If you’re an expatriate thinking about moving to Bulgaria, it’s quite important to understand how the tax system works there. People typically say nice things about Bulgaria since it is simple and has minimal taxes compared to many other Western European nations. The nation is a good place for foreign workers, retirees, entrepreneurs, and investors since it has a flat tariff rate for both personal and business income. But even if the system seems simple at first glance, expats need learn about its primary parts to stay in compliance and prevent any unforeseen costs.
Expats and personal income tax
The personal income tax rate in Bulgaria is a flat 10%, which is one of the lowest in the EU. This rate applies to most kinds of income, such as wages, self-employment income, rental income, and capital gains from selling certain assets. This implies that if an expat becomes a Bulgarian tax resident, their worldwide income may be subject to Bulgarian tax regulations, depending on any double taxation treaties that apply.
A person is considered a tax resident in Bulgaria if they spend over 183 days in any 12-month period, or if their family or primary business activities are based there. When someone becomes a tax resident, they have to report all of their income from around the globe every year, even if some of it originates from outside the country.
Tax on businesses and self-employment
If you are an expat and you start a business in Bulgaria, like a limited liability company (OOD), you will have to pay a fixed corporation tariff rate of 10% on your earnings. The corporation pays a 5% tax on dividends, which is similarly low by EU norms. Freelancers and sole proprietors also pay a flat 10% tax on their income after deducting any company expenditures that are allowed.
Both self-employed people and workers must pay into social security. These payments, which are usually around 32% of an employee’s gross salary (split between the company and employee), go towards pensions, healthcare, and unemployment benefits. Self-employed expats have to pay the whole amount themselves, although the actual rate might change according on how much money they say they make.
Value added tax (VAT)
Bulgaria has a Value Added Tax (VAT) of 20% on most products and services. Certain industries, including hotels, pay a lower tax rate of 9%. Expats who run a company and make at least BGN 100,000 (about €51,000) a year must sign up for VAT. People may also register voluntarily below this barrier, which can be good for certain businesses and their customers.
Most of the time, the price of products and services already includes VAT, so there is no need to figure it out individually. But company owners still have to keep accurate accounting records and send the National Revenue Agency frequent VAT reports.
Real estate and capital gains
Expats who buy property in Bulgaria should know about the taxes that come with it. Every year, the local government charges property tax, which is between 0.01% and 0.45% of the property’s assessed value. Also, you have to pay for additional city services like trash pickup.
Sellers may avoid capital gains tax on real estate if the property was their main home for at least three of the past five years or held longer under certain conditions. Property owners must also submit an annual tax return and pay 10% on their rental revenue.
Double taxation agreements and following the rules
Bulgaria has signed double taxation treaties with several nations, including as India, the UK, the US, and many EU members. These treaties save expats from being taxed twice on the same income and frequently provide them ways to get out of paying taxes, including via exclusions or credits. To get the most out of the treaty between Bulgaria and your home country, you need to know exactly what it says.
Individuals must file their tax returns every year, generally by April 30. Filing late or underreporting income can lead to fines, so expats are advised to hire a local accountant or tax advisor, especially during their first year of living there.
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