Doing business in Bulgaria

What are the advantages of the Bulgarian market?

  • Free movement of goods and services, due to Bulgaria’s membership in the EU
  • Stable currency (a fixed rate of 1 € for 1,95583 BGN);
  • Low rents;
  • Low labor costs
  • Low tax rates (see below);
  • Tax incentives and other investment encouragement measures for certain categories of investments

What are the tax rates in Bulgaria?

VAT

  • 20% on taxable supplies, import of goods in Bulgaria and taxable Intra-Community supplies;
  • 9% for hotel, accommodation and vacation services;
  • 0% for Intra-Community supplies, international transport of passengers and goods, international transport–related supplies, supplies related to duty-free commerce and others.

Personal income tax

  • A flat rate of 10%, applicable to local and foreign physical persons’ income, self-employment income, and non-resident’s income originating from sources in Bulgaria

Withholding tax

  • 5% on dividend and liquidation-quota income;
  • 10 % on royalties, remuneration for technical services, remuneration under franchising and factoring agreements, remuneration under copyright or licensing agreements and others

Corporate tax

  • A flat rate of 10%

Excise duties

The following goods are subject to excised duties:

  • Tobacco products
  • Alcoholic beverages;
  • Electrical energy and energy products (such as fuels)

Are there any tax incentives?

Aside from the cases when the amount of VAT due is reduced, the Bulgarian legislation provides tax incentives depending on the economic area and the purposes for which the goods and services are provided.

Without limitation, the following tax incentives are available in Bulgaria:

  • Tax exemption of certain types of personal income;
  • Tax relief for hiring unemployed persons;
  • Reimbursement of corporate tax for enterprises employing people with disabilities and for social security and health insurance funds;
  • Reimbursement of 100% of the corporate tax for enterprises engaging in manufacturing activities in municipalities with high unemployment and of 60% cent of the corporate tax for registered agricultural producers;
  • Exemption from taxation of social expenses of transportation of workers and employees, and the persons employed under management and supervision agreements;
  • Accelerated tax depreciation of machinery, production equipment and apparatuses which are part of the initial investment;
  • Tax exemption of the transactions involving shares, carried out in the stock exchange;
  • Exemption from corporate tax of collective investment schemes, the licensed investment companies and the companies with a special investment purpose;
  • Reimbursement of the excise duty paid on alcohol and alcoholic beverages where they are used for medical treatment purposes;
  • Reduced excise rates for ethanol, produced in a specialised small distillery and beer produced by independent small breweries;

Reduced excise rates on mixtures of bio-fuels and liquid petrol-based fuels;