Taxation and Regulations Affecting Investors
The Income Taxes on Natural Persons Act lays down the rules on taxation of the income of individuals, residents, non-residents, sole-traders and the income of certain corporations. The tax procedures apply equally to the national and foreign investors if natural persons. Bulgarian residents are taxed on their worldwide income. Non-resident individuals are taxed on their Bulgarian-source income. Effective since January 1, 2008, a 10% flat tax on personal income has been introduced.
Dividends and liquidation proceeds payable by resident entities to both resident and foreign natural persons are subject to a 5% final withholding tax at the source. When a foreign individual is treated as a resident for tax purposes of a country - member of the European Union or in another country - member of the European space, then certain incomes shall not be subject to tax (Art. 37 (7) of the new Income Taxes on Natural Persons Act).
As far as the corporate income tax (profit tax) is concerned, the new Corporate Income Tax Act, effective since 2007, reduced the profit tax to 10%.
The Bulgarian-source incomes of foreign entities, realised without business seat in the country, shall be subject to a 10% final withholding tax at the source. If the foreign entities have a kind of resident representation, then the respective resident entity shall be taxed (Art. 200 (2) in reference with Art. 195 of the new Corporate Income Tax Act).
Dividends and liquidation proceeds payable by residents to foreign legal entities are subject to a 5% final withholding tax at the source (Art. 200 (1) with reference to Art. 194 of the new Corporate Income Tax Act.
Capital gains from transactions with shares in public companies and traded rights in such shares realised on a regulated Bulgarian stock market are not subject to withholding tax.
Withholding tax rates could differ depending on the provisions in Double Taxation Agreements between Bulgaria and other countries.
Value Added Tax: 20%
Foreign Exchange Act effective since 2007:
Art. 1 This Act shall regulate:
1. Transactions and payments between local and foreign persons;
2. Transborder transfers and payments;
3. Transactions with foreign currency;
4. Transactions with precious metals and gemstones by occupation, the export, import and processing thereof;
5. Export and import of Bulgarian levs (BGN )and foreign currency in cash;
6. Collection, maintenance and provision of statistical information on the country's balance of payments;
7. The exercising of currency control.
Freedom to Carry out Transactions, Actions and Payments
Art. 2 (1) All actions, transactions and payments under Art. 1, items 1 - 5 shall be conducted freely inasmuch as this Act does not provide otherwise.
Export and Import of Levs (BGN) and Foreign Currency in Cash
Art. 11 (1) Local and foreign natural persons may import and export unlimited amounts of levs, foreign currency in cash and bearer payment instruments while observing the requirements established under this Act.
Exchange Rates of Foreign Currencies in Respect to the Lev
Art. 12 (1) The Bulgarian National Bank shall announce daily exchange rates in respect to the lev of certain foreign currencies chosen at its discretion that shall be used for accounting and statistical purposes.