Bulgaria boasts one of the healthiest economies in South East Europe and is considered in a positive and favourable light by the international community. The country has experienced strong economic growth over the last seven years, with an annual GDP increase averaging around 6% and high levels of foreign direct investment. There has been a lot of recent media coverage of the EU’s harsh line in withholding funds because of Bulgaria’s poor housekeeping and lack of transparency in the spending of EU grants.
While the EU’s accusations of corruption and fraud in this area are valid, the country is making great efforts to improve and, to overcome this legacy of Communism, the administration has recently instituted a raft of new monitoring programmes in conjunction with Brussels, which now account for every Euro spent. The EU is playing a significant role in shaping Bulgaria’s political and judicial systems to ensure that the ordinary citizens of the country benefit fully from EU membership and significant progress is being made, albeit at a somewhat slower pace than it should be.
|Overall rank 2016:||rank 38th (change in rank: -2)|
|– Starting a business:||rank 52 (average processing time 18 days)|
|– Dealing with construction permits:||rank 51 (change -1) (average processing time 110 days)|
|– Getting electricity:||rank 100 (average installation time 130 days)|
|– Registering property:||rank 63 (no change) (average processing time 11 days)|
|– Getting credit:||rank 28|
|– Protecting minority investors:||rank 14 (change -2)|
|– Paying taxes:||rank 88 (change -6) (average company tax from profits 27%, average time used for taxation 423 hours per year)|
|– Trading across borders||rank 20 (no change)|
|– Enforcing contract:||rank 52 (average 564 days, average cost from standing amount 23,8%)|
|– Resolving Insolvency:||rank 48 (Average time processing bankruptcy: 3.3 years)|
New businesses registered in 2017: 43 453
Bulgaria is probably best known for its low property prices but what may be less widely appreciated is that the cost of living here is about a third of that in the most of Western European countries. While some items, such as petrol at around 1.90 BGN (Bulgarian Leva), are more expensive, direct price comparisons of non-imported food, clothing, electrical goods and furniture reflect around 30 to 35% of for example UK costs, with utility bills and municipal tax (council tax) at an even lower level.
The key point to note is that, as a citizen of a country within the European Economic Area (EEA), you are free to work in any other EU or EEA country without a work permit as either a salaried employee or a self-employed individual. You will, of course, be required to pay national insurance contributions, either directly through your business accounts or deducted at source along with your income tax if you are employed.
|Overall rank 2016:||44th (62/100 points)|
|– Property rights:||30/100 points|
|– Freedom from taxes:||91/100 points|
|– Freedom of speech/religion:||88/100 points|
|– Limited government:||65/100 points|
|– Gun rights:||70/100 points|
|– Drug rights:||20/100 points|
|– Freedom from corruption:||41/100 points|
|– Freedom from inflation:||80/100 points|
|– Business freedom:||74/100 points|
|VAT registration:||Is compulsory for persons with taxable turnover exceeding BGN 50 000 with respect to VAT taxable supplies with a place of supply in Bulgaria in any previous 12-month period (except when the VAT must be self-assessed by the recipient). Registration also is triggered by the receipt of services in Bulgaria provided by a taxable person not established in Bulgaria. The other thresholds for compulsory registration are BGN 20 000 for intra community acquisitions and BGN 70 000 for the distance selling of goods with a place of supply in Bulgaria. Registration may be made on a voluntary basis regardless of turnover. A non-resident company making supplies in Bulgaria must register for VAT through an accredited representative (except entities established for VAT purposes in an EU member state).|
|– VAT Rates:||The standard rate is 20%, with reduced rate of 9% applying to hotel accommodation services. Exports and intra community supplies are zero-rated.|
|Withholding tax (general):||–|
|– From Dividends||Dividends and liquidation proceeds payable to a non-resident are subject to a 5% withholding tax, unless a lower rate applies under a tax treaty. Dividends and liquidation proceeds payable to a legal entity that is tax resident in an EU/EEA member state are exempt from withholding tax.|
|– From Royalties||Royalties paid to a non-resident are subject to a 10% withholding tax, unless the rate is reduced under a tax treaty or the EU interest and royalties directive applies. Bulgaria Levies withholding tax on the gross amount of the payment but EU resident entities can claim a refund of a portion of the withholding tax paid on the gross income for the calendar year.|
|– From Interests||Interest paid to a non-resident are subject to a 10% withholding tax, unless the rate is reduced under a tax treaty or the EU interest and royalties directive applies. Bulgaria levies withholding tax on the gross amount of the payment but EU resident entities can claim a refund of a portion of the withholding tax paid on the gross income for the calendar year.|
|Transfer tax:||Transfer tax is imposed on the sale or exchange of immovable property and motor vehicles, at rates ranking from 0.1% to 3% determined by the municipality.|
|Real property tax:||An annual real estate tax is levied on the owner of immovable property at a rate between 0.01% and 0.45 of the tax value of the property.|
|Social security:||The total social security insurance contribution is 30.7%-31.4% (the employers is 17.8%-18.5% and the employees portion is 12.9%). The base for the contribution is total income, capped at BGN 2,600 per month. Minimum thresholds per position and industry also apply.|
|– Transfer pricing||Bulgarian transfer pricing rules generally follow the OECD guidelines. There are no documentation requirements, but the tax authorities are permitted to request transfer pricing documentation during an audit. In the case of transactions involving non-residents, the burden of proof is shifted to the Bulgarian taxpayer to demonstrate the arm’s length nature of the transaction.|
|– Thin capitalization rule||The thin capitalization rules apply in both domestic and cross-border situations where the liabilities of a company exceed three times its equity (i.e a3:1 debt-to-equity ratio)- In such cases, interest expense incurred by a Bulgarian company may not be fully deductible, although non-deductible interest expense may be carried forward for five years. The thin capitalization rules do not apply in certain cases (e.g bank loans).|
|– Disclosure requirements||No, but a company is required to file an annual report on its activities at the time it files its income tax return.|
Compliance for corporation:
Consulting & Advisory services
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Company administration in Bulgaria
Additional business services in Bulgaria (by Novasigma Certified Partners)
Value Added Tax (VAT)
Legal services in Bulgaria for all Novasigma Clients including companies and their owners and directors
Novasigma has built in Bulgaria a team of lawyers, associates and legal advisers to assist our clients with a business and tax planning, overseas business operations, risk management and other legal matters. Primarily focused on business transactions, Novasigma Accounting & Law corporate attorneys are a great asset to a small and large businesses. With a background on corporate law, our corporate lawyers and legal advisers have an in depth knowledge on the transactions that may put your business at risk of litigation. These include contracts and negotiations, taxation laws, business structuring, buy/sell agreements, and intellectual property, among others.
Banking services in Bulgaria
Financial services in Bulgaria
Insurance services in Bulgaria
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