In Bulgaria, employers have several tax responsibilities. One of these is the flat income tax rate of 10% on employment income. Employers are responsible for withholding this income tax from employee wages and remitting it to the National Revenue Agency (NRA) on a monthly basis. They must also file annual tax returns with the NRA.

Social Security Contributions (National Insurance)

Employers and employees share social security contribution costs in Bulgaria. The employer's portion varies slightly depending on the industry. Employers are responsible for contributions towards several funds. These include the General Pension Fund, Supplementary Mandatory Pension Insurance (for individuals born after 1959), Disability, Old-age and Survivors Fund, Unemployment Fund, and General Illness and Maternity Fund. Social security contributions are calculated as a percentage of gross salary, capped at a monthly maximum of BGN 3,400.

Health Insurance Contributions

Employers are also required to contribute to the National Health Insurance Fund (NHIF) on behalf of employees. The employer contribution rate for health insurance is 4.8% of the employee's gross salary.

Other Potential Employer Taxes

Employers in certain higher-risk industries must make contributions to the Labor Accident and Occupational Diseases Fund.

Key Responsibilities

Employers in Bulgaria have several key responsibilities. These include ensuring correct deductions, contributions, and tax withholding according to Bulgarian law. They must remit tax and social contribution payments to the relevant authorities on time. Employers are also responsible for maintaining accurate payroll records for reporting and potential audits. Finally, they must keep up-to-date with changes in tax and social contribution regulations.

In Bulgaria, a flat income tax rate of 10% is applied to all employment income, which includes salaries, bonuses, and other benefits.

Social Security Contributions (National Insurance)

Social security contributions are essential for coverage for pensions, healthcare, unemployment, and other benefits. As an employee, you are required to contribute 10.58% of your gross income. There is a cap on the maximum amount of income subject to social security contributions, which currently stands at BGN 3,400 per month.

Health Insurance Contributions

Health insurance contributions are necessary for access to public healthcare services. As an employee, you are required to contribute 3.2% of your gross income towards health insurance.

Additional Notes

Bulgaria has double taxation treaties with various countries which may influence how taxes are applied for foreign workers in Bulgaria.

Value-Added Tax (VAT) is a significant indirect tax in Bulgaria, affecting the provision of services within the country. It's crucial for businesses operating in or providing services to Bulgaria to understand VAT regulations.

Standard VAT Rate

The standard VAT rate in Bulgaria is 20%. This rate applies to most services, except those designated for a lower rate.

Reduced VAT Rate

A reduced VAT rate of 9% applies to specific service categories, including:

• Hotel accommodation: This aligns with Bulgaria's focus on boosting its tourism sector.
• Certain restaurant and catering services

VAT Registration

Businesses providing taxable services in Bulgaria might need to register for VAT. The registration threshold depends on the taxable turnover during the previous 12 months:

• Mandatory registration: Businesses with a taxable turnover exceeding BGN 50,000 within a 12-month period.
• Voluntary registration: Businesses with taxable turnover below the threshold may opt to register for VAT.

VAT Compliance

VAT-registered businesses in Bulgaria must comply with the following:

• Charging VAT: Issue tax invoices with the correct VAT rate to customers.
• Filing VAT returns: Regularly submit VAT returns and make timely payments to the tax authorities.
• Record-keeping: Maintain accurate records of sales and purchases for VAT audit purposes.

VAT on Cross-Border Services

• Services provided to EU businesses: The reverse-charge mechanism often applies, shifting VAT accounting responsibility to the recipient business.
• Services provided to non-EU businesses: The place of supply rules determine where VAT is due. The general rule is that VAT is charged where the service is consumed.

Exemptions from VAT

Certain services are exempt from VAT in Bulgaria, including:

• Financial services (e.g., banking, insurance)
• Some healthcare and educational services
• Specific social and cultural services.

VAT regulations can be complex. It's advisable to consult a tax professional in Bulgaria to ensure full understanding and compliance with the VAT implications for your specific services.

Bulgaria provides a business-friendly environment with favorable tax laws. Some of the key incentives include:

Low Corporate Income Tax

Bulgaria maintains one of the lowest flat corporate income tax rates in the European Union at 10%.

Incentives for Investments in High-Unemployment Regions

Businesses investing in regions with high unemployment rates may be eligible for full reimbursement (up to 100%) of their corporate income tax due.

Incentives for Hiring Specific Groups

Additional tax deductions may be granted for companies that hire long-term unemployed individuals, persons with disabilities, or elderly persons.

Research and Development (R&D) Incentives

Companies may be able to carry forward tax losses related to R&D activities for up to 5 years. 100% tax depreciation may be available for fixed intangible assets resulting from research and development activities carried out related to the taxpayer's business.

Regional Development Incentives

Tax incentives are available under the Investment Promotion Act for investments that meet specific criteria, such as job creation thresholds and investment amounts, in certain economically disadvantaged regions.

Specific Industry Incentives

• Agriculture: Partial corporate income tax relief is available for agricultural activities.
• Manufacturing and Production: Tax benefits exist for companies investing in production activities in areas with high unemployment.
• Information Technology: Some tax incentives are designed to bolster Bulgaria's IT sector.

Important Considerations

Tax incentives usually require specific eligibility criteria and application processes. It's essential to consult with a Bulgarian tax advisor or accountant to fully understand the incentives available to your business and the best way to take advantage of them.