History
Taxation in Bulgaria has shifted depending on which government was in control. During theTax law
The tax legislation inThe value-added tax
VAT taxation under Bulgarian tax law is regulated by Value Added Tax Act (VATA) (BulgRegistration under VATA
In order for a taxable person to be part of the taxation procedure under VATA, the same needs to be registered for VAT purposes. VAT registration and its termination are regulated in Arts. 94 - 111, as well as in Arts. 132-135. This registration forms part of the general tax registration under TIPC. Until registered, a taxable person has no rights and obligations under VATA. VAT registration can be compulsory, voluntary and on the initiative of the revenue administration, such that the law outlines several situations where specific registration and deregistration apply. Special cases of compulsory registration are separately provided for. Objects of VAT taxation: objects of taxation are supplies of goods and services; intra-European Union acquisitions; importation of goods. 1. any onerous taxable supply of goods and services 2. intra-European Union acquisition: acquiring ownership of goods and the actual receipt of goods which are dispatched or transported to the territory of the country from that of another MS, where the supplier is a taxable person who is registered for VAT purposes in another MS. Cases of non-intra-European Union acquisitions are listed in Art.13 (4). 3. Imports: introduction of non-European Union goods - import of goods and placing goods in free circulation after outward processing. As import of goods is also considered any other event resulting in a customs duty.Tax rate and tax amount
Art. 66 VATA provides for the following tax rates: A standard 20% rate, which applicable to taxable supplies, except for those expressly specified as subject to a zero rate; the importation of goods into the territory of the country; the taxable intra-European Union acquisitions. The tax applicable to accommodation provided at hotels and similar establishments, including the provision of vacation accommodation and letting out of places for camping sites or caravan sites, is 9%. The tax amount is determined by multiplying the taxable amount by the rate of tax (Art. 67 VATA).VAT return (Art. 125 VATA)
For every tax period, the registered person shall submit a VAT return, prepared on the basis of the ledger of purchases and ledger of sales. This requirement does not apply to services performed electronically by persons who are not established within the European Union. A registered person, who has effected intra-European Union supplies, supplies as an intermediary in a triangular operation or supplies of services under Art. 21 (2) with the place of supply within the territory of another Member State for the tax period, must submit a VIES return on the said supplies for the relevant tax period together with the VAT return (Art. 125 (1) and (2) VATA). Together with the VAT return the registered person must submit the ledger of purchases and ledger of sales for the relevant tax period. VAT returns must furthermore be submitted where there is no payable or refundable tax, as well as in the cases where the registered person has not effected or received any supplies or acquisitions or has effected any importation for the said tax period. The returns and the ledgers of accounts must be submitted on or before the 14th day of the month following the tax period to which the said returns and ledgers refer.The corporate tax in Bulgaria
The tax obligations, tentative taxes, tax reliefs and the taxation regime of legal persons and their incomes are regulated by the rules of the Corporate Income Tax Act (BulgStatement of corporate tax
The corporate tax is declared by 31 March of the subsequent year of its occurrence. The tax return form is to be submitted at the territorial directorate of the National Revenue Agency for registration of taxable person. To encourage the electronic submission of documents, the legislature has provided for a preference. Taxable persons that submit an annual tax statement and annual activity report by 31 March of the subsequent year electronically and pay their corporate tax within the same time limit, enjoy a relief of 1 per cent of the annual corporate tax due, however, this relief may not exceed BGN 1,000 (Art. 92 (5) of CITA).Withholding tax in Bulgaria
The most widespread type of withholding taxes is colloquially referred to as "dividend tax". The withholding tax on dividends and liquidation proceeds which were distributed in favor of foreign or national legal persons from a local company are subject to taxation in Bulgaria. Foreign legal entities’ profits originating either from business activity performed through a certain location of business activity inside the territory of the Republic of Bulgaria or from disposal of the property of such a location of business activity are to be considered income from a source within the country - Article 12 of the Law on corporate income taxation. The withholding tax is final. The tax rate on dividends and liquidation proceeds is 5%. If the incomes have been received from other non-commercial revenues, such as rent, author rights, etc., the tax rate is 10%.Statement of tax withheld at the source
