Tax & Residency Guide in Bulgaria

### Comprehensive Tax Guide for Bulgaria

Bulgaria, located in southeastern Europe, offers a favorable tax environment for individuals and businesses. Understanding the tax system, residency triggers, filing requirements, and key strategies can help you navigate the Bulgarian tax landscape effectively. This guide provides an overview of the key aspects of the tax system in Bulgaria to help you make informed decisions.

#### Residency Triggers in Bulgaria

In Bulgaria, residency is primarily determined by the number of days an individual spends in the country. To be considered a tax resident in Bulgaria, an individual must meet one of the following conditions:

1.

Physical Presence

An individual is considered a tax resident if they spend 183 days or more in Bulgaria within a calendar year.

2.

Centre of Vital Interests

An individual whose center of vital interests is in Bulgaria, meaning their personal and economic ties, may also be considered a tax resident, regardless of the number of days spent in the country.

Once you qualify as a tax resident in Bulgaria, you are subject to taxation on your worldwide income.

#### Tax System Type and Treaties

Bulgaria operates under a territorial tax system, which means that residents are taxed on their worldwide income, while non-residents are taxed only on income derived from Bulgarian sources.

Bulgaria has a network of double taxation treaties with many countries to prevent income from being taxed twice. These treaties often provide reduced rates of withholding tax on various types of income, such as dividends, interest, and royalties.

#### Entity Options and Filing Requirements

Individuals in Bulgaria can choose to operate as sole traders or set up limited liability companies (LLCs) for their business activities. LLCs provide limited liability protection and are a popular choice for entrepreneurs and small businesses.

In terms of filing requirements, individuals must submit an annual tax return to the National Revenue Agency by 30th April of the following year. The tax return should include all sources of income and relevant deductions. Businesses have specific filing obligations based on their legal form and activities.

#### Tax Rates and Deductions

Bulgaria has a flat personal income tax rate of 10%, one of the lowest in the European Union. This rate applies to both individuals and companies.

Common deductions that individuals can claim include:

1.

Social Security Contributions

Contributions made to the social security system. 2.

Health Insurance Premiums

Payments made for health insurance. 3.

Charitable Donations

Contributions to approved charitable organizations. 4.

Pension Contributions

Contributions to private pension funds. 5.

Education and Training Expenses

Costs related to education and training.

#### When to Hire a Tax Advisor

While navigating the Bulgarian tax system is relatively straightforward, there are instances where hiring a tax advisor can be beneficial. Consider seeking professional advice in the following situations:

1.

Complex Tax Situations

If you have multiple income sources or complex investments. 2.

International Taxation

When dealing with cross-border transactions or investments. 3.

Business Setup

When establishing a company or structuring business operations. 4.

Tax Planning

To optimize your tax position and take advantage of available deductions and incentives.

#### Country-Specific Strategies

To optimize your tax position in Bulgaria, consider the following country-specific strategies:

1.

Investment Incentives

Bulgaria offers various investment incentives, such as tax breaks and grants, to attract foreign investment. Explore these opportunities to reduce your tax burden. 2.

Entrepreneurship Support

Take advantage of Bulgaria's favourable tax regime for entrepreneurs by setting up a business entity and benefiting from the low tax rates. 3.

Retirement Planning

Consider Bulgaria as a retirement destination due to its favourable tax environment for retirees. Plan your finances accordingly to make the most of your retirement income.

In conclusion, understanding the residency triggers, tax system type, entity options, filing requirements, tax rates, deductions, and key strategies in Bulgaria is essential for individuals and businesses operating in the country. By staying informed and leveraging available resources, you can navigate the Bulgarian tax landscape effectively and optimize your tax position.