SIGNIFICANT DEVELOPMENTS
There were no significant tax or regulatory developments in the past year.
TAXES ON CORPORATE INCOME
In general, all companies are liable for the corporate income tax. Corporate income is taxed at the rate of 20%. This rate is reduced to 15% for enterprises with taxable profits of less than BGL 50,000 (about US$24,090 as of January 1, 2001). Companies undertaking certain types of activities described by law (mostly restaurant and hotel services, hairdressers, etc.)
with a turnover for the previous year below BGL 75,000 (about US$36,134 as of January 1, 2001) pay a flat business tax, the amount depending on the type and size of the business, instead of business income.In addition to the corporate tax, there is a municipalities tax at 10% of the taxable profit. The taxable base for the corporate income tax is reduced by the municipalities tax paid. Bulgarian-resident entities are taxed on a worldwide basis. Nonresident entities are taxed on their Bulgarian-source income. Nonbusiness organizations (including governmental) are taxed on their businesslike activities.
The Bulgarian Law on Commerce provides for the following types of entities.
1. Limited liability company.
2. Joint stock company, which may be public or private.
3. General partnership.
4. Limited partnership.
5. Partnership limited by shares, which may be private or public.
6. Foreign business entities may register a branch in Bulgaria.
CORPORATE RESIDENCE
A corporation is resident in Bulgaria for tax purposes if it is registered in Bulgaria. Foreign legal entities with headquarters abroad and registered correspondingly are nonresidents for tax purposes, but their Bulgarian branches are deemed Bulgarian-resident companies for tax purposes.
OTHER TAXES
Tax on insurance and reinsurance premium/Insurance companies pay a special one-time (final) tax on insurance premiums and on any other kind of income and are not obliged to pay corporate income taxes separately for their activities other than insurance or reinsurance.
The tax base is the sum of all insurance premiums and any other income (even if not related to insurance) within a given month, reduced by the gross amount of reinsurance premiums assigned to other reinsurance companies and insurance premiums paid back to clients. If the tax base is a negative figure, it is deductible from the tax base in the subsequent months.
The rate of the special tax for insurance companies is 7%, except for life insurance companies whose income will be taxed at 2%.
The same tax is levied on premiums received by a foreign insurance company through a permanent establishment in Bulgaria.
Taxation of company expenses/Entertainment and representation expenses, sponsorships, and business gifts that do not bear the trademark of the donating company are subject to taxation at 25%. Social expenses and benefits-in-kind for the staff, as well as expenses for maintenance, repair, and usage of cars, are taxed at 20%. The taxes are final, and both the taxes
and the expenses are deductible for the purposes of the orporate income tax.
Value-added tax/VAT was introduced on April 1, 1994. In general, it follows the provisions of the Sixth EU Directive.
The tax base includes the agreed-upon price, customs, and excise duties, if any, and some other expenses (such as commission, packing, transport,insurance costs charged by the supplier to the purchaser).
The rate of tax is currently 20%. The exports of goods and a limited number of services are subject to VAT at a zero rate. Within the meaning of the VAT Act, export of goods is exportation abroad or to the free zones, free warehouses, and duty-free outlets. However, supply to customs warehouses does not qualify for export. There are three types of exempt upplies.
1. Supplies of services, which, according to the statutory “place of supply” rules, are provided outside the territory of Bulgaria.
2. Supplies of goods in customs warehouses within the scope of the respective customs procedure.
3. Supplies exempt due to their subject, such as financial services, insurance, gambling, educational and health services, transfer of ownership of land, etc.
Excise duties/The Excise Duty Act was introduced on April 1, 1994. The system is harmonized with the VAT legislation. Excise duties are not due on goods and services for export. The duties are calculated as either percentage of the producer’s sales price/customs value or as a flat amount per unit.
Excise duty is levied on a limited group of goods and services, mainly coffee and tea; cars; petrol and diesel fuel; beer, wine, and hard drinks; tobacco products; and gambling.
Property tax/Taxpayers are individuals and legal entities that are owners of immovable property, that is, land and buildings. For individuals, the property tax rate is 0.15% on the taxable value of the property, determined by the relevant method. If the owner of th
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