TAXATION
OF FOREIGN INDIVIDUALS IN BULGARIA:
General provisions.
The foreign persons are tax liable for
income derived from sources in Bulgaria,
and the type of taxation depends on the
nature of the income. The income is allocated
depending on whether the taxation is effected
according to a tax return or with final
tax. Where an international treaty, which
has been ratified by the Republic of Bulgaria,
has been promulgated and has entered into
force, contains any provisions different
from the provisions of the CITA, the provisions
of the relevant international credit shall
prevail.
Taxation
by the types of income.
Any income, which has its source inside
the country referred to in Art. 12, paragraph
2, 3, 5 and 8 herein, accruing to any
non-resident individual, were not
accruing through a permanent establishment
in the Republic of Bulgaria and incomes
from sources in the country referred to
in Art. 12, paragraph 9 of the CITA of
foreign legal persons established in jurisdictions
with a preferential tax regime when they
are not realized through a permanent establishment
in the country, shall be subject to levy
of a tax withheld at source which shall
be final. The tax shall be withheld by
the resident legal persons, the sole traders
or the permanent establishments in the
country which charge the income to the
non-resident legal persons (Art. 195,
paragraph 1 and 2 of the CITA). The taxable
amount for assessment of the corporation
tax shall be the tax profit. The rate
of corporation tax shall be 10 per cent
(Art. 19 - 20 of the CITA). Any person,
who has acquired income from business
activity, under Art. 29 of the Income
Taxes on individuals Act shall due
in advance a tax on the difference between
the taxable income and the contributions
which the self-insured person is obliged
to pay at his own expense for the months
of the quarter during which the taxable
income was gained, and if the person is
not self-insured - between the taxable
income and the compulsory social insurance
contributions withheld by the employer.
The amount of the tax due shall be calculated
as the difference under Art. 43, paragraph
1 of the ITNPA shall be multiplied by
10 per cent tax rate - Art. 43, paragraph
1 and 3 of the ITNPA. The income tax of
these persons shall be fixed and paid
by the companies, which have charged and
paid it. The advance income tax from leases,
rents and payment is determined and paid
up by the recipients of this income for
each quarter (by the 15-th of the month
following the end of the respective quarter)
on the account of the Territorial Directorate
of the National Revenue Agency (NRA) per
permanent address of the person, who has
received the lease, leasehold or rent.
Taxability shall not apply to any income
derived from ground rent, rent charge
or from other onerous provision for use
of agricultural land (Art. 13, paragraph
1, item 24 of the ITNPA).
The annual taxable amount for the income
from other sources, indicated in Art.
35, items 1 - 6 of the ITNPA shall be
determined by debiting the taxable income,
as acquired during the tax year, with
the contributions which the person is
obligated to make for the tax year for
his or her own account according to the
procedure established by the Health Insurance
Act - Art. 36 of the ITNPA. A final tax
shall be levied on the income from sources
in the Republic of Bulgaria, charged by
foreign legal persons and sole proprietors
through a permanent establishment or fixed
base in the country in favour of foreign
individuals resident in jurisdictions
with a preferential tax regime:
- Remuneration for services or rights,
except where the services or the rights
are actually granted;
- Penalties and damages of any kind, except
for benefits accrued under insurance contracts
- Art. 37, paragraph 1 in relation to
Art. 8, paragraph 11 of the ITNPA.
Issuance
of a certificate for declared tax profit
or tax loss.
As a Result of Economic Activity to any
Non-resident Person within the Territory
of Bulgaria. The certificate shall be
issued on purpose submission to a foreign
tax administration. The document shall
be issued to foreign legal persons, who
would like to obtain a certificate for
declared profit or loss as a result of
economic activity to a foreigner in the
Republic of Bulgaria, as well as for the
amount of the tax paid. The foreign legal
person shall submit a request for issuance
of a document after a pattern, which shall
be address to the TD of National Revenue
Agency. Competent authority for issuance
of the document is the Territorial Directorate
of the National Revenue Agency (TD of
NRA) where the foreign legal person is
registered or where the taxable person
is liable to registration. Services, within
the meaning given by Chapter Twelve, shall
be provided by means of issuance of documents
relevant to the recognition, exercise
or extinguishment of rights or obligations
- Art. 80, paragraph 1 of the Tax and
Social Insurance Procedure Code (TSIPC).
A revenue authority shall conduct a check
of the data, indicated in the application,
as well as of the declared profits and
losses of economic activity of the foreign
person in the Republic of Bulgaria. The
document referred to in Art. 88, paragraph
1 shall be issued within seven days after
receipt of the request, unless a shorter
time limit is provided for. Where the
request is submitted care of another territorial
directorate, the document shall be issued
within fourteen days after the submission
thereof - Art. 90, paragraph 1 of the
TSIPC. The certificate shall be issued
in the Territorial Directorate where the
application was submitted. Two copies
of the certificate shall be handed to
the foreign person. Pursuant to Art. 3,
paragraph 3 of the National Revenue Agency
Act (NRAA) the Agency shall not collect
fees for issuing and certifying documents
and certificates.
Issuance
of a certificate for final tax, paid by
a foreign individual.
Person’s incomes from Sources in the Country
under Art. 37 and Art. 38 of the Income
Taxes on individuals Act (ITNPA)
A certificate on tax remitted according
to the procedure established by the ITNPA
by a non-resident individual shall
be issued in a standard form at the request
of any such person. Any such request (for
issuance of a document after a pattern)
shall be submitted to the National Revenue
Agency territorial directorate whereto
the tax return referