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"If you do the sums, you will never figure out life." - Anthony T.Hincks
General information about the accounting legal framework in Bulgaria
Fully implemented EU standards with some local scent
Bulgarian taxation and the accounting legal framework are fully harmonized with that of the EU. There are however some country-specific characteristics, which need to be taken into account.
The challenge to find a good accountancy company
In Bulgaria, the main challenge for all international businesses is finding a good accountant who can not only do the job, but is also communicative and can explain the different legal options that the Bulgarian legislation provides. And all that has to be done in English, or even in the native language of the client. This is often an impossible mission. The frustration that comes from the uncertainty that the accountancy work is done correctly can at times be even more destructive than the penalties that the Bulgarian tax authorities will impose on everyone who hasn’t been able to bring his books in order.
The problem becomes even more serious, because of the fact that the accounting companies do not have access to professional legal help and assistance with the ever changing tax laws in Bulgaria. This can become a real hurdle for companies who trade internationally and have to apply different and more comprehensive tax regulations.
We can provide not only service in virtually all major languages, but also an ultimate legal compliance assurance. Please browse the different sections under the accountancy services menu and contact us for any questions you might have.
More on filling your annual tax return
Local and foreign companies doing business in Bulgaria are obliged to submit an annual tax return. It should be filed by 31st of March of the following year in the territorial directorate of the Bulgarian National Revenue Agency. If the firms have not reported income or expenses during the year, they are not required to file full annual tax return, instead they submit different forms (i.e. form 1010a).
The tax declaration
The annual tax declaration of local individuals has to include:
- Acquired income during the year;
- Income subject to license tax;
- Income from dividends and liquidation quotas;
- Income from shares in companies located abroad;
- Delivered and received cash loans;
- Additional forms.
Private individuals who have received only employment income as well as non-taxable income or income subject to final tax are not obliged to file an annual tax return, provided all legal conditions are met.
Employed vs self-employed
An important factor to determine if a person is employed or self-employed is whether the person performing the activity is a "person in the business on its own account". The individuals who are freelancers performing registered crafting activity, all sole traders, owners or partners in commercial companies, individuals, member of unincorporated associations and registered agricultural or tobacco producers are self-employed.
Monthly tax on self-employed persons for income from labor relationship is defined as taxable income charged for the month and shall be reduced by the advance payments made through the company contributions which the self-employed is obliged to make at their own expense. The amount of tax due is calculated by multiplying the difference by the tax rate of 10%.
Local vs foreign employees
Employment income tax is payable by individuals, who receive income from committing activities as a sole trader. According to law there are two cases:
- For individuals resident and ordinarily resident in Bulgaria - tax is due on total remuneration received in and outside of Bulgaria;
- For individuals not resident in Bulgaria - tax is due on total remuneration received for duties performed in Bulgaria.
To a sole trader is valid the principle of "accounting" for determining the total annual income - it is formed by the income relating to that year regardless when paid.
Income from employment is the only type of income, which is assessed not only on an annual base but also on a monthly tax base. The monthly tax base is defined as the taxable income accrued for the month is reduced by the deducted by the employer contributions required to be borne by the individual under the Social Security Code and the Health Insurance Act or any similar compulsory insurance abroad.
There are two tax rates. The monthly tax base after the reduction of its tax relief shall be multiplied by tax rate of 10 percent and for the income obtained as a seafarer - tax rate is 1%. The obligation for the determination, withholding and payment of income tax on income from employment rests entirely with the employer.