Tax regime in Bulgaria
Flat tax rates
Bulgaria applies a worldwide income tax system and residents are taxable on their worldwide income. Bulgarian companies are subject to a flat tax rate of 10% and the taxable profit is the annual financial result adjusted for tax purposes. Bulgaria also levies a flat personal income tax rate of 10%.
Tax holiday, tax exemptions and special regimes
Taken into account certain limitations and conditions (including the EU state aid restrictions), a tax holiday allows companies to reduce the amount of the annual corporate income tax due on their profits derived from manufacturing activities. Special purpose investment companies, close-ended licensed investment companies and collective investment schemes authorized for public offering in Bulgaria are exempt from corporate income tax. There are special corporate tax regimes applicable to (1) commercial maritime shipping companies, (2) gambling businesses, and (3) other entities such as governmental institutions.
Other withholding tax rates
A withholding tax rate of 5% applies to interest and royalties paid to associated legal entities residing in the EU. However, starting from the first of January 2015, Bulgaria has to implement the EU Interest and Royalties Directive (0% withholding tax on interest and royalties paid to an associated company of another member state). A withholding tax rate of 10% applies to the gross amount of other kinds of outbound payments. If tax treaties are applicable, lower withholding tax rates can apply according to the treaty.