I. Individuals
1.1 Personal Income Tax
Resident individuals are taxed on their worldwide income, while non-residents are taxed on their income derived from sources in Bulgaria.
1.1.1 Residency
In general, individuals are considered tax residents if:
- They have stayed in Bulgaria for more than 183 days in any 12-month period; or
- The center of their vital interests is in Bulgaria (determined in view of their personal and economic ties to the country, e.g., factors like permanent address in Bulgaria, family, employment, possession of property, etc.)
1.1.2 Tax Rates
A flat tax rate of 10% on the taxable income is applicable.
1.1.3 Taxable Income
| Employment income including salary payments, bonuses, housing allowances etc. |
| Income from the distribution of dividends |
| Interest income* |
| Income from other economic activity (such as, agricultural activities, royalties, activities performed under civil contracts etc.) |
| Capital gains from the sale of property |
| Rental income |
*10% tax applicable under certain circumstances e.g. when the source of the income is outside the EU
1.1.4 Exempt Income
| Income from selling residential properties, when such a sale is not by occupation (under certain circumstances) | 100% |
| Income from selling movable properties except works of art and antiques, new vehicles and others | 100% |
| Income from disposal of financial instruments in resident companies - shares, bonds etc. | 100% |
| Income from insurances - pensions, maternity and sickness, unemployment benefits etc. | 100% |
| Capital gains from disposal of shares on regulated Bulgarian/EU/EEA stock market | 100% |
| Interest and rebates on Bulgarian government securities, municipality and corporate bonds and similar bonds from EU / EEA | 100% |
| Interests on bank accounts in commercial banks situated in Bulgaria, EU and EEA | 100% |
| Insurance claims (benefits) | 100% |
| Rent, lease or similar for use of agricultural land | 100% |
| Persons with low work efficiency of 50% and more than 50% | Annual tax-free income of EUR 4,050 |
| Income of registered tobacco and agricultural farmers | 60% |
| Sales of manufactured products from agriculture (excluding the above), forestry, hunting and fishing, royalties, remuneration of actors; income from handicraft | 40% |
| Income of freelancers (lawyer, notary, accountant, etc.); civil contract remuneration | 25% |
| Rental income or other kind of income formed from providing of rights of usage of a property; sale or exchange of real property (the taxable income is the difference between the sales price and the acquisition one) | 10% |
1.1.5 Deductible Expenses
| Mandatory social security and health insurance contributions | The whole amount |
| Gifts and donations to certain qualified beneficiary organisations in Bulgaria and EU/EEA Member States | At the amount of 5%, 15% or 50% of the annual tax base |
| Interest on mortgage loans to young families under certain conditions | Only for the first EUR 51,130 of the mortgage loan |
1.1.6 Non-deductible Expenses
| Expenses that are not documented properly |
| Expenses relating to hidden profit distributions |
| Withholding taxes received from a third party |
| Penalties, fines, etc. |
1.2 Social Security Contributions
The social security contributions are between 32.7%- 33.4% in total (paid by the employer and the employee). There are different amounts of minimum social security taxable incomes according to the company's activity. The cap of the monthly social security base up to 31.12.2023 is BGN 3,400 (approx. EUR 1,738.39) and with effect from 01.01.2024 is BGN 3,750 (approx. EUR 1,917.34)without exception.
Foreigners could be exempt from social security contributions in Bulgaria or the contributions paid in Bulgaria could be recognized in their home country under applicable social security treaties.
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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.