BulgariaTax Obligations Detailed

In Bulgaria, employers face several tax obligations related to payroll, social security, and other areas.

Employer Tax Obligations in Bulgaria for 2025

As of today, February 5, 2025, the following information is valid, but might change in the future.

Income Tax

• Rate: A flat rate of 10% is applied to employee income, which includes wages, salaries, bonuses, overtime pay, and fringe benefits.
• Withholding: Employers are responsible for withholding income tax from employee salaries at the time of payment.
• Payment: The withheld tax must be paid to the National Revenue Agency monthly, by the 25th of the following month.
• Annual Certificate: At the end of the tax year, employers provide employees with an annual income certificate detailing gross earnings, withheld income tax, and social security contributions.
• Annual Declaration: An annual declaration of paid wages and salaries is submitted to the tax authorities by the end of February of the following year.

Social Security Contributions (National Insurance Contributions)

• Rate: Total employer contribution rates vary between 18.92% and 19.62% of the employee's gross salary. The total rate, including employee contributions, ranges from 32.7% to 33.4%. Employee contribution rate is 13.78%.
• Payment: Social security contributions, together with the withheld income tax, are due by the 25th of the following month.

Value Added Tax (VAT)

• Rate: The standard VAT rate is 20%.
• Filing and payment: Monthly VAT returns must be submitted by the 14th day of the month following the reporting period.

Other Taxes and Obligations

• Corporate Tax: Annual corporate tax returns are due between March 1st and June 30th of the following year. Payments are also due within this period. An amended return can be filed until September 30th.
• Annual Financial Statements: These need to be filed with the National Statistical Institute before submitting corporate tax returns.
• Trade Register Filing: Companies must file their balance sheet for the previous year with the Trade Register by September 30th.
• SAF-T: Bulgaria is expected to implement the Standard Audit File for Tax (SAF-T) in phases, starting in 2025, though deadlines are not yet confirmed.
• Employment Contract Registration: Employers must register employment contracts with the National Revenue Agency within three days of signing. Employees cannot legally begin work before this registration is complete.

Additional Information

• Tax Year: The tax year in Bulgaria follows the calendar year (January 1st to December 31st).
• Currency: The official currency is the Bulgarian Lev (BGN).
• Payroll Frequency: Payroll is typically processed monthly.
• Bank Account: While not mandatory for employers to have a local bank account, payments to employees must be made from an employer-held account.

This information is for general guidance only and does not constitute professional tax advice. Consulting with a tax professional is recommended for specific situations.

In Bulgaria, employee tax deductions encompass various areas, including income tax, social security contributions, and other deductions like unemployment insurance.

Income Tax

In Bulgaria, a flat income tax rate of 10% applies to employment income. This rate is consistent for all income levels, meaning that regardless of how much an employee earns, the same percentage is withheld for income tax.

Social Security Contributions

Social security contributions in Bulgaria are shared between the employer and the employee. The total contribution rate is split into several parts, covering pensions, healthcare, unemployment insurance, and other social security benefits. As of 2025, the total rate is typically around 33%, with the employer's portion being the larger share. These contributions are calculated based on the employee's gross salary up to a specified maximum monthly threshold, which is subject to change annually.

Other Deductions

Apart from income tax and social security, several other deductions may apply. These include unemployment insurance contributions, which are a small percentage of the employee's salary and are also split between the employer and employee. Additionally, some collective agreements or individual contracts may stipulate deductions for things like trade union membership or supplementary pension schemes.

Tax Relief for Individuals with Reduced Working Capacity

Employees with a permanently reduced working capacity of 50% or more are eligible for annual tax relief of BGN 7,920. This relief is applicable for the year the disability is established and the year the expert decision on reduced capacity expires.

Tax Relief for Parents

Employees with children under 18 can also benefit from tax relief. The annual tax base reduction is BGN 6,000 for one child, BGN 12,000 for two children, and BGN 18,000 for three or more children. For disabled children, the relief is BGN 12,000 per child. This relief can be claimed even if the employer is a foreign insurer not obligated to withhold taxes, requiring the employee to file an annual tax return.

Tax Administration and Deadlines

As of today, February 5, 2025, employees generally need to file an annual tax return by April 30th of the following year. However, if they solely receive employment income fully taxed through monthly payroll withholding from a single employer who performs annual tax reconciliation by January 31st, filing might not be necessary. Employers must provide employees with an annual income certificate detailing wages, income tax, and national insurance contributions. They must also submit an annual declaration on paid wages and salaries to tax authorities by the end of February of the following year. Monthly social security contributions and withheld income tax are due by the 25th of the following month, accompanied by Declarations 1 (employer contributions) and 6 (employee contributions).

In Bulgaria, Value Added Tax (VAT), known locally as Danŭk vŭrkhu dobavenata stoĭnost (DDS) or Данък добавена стойност (ДДС), is a consumption tax applied to most goods and services.

VAT Rates

• Standard Rate: 20% (applicable to most goods and services).
• Reduced Rate: 9% (applies to specific goods and services, including hotel accommodations, newspapers, and journals).
• Zero Rate: 0% (applies to specific supplies like intra-community passenger travel by air and sea, exports, and intra-community supplies of goods).

As of January 1, 2025, the reduced 9% rate for restaurant and catering services has been removed. The 9% reduced VAT rate for baby foods and hygiene products and books is now permanent.

VAT Registration

• Threshold: The mandatory VAT registration threshold is BGN 166,000 (approximately EUR 85,000) as of January 1, 2025.
• Non-Resident Businesses: Foreign businesses without a permanent establishment in Bulgaria are required to register for VAT if they conduct taxable supplies of goods or services in the country. There is no threshold for non-resident businesses; VAT registration is mandatory regardless of turnover. Non-EU businesses are required to appoint a fiscal representative.
• Distance Selling: For EU businesses selling goods online to consumers in Bulgaria (distance selling), the VAT registration threshold was previously BGN 70,000. However, with the introduction of the Import One-Stop Shop (IOSS), non-Bulgarian EU e-commerce sellers now charge Bulgarian VAT on all sales shipped from within the EU, regardless of the value. For imported distance sales not exceeding €150, sellers can use the IOSS return.
• Voluntary Registration: Businesses operating below the mandatory threshold can register for VAT voluntarily.

VAT Filing and Payment

• Returns: VAT returns must be submitted monthly, by the 14th day of the following month. The same deadline applies for payments.
• Method: VAT returns and payments are submitted electronically through the National Revenue Agency (NRA) website.
• Penalties: Late filing or payment can result in penalties and interest charges.

VAT Exemptions

Certain goods and services are exempt from VAT, including:

• Education, healthcare, and financial services (exempt without the right to deduct input VAT).
• Letting of immovable property.
• Betting and gambling.
• Welfare services.
• Certain copyrights.
• Public broadcasting.

It is important to consult with a tax professional for specific guidance on Bulgarian VAT regulations and their application to your business activities. This overview is current as of today's date, February 5, 2025, and may be subject to change.

Bulgaria offers various tax incentives to stimulate economic growth and attract investment. These incentives target specific sectors and demographics, including those detailed below.

Corporate Tax Incentives

• Investments in Depressed Regions: Tax incentives are available for investments and job creation in designated regions with high unemployment. These can include corporate income tax reductions or refunds.
• Employing Individuals with Disabilities: Businesses employing people with disabilities may be eligible for corporate tax reimbursements for social security and health insurance contributions.
• Hiring Long-Term Unemployed: Companies hiring individuals registered as unemployed for over a year, those aged 50 or older, or individuals with reduced working capacity can deduct the amounts paid as remuneration and employer contributions for social security and health insurance during the first 12 months of employment.
• Agricultural Activities: Under certain conditions, agricultural operations can benefit from a reduced corporate income tax rate.

Personal Income Tax Incentives/Reliefs

• Reduced Working Capacity: Individuals with a permanently reduced working capacity of 50% or more can deduct BGN 7,920 from their annual taxable income.
• Tax Relief for Children: Parents or guardians can claim deductions based on the number of children, with increased amounts for children with disabilities.
• Young Families and Mortgage Interest: Young married couples can deduct mortgage interest expenses on loans up to BGN 100,000.
• Charitable Donations: Deductions are available for approved charitable donations up to 65% of an individual's annual taxable income.
• Social Security and Insurance Contributions: Full deductions can be claimed for mandatory social security contributions made within Bulgaria or other EU/EEA countries. Voluntary contributions to pension and unemployment funds, as well as certain health and life insurance payments, are also deductible, subject to limitations.
• Home Improvements/Repairs: Individuals can deduct up to BGN 2,000 from their annual tax base for expenses related to home improvements or repairs of property located in Bulgaria.
• Non-Cash Payments: Individuals using non-cash payment methods for at least 80% of their expenses and receiving 100% of their taxable income via bank transfers, without outstanding public liabilities, can benefit from a 1% tax relief capped at BGN 500.

Value Added Tax (VAT)

As of February 5, 2025, the standard VAT rate remains 20%. However, the Bulgarian government has proposed changes for 2025 which include reinstating the standard 20% VAT on bread and restaurant services, although these changes are still proposals and subject to parliamentary approval.

It is important to note that this information is current as of February 5, 2025, and might be subject to change. Consulting with a tax advisor is recommended for specific situations and up-to-date information. Further changes to the Bulgarian tax code, including the introduction of a windfall tax on the banking sector and reforms to the taxation of natural resource companies, have also been proposed for the 2025 budget. The details of these changes and their potential impact are yet to be determined.