What is the corporate tax in Bulgaria?
I. Taxable persons
Taxable persons for corporate tax are:
- the local legal entities - commercial companies;
- the local legal entities which are not merchants, including the religious organizations - for their profit derived from definite transactions (purchasing goods or other chattels for the purpose of reselling them in their original, processed or finished form; sale of one's own manufactured goods; purchasing securities for the purpose of selling them; commercial agency and brokerage; commission, forwarding and transportation transactions; insurance transactions; banking and foreign-exchange transactions; bills of exchange, promissory notes and cheques; warehousing transactions; licence transactions; supervision of goods; transactions in intellectual property; hotel operation, tourist, advertising, information, entertainment, impresario and other services; purchase, construction or furnishing of real property for the purpose of sale; leasing; leasing of movable and immovable property);
- the local unincorporated companies (civil partnerships under the Law on Obligations and Contracts) and the insurance funds;
- the foreign legal entities where carrying out economic activity within Bulgaria through a permanent establishment;
- the foreign unincorporated companies where carrying out business activity within Bulgaria through a permanent establishment.
Local legal entities are:
- the legal entities established under the Bulgarian law;
- the companies established under Regulation (ЕC) No. 2157/2001 of the Council, and cooperative societies established under Regulation (ЕC) No. 1435/2003 of the Council where they have their registered office within Bulgaria and are entered in a Bulgarian register.
Foreign legal entities are those which are not local ones.
Permanent establishment is:
- a definite place (owned, rented or used on another ground), through which a foreign person implements fully or partially an economic activity in the country, for example: a place of management, a branch, a trade representative office registered in the country; an office; a chamber; a studio; a factory; a workshop (factory); a shop; a storehouse for trade; a service shop; an installation site; a construction site; a mine; a quarry; a drill; a petrol or gas well; a spring or another site for deriving natural resources;
- the implementation of activity in the country by persons, authorized to conclude contracts on behalf of foreign persons, except for the activity of а procurator, an agent, a shop assistant, a sales representative and a broker;
- durable implementation of commercial transactions with place of fulfilment in the country, even when the foreign person doesn’t have a permanent representative or a definite place.
II. Persons that are not liable for corporate tax
Corporate tax is not due by persons who are taxed with alternative tax for the relevant activity - the budget enterprises; the organizers of gambling games and the persons performing activity of operation of vessels. The organizers of gambling games and the persons performing activity of operation of vessels are liable for corporate tax for all activities other than the activities subject to taxation with alternative tax.
III. Object of taxation
With corporate tax is levied on:
- the profit of local legal entities;
- the profit of those local legal entities which are not merchants (including of the religious organizations), derived from the indicated in item I. transactions;
- the profit of foreign legal entities derived from a permanent establishment within Bulgaria.
IV. Tax base
The taxable amount for determining the corporate tax is the tax profit.
V. Tax rate
The tax rate of the corporate tax is 10 %.
VI. Tax period
The tax period for determining the corporate tax is the calendar year. For the newly established taxable persons, the tax period covers the period from the date of their incorporation until the end of the year.
VII. Declaring the tax
The taxable persons submit an annual tax return in a standard form regarding the tax financial result and the annual corporate tax due.
The annual tax return is submitted not later than 31 March of the subsequent year in the territorial directorate of the National Revenue Agency by registration of the taxable person. The annual activity report is submitted together with the annual tax return.
Annual activity report is not submitted by taxable persons, who have simultaneously met the following requirements:
1. they have not carried out any activity during the year;
2. they have not accounted income or expenses in the year according to the accounting legislation.
VIII. Payment of the tax due
After deducting the advance contributions paid for the respective year, the taxable persons pay the corporate tax for the respective year not later than 31 March of the subsequent year.
The taxable persons make monthly or quarterly advance contributions for corporate tax on the basis of estimated tax profit for the current year.
Exempt from advance contributions are:
1. taxable persons, whose net income of sales for the preceding year does not exceed 300 000 levs;
2. newly incorporated taxable persons for the year of their incorporation, except those newly incorporated as a result of a transformation under the Commercial Law.
The monthly advance contributions are made by taxable persons whose net income from sales for the preceding year exceed 3 000 000 levs.
The quarterly advance contributions are made by taxable persons that have no obligation to make monthly advance contributions.
IX. Reduction and exemption from corporate tax
There is a possibility for exemption from corporate tax for: collective investment schemes and national investment funds; companies with a special investment purpose; Bulgarian Red Cross; organizers of gambling games, for which state fee is due and others.
General tax relief is provided for: tax incentives in the cases of hiring unemployed persons; tax incentives in the provision of scholarships; enterprises employing disabled persons and others.