The statement of tax withheld at the source is performed quarterly by the end of the month following the quarter. Persons who are obliged to withhold and pay tax at the source under Art. 194 and Art. 195, need to declare the due tax for the quarter through a declaration according to a form. A new addition is that the declaration is submitted for the taxes due and not the withheld and paid taxes at the source. The statement is filed with the territorial directorate of the National Revenue Agency, either by registration of the payer of the income or by the place in which the payer of the income must have registered (where the payer of the income is not subject to registration, the tax return is to be filed with the territorial directorate of the National Revenue Agency - Sofia). Subject to statement submission are also the taxes withheld at the source on income from dividends and liquidation shares accruing to the benefit of local legal persons who are not traders. In cases where the payer of the income is a person who is not required to withhold and remit taxes, the tax return is submitted by the income recipient until the end of the month following the quarter.Payment of tax withheld at the source
The period for payment of the tax is until the end of the month following the quarter in which the tax liability arose (Art. 202 (1) and (2) of CITA). The tax due is paid in the respective territorial directorate of the National Revenue Agency by registration of the payer of the income or by the place in which the payer of the income must have registered. Where the payer of the income is not subject to registration, the tax is paid in the Territorial directorate of the National Revenue Agency - Sofia (Art. 202 (3) and (4) of CITA). Overpaid tax is recovered by the territorial directorate of the National Revenue Agency, in which the tax is payable. When the tax is not withheld and paid accordingly, it is due jointly by the taxable persons of such income.Taxes on expenses
The tax on expenses is performed in accordance with Art. 217 (1) CITA by the taxpayer with an annual income tax return. The tax on expenses is accrued on the annual basis of taxation and is paid once until 31 March of the following year. The main group of taxable persons are local legal entities and foreign legal entities by place of business within the country. Therein are also included sole proprietors in respect of taxes withheld at source on expenses, as well as in cases where they are subject to an alternative tax. For the purposes of taxation under Bulgarian law the key term is "local legal entity". Art. 3 of CITA states that "local" are: • legal entities established under Bulgarian legislation (for the purposes of tax law, unincorporated associations and insurance funds under CSR are treated as legal entities, as well as NGOs – for profit realized within the country); • companies established under Regulation (EC) No. 2157/2001 of the Council, and cooperative societies established under Regulation (EC) No. 1435/2003 of the Council where they have their registered office within the country and are entered in a Bulgarian register Local legal entities are taxed on their profit and income from all sources within Bulgaria and abroad. In terms of realized profits and taxes paid abroad, the provisions apply of the relevant treaties for the avoidance of double taxation (Double Taxation Treaties or DTT) apply or to recognize the right of deduction under CITA.Income Taxes on Natural Persons Act in Bulgaria
The Income Taxes on Natural Persons Act (ITNPA) (BulgTax reliefs
The Act provides for the following tax reliefs: * Tax relief for persons with reduced working capacity (Art. 18 ITNPA). * Tax relief for personal contributions for voluntary insurance (Art. 19 ITNPA). * Tax relief for personal contributions for insurance length of service has been preserved (Art. 20). * A sequence was introduced for the application of tax reliefs (Art. 21). * Tax relief for donations; * 22а introduced a tax relief for young families. * Tax relief for children; * Tax relief for children with disabilities.Local taxes in The Republic of Bulgaria
Local taxes are needed by local authorities to provide a more comprehensive and quality services and to align these services with the needs of the local population. The following local taxes are paid into the municipal budget: real estate tax; succession tax; donation tax; property acquisition tax; transport vehicle tax; patent tax; other local taxes stipulated by the law. The amount of local taxes is determined by the municipal council in accordance with the Local Taxes and Fees Act (LTFA) (BulgLocal fees in the Republic of Bulgaria
The local fees collectable within the territory of the Republic of Bulgaria include: # household waste disposal, # retail markets, wholesale markets, fairs, sidewalks, squares, and street roadways use, # crèches, child-food kitchens, kindergartens, specialized social services institutions, camps, dormitories, and other municipal social services usage; # technical services, # administrative services, # purchase of graveyard plots, # dog ownership; # other local fees stipulated by the law; Local taxes are paid in cash at the cash desks of the municipal administration, or to the relevant bank account. (Art. 2 LTFA). Violation of the LTFA provisions could lead to the imposition of a range of penalties. Failure to submit a statement of acquisition of real estate or declaring incorrect data so as to reduce the tax to a lower rate, is punishable with a fine - from BGN 10 to BGN 400 for natural persons and from BGN 100 to BGN 1,000 for legal entities.Taxes on transport vehicles
This tax is levied on legal and natural persons, who own motor vehicles registered for operation on the road network in the Republic of Bulgaria, ships registered in the Bulgarian ports, as well as aircraft recorded in the state register of civil aircraft of the Republic of Bulgaria. If the owners of transport vehicles have no permanent address within the territory of the country, the declarations are to be submitted to the municipality where the transport vehicle is registered. The amount of the transport vehicle tax is determined by the municipal council in compliance with the terms, conditions and limits set by the LTFA (according to Art. 1 (2) LTFA). For instance: * For passenger automobiles the taxable amount is determined according to engine power adjusted by a coefficient depending on the year of manufacture; * For buses the taxable amount is determined by the number of seats; * For cargo trucks of up to 12 tons of permissible maximum weight the taxable amount is a fixed sum per each ton of load-carrying capacity; * For motorcycles the taxable amount is the absolute amount depending on the cubic capacity of the engine. The taxation regime of transport vehicles in Bulgaria is regulated in Art. 52-61 of the Local Taxes and Fees Act (LTFA).Real estate tax in Bulgaria
In Bulgaria the real estate tax, also called "buildings tax" is levied on buildings and land located within the territory of the country and within the spatial planning areas of settlements, as well as the lands outside such areas, whose intended use, according to a detailed construction plan, falls within Art. 8, item 1 of the Spatial Planning Act and after change of the purpose of the land where that is required by special legislative statute (Art. 10 Local Taxes and Fees Act, or LTFA). Under Art. 11 LTFA, tax is levied on: * owners of taxable real estate; * owners of buildings constructed on state or municipal land; * person who was given a right of use - in rem (in deed); * person who was given a right of use - concession (concessionaire); * users of restituted property that has been restored to the owners, but cannot be used by them (for a period of 5 years) No tax is levied on: * sites occupied by streets, roads of the national and municipal road networks, and the railway network, up to the limiting construction lines; * lands occupied by water basins which are state and municipal property * agricultural land and forests, with the exception of land with buildings and only for the built area and the adjoining it land * real estate with tax assessment of BGN 1680 inclusive.The Bulgarian succession tax
According to the Bulgarian legislation regulating local taxes, succession tax is levied on estate succeeded by law or by will within Bulgaria or abroad by Bulgarian citizens as well as on the estate located within Bulgaria succeeded by foreign nationals. The succeeded estate includes the movable and immovable property owned by the decedent and the rights over such property, as well as their other property rights, receivables and liabilities at the time of opening of the succession, unless otherwise provided by legislative statute. The inherited estate is subject to deductions as to the obligations and tax reliefs laid down in Bulgarian law, or in those cases where it is inherited by the state. Art. 38 lists the types of property that are tax free: * property passed to the State or municipalities; * ordinary household furnishings; * pensions not received by the decedent; * estate of Bulgarian citizens located abroad to which the succession tax of the respective state has applied. Taxable persons are: * heirs by law, such that as of 2004, succession tax in Bulgaria does not apply to the surviving spouse and the lineal heirs; * testamentary heirs, beneficiaries and legatees; * stateless persons are subject to the succession tax for inherited estate on the territory of Bulgaria, if the person in question has been permanently resident within the territory of Bulgaria (Art. 29 LTFA). The heirs may waive the succession through a unilateral act and as a result, they are subject to the succession tax. The waiver needs to be express, written and recorded in a specific book at the District Court. In case there is more than one heir, the tax is due in accordance with their share, and the taxable amount depends on the degree of kinship and the size of the inherited share. The tax is determined and communicated to each co-heir - Art. 106 and Art. 107 TIPC. Persons that have become heirs by law or will, legatees or their legal representatives are obliged to file a tax return in the municipality within six months, such that the period is calculated differently – starting from the moment of opening of the succession or of learning about the succession. Exempt from this six-month period is inherited property whose existence became known to the heirs or legatees after six months. In this case, the time limit is one month from learning about the succession and on the basis of a submitted declaration. Any declaration submitted in time by one heir benefits the other heirs as well. Failure to submit the declaration results in an administrative liability.Literature
* Tax law and tax process – Ivan G. Stoyanov (Feneia, Sofia 2012) * Taxation 2015 Commentory – Rosen Ivanov (Ciela, Sofia 2015)References
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