing a Tax Return in Bulgaria
Expats in Bulgaria are required to file an annual tax return if they have received income in Bulgaria during the tax year. The tax year in Bulgaria runs from January 1 to December 31. The deadline for filing a tax return is March 31 of the following year.
Expats can file their tax return online or in person at the local tax office. If you are unsure about how to file your tax return or which forms you need to complete, it’s advisable to consult with a tax advisor or accountant.
Tax Exit Procedures for Leaving Bulgaria to move abroad
If you are leaving Bulgaria to move abroad, you will need to follow certain tax exit procedures to ensure that you fulfill all your tax obligations in the country. The first step is to inform the Bulgarian tax authorities of your departure by submitting a declaration of leaving the country.
You will also need to settle any outstanding tax liabilities before leaving the country, including income tax, social security contributions, and VAT. If you have any assets in Bulgaria, such as property or investments, you may also need to pay any applicable taxes before you can transfer ownership.
It’s always advisable to consult with a tax advisor or accountant to ensure that you fulfill all your tax obligations before leaving Bulgaria. They can help you prepare the necessary paperwork and advise you on any taxes that you may need to pay.
Bulgaria’s flat tax system and low tax rates make it an attractive destination for expats looking to minimize their tax burden. While the tax system is straightforward, there are still several taxes that expats need to be aware of, including social security contributions, VAT, and local taxes. Expats are also required to file a tax return if they have received income in Bulgaria during the tax year.
If you are leaving Bulgaria to move abroad, it’s essential to follow the tax exit procedures to ensure that you fulfill all your tax obligations in the country. This includes settling any outstanding tax liabilities and informing the Bulgarian tax authorities of your departure. It’s always advisable to consult with a tax advisor or accountant to ensure that you comply with all the tax regulations in Bulgaria and fulfill all your tax obligations.