Accounting and tax
Considerations for all legal entities
- Companies in Bulgaria are subject to a corporate tax rate of 10% on their worldwide income. Tax returns must be filed and fully paid by March the 31st. Failure to do so may will incur up to 12% monthly interest on the outstanding amount;
- Standard VAT rate in Bulgaria is 20%. All businesses with sales over €25,000 must register for a VAT number and file corporate VAT returns by the 14th of every month;
- Bulgarian companies can carry forward their business losses for up to five years. Carryback of losses is not permitted;
- The Bulgaria tax authority considers capital gains as standard taxable income and henceforth levies on them corporate tax at the standard 10% rate;
- Employers are required to pay monthly social security contributions representing up to 18.5% of their employees’ gross salary. However, the maximum social security contribution is capped at €222 per month.
Considerations for entities within the EU/EEA
- Dividends distributed between resident or other EU/EEA entities are exempt from corporate withholding tax;
- Bulgaria does not impose participation exemption, except for local and EU/EEA dividends received;
- Legal entities resident with the EU/EAA are taxed on their global business income;
- Capital gains derived from the sale of shares through EU/EAA countries’ stock markets or the Bulgarian Stock Exchange are exempt from taxes.
Considerations for EU/EEA non-resident entities
- Dividends payable to non-EU/EEA entities suffer 5% withholding tax, unless reduced under a double tax avoidance treaty;
- Interest and royalties paid to a non-EU/EEA entity are subject to a 10% withholding tax, unless reduced where a double tax treaty is applicable;
- Legal entities not resident in the EU/EEA and are doing business in Bulgaria are only taxed on their Bulgarian-sourced income.
- Bulgaria has signed double taxation avoidance agreements with 68 countries, including UAE, Japan, Malaysia, Canada and Singapore among others;
- All Bulgarian companies are required to i) have their annual financial statements audited by a certified accountant and ii) file them with the Trade Registry by March the 31st;
- Healy Consultants will assist our Clients with i) documenting and implementing accounting procedures ii) implementing financial accounting software iii) preparing financial accounting records and iv) preparing forecasts, budgets and performing sensitivity analysis;
- It is important our Clients are aware of their personal and corporate tax obligations in their country of residence and domicile; and they will fulfill those obligations annually. Let us know if you need Healy Consultants’ help to clarify your annual reporting obligations.
Legal and compliance
- All Bulgarian enterprises must maintain a registered office address in the country at all times;
- The Bulgarian Trade Register allows viewing of company details, including: i) company’s name and legal form ii) names and addresses of all shareholders and directors iii) the amount of paid up share capital and iv) annual financial statements;
- All Bulgarian registered companies are required to always keep records of their accounts and financial statements, as the Ministry of Finance and the Bulgarian National Audit Office has the right i) to conduct a corporate tax audit for up to 5 years back and ii) to request the company to provide additional proofs of revenue;
- Annually, all companies must file with the Trade Register copy of their financial statements. Public limited liability companies must present the same audited by a qualified and registered auditor.
- All employment contracts must be translated into Bulgarian. Non-Bulgarian speaking employees should have a translated copy of their contract in their preferred language;
- The Bulgarian Labor Codex sets for a maximum probation period of up to 6 months for all employees;
- The minimum wage is fixed at €220 per month;
- Bulgarian staff are entitled to receive at least i) 20 days of paid annual holidays and ii) 14 days of national holidays;
- Employers have the authority to suspend their employees’ employment contract in case of i) public intoxication or drug use during business hours ii) negligent behavior on the workplace or iii) any other disciplinary case listed in the Bulgarian Labour Code;
- Conflicts between employees and employers are settled in accordance with the Act of Labour Disputes. This said, employers must implement the so called “social dialogue”, monitored by the General Labour Inspectorate;
- Except during probation periods, all dismissed employees must be provided with at least a 1 month notice.
Other business regulations
- Bulgaria is a member of the European Union since 2007. Consequently, many regulations follow the guidelines set by the European Union;
- The country is one of the founding members of the Organization for Security and Co-operation. Consequently, the country laws must adhere to the human rights guidelines set by the multi-country organization;
- Bulgaria is a member of the World Intellectual Property Organization, which allows i) foreign businesses to apply for a patent or a trademark and ii) give them similar intellectual property protection conferred to Bulgaria nationals;
- Bulgaria has acceded to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958) (the New York Convention). Therefore, arbitration awards made in countries that are party to this convention should be enforceable in Bulgaria, according to the provisions of the convention;
- The most common way to settle a business dispute in Bulgaria involves referring for settlement with the Municipal Courts. There is a three-step court system which have authority over each other;
- As the Bulgarian Courts tend to favor Bulgarian companies over foreign ones, Healy Consultants Group PLC recommends our Clients to place a clause in their customer contracts specifying how certain types of dispute will be arbitrated;
- Bulgarian Law punishes businessmen convicted of bribing public officers by i) up to one year of imprisonment and ii) a fine of up to €5,000. This said, the regulation is not transparent and easily battled in Court;
- Non-EEA nationals must register a Bulgarian company if they wish to purchase commercial or residential property in the country. However, EEA nationals may purchase the property directly without initially incorporating a local company.