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Tax incentives

Main acts:

  • Law on corporate income tax levying
  • Law on value added tax (VAT)
  • Law on income tax of physical persons

 

  • Law on corporate income tax levying

Bulgaria applies the lowest corporate income tax rate in EU – 10% (along with Cyprus).

0% in areas with high unemployment* – 35% higher than the country average, when the following conditions are fulfilled:

  • the assets are located entirely within the administrative boundaries of the municipality with high unemployment
  • taxable entity has no liquid tax liabilities and liabilities for obligatory insurance payments
  • tax has been invested in acquiring long-term tangible and intangible assets necessary for the production activity for a period of up to three years after the year for which the cession is used
  • the value of the intangible assets from the initial investment is no more than 25 percent of the value of the long-term material assets from the initial investment

*The approval of those projects is issued by the Ministry of Finance

 

  • Law on value added tax (VAT)

Special preferential VAT regime for imports of goods necessary for the implementation of an investment project

 

VAT-registered investors who perform certain eligible investment projects are entitled to import assets needed for the project without effective payment of import VAT. In addition, such investors are entitled to refund VAT incurred on local purchases within 30 days after filing the tax return.

 

In order to receive the approval, the investment project must meet certain conditions:

  • The size of investment should be at least BGN 10 million (EUR 5 m) for a period not exceeding 2 years
  • The period for the completion of the project should not exceed two years
  • The project should result in the creation of at least 50 new jobs
  • The project should be eligible for state aid for regional development
  • The investor should prove its ability to finance the project

*The approval of those projects is issued by the Ministry of Finance

  • Law on income tax of physical persons

Personal income tax - 10% flat rate

 

Personal Income Tax Act (PITA) applies only to income accruing to resident and non-resident natural persons. The Act regulates the taxation of income accruing to natural persons, including income from activities in a sole-trader capacity. Income from dividends and liquidation shares, accruing to resident and non-resident natural persons, is also taxed according to the procedure established by this Act.

 

  • Other tax incentives

  • Possibility for R&D expenditure write-off
  • Accelerated depreciation of 2 years for computers and new manufacturing equipment
  • 5% withholding tax on dividends and liquidation quotas(0% for EU tax residents)
  • No restrictions concerning capital repatriation