TERRITORIALITY AND RESIDENCE
Taxation of individuals' income in Bulgaria is based on their residence status. Bulgarian tax residents are taxed on their worldwide income.
Nonresidents are taxed on their income from Bulgarian sources.
Irrespective of their citizenship, individuals are considered Bulgarian tax residents if they have permanent domicile in the country (i.e.,personal links such as family or permanent home) or reside in the country for more than 183 days in any 365-day period, in which case the individual becomes a Bulgarian tax resident upon the expiration of the 183-day period in the respective calendar year.
If a double taxation treaty is in place, the 183-day residency principle is applicable in accordance with the provisions in the treaty.
A foreign tax resident is any individual who is not a Bulgarian tax resident.
The law gives a broad definition of what is considered Bulgarian-source income.
Generally, income from a Bulgarian source is all income received by an individual as a result of business activities performed in the country.
Activities performed in the country are considered business activities if the individual either has a permanent establishment or a base in the country or assigns or performs services in Bulgaria directly or through a procurator, an agent or otherwise.
Any income derived as a result of performing work or rendering services in the country is deemed Bulgarian-source income, no matter where and by whom it is paid.
Investment income and professional income other than employment income are considered Bulgarian-source income if paid by a resident a Bulgarian permanent establishment of a nonresident entity.
To be allowed to work in the country, expatriates need a work permit, which necessitates following a time-consuming procedure and submission of over 12 documents to the labor authorities. Work permits are also required for expatriates who are registered with Bulgarian courts as directors,managers or controllers of Bulgarian companies.
GROSS INCOME
Employees must pay personal income tax in accordance with the level of gross income.
Employee gross income/Taxable income from work on the basis of an employment Contract includes the following:
1. Salary, wages or any other remuneration for work performed, as well as any additional compensation for, e.g., years of service, unhealthy work conditions, higher professional qualifications, cost-of-living adjustments, bonuses and premiums, and overtime pay.
2. All fringe benefits/benefits-in-kind provided by the employer or on the account of the employer.
3. Certain compensations received by the employee on the basis of the Labor Code (in general, for some cases of termination of the employment contract, unutilized paid leave, etc.).
The following employees' income is not subject to taxation:
1. The value of free preventive food, antidotes and personal protection devices provided by the employer pursuant to the Labor Code and other
laws.
2. The value of special work clothes, free work clothes and uniforms provided by the employer pursuant to the Labor Code and other
laws.
3. Business trip allowances and compensation for moving to another workplace, reassignment due to health reasons, non-completion of work due to force majeure circumstances, and redundancy provided under the Labor Code.
4. The value of any commuting fares provided by the employer free of charge.
5. Social expenses borne by the employer, subject to taxation under the Corporate Income Tax Act.
The following amounts are deductible from the taxable base:
1. Compulsory social, health, pension and other contributions paid by the employee.
2. Voluntary social, pension and health contributions.
3. The loss carry forward facility is not applicable for individuals.
No concessions are granted to foreigners.
Capital gains and investment income/The concept of income globalization was introduced in Bulgaria as from January 1, 1998. Bulgarian tax residents (including expatriates who are considered Bulgarian tax residents) are taxed on capital gains and investment income realized from all sources during their period of residence. Foreign tax residents are taxed only on the capital gains and investment income derived from sources
in Bulgaria.
Capital gains on the disposal or exchange of immovable property as well as on the transfer of sole traders' enterprises are taxable on an annual basis (see the respective table). An exemption provided in respect to capital gains is discussed under "Tax-exempt income "below.
The taxable bade in the case of disposal or exchange of immovable property and means of transportation is the difference between t
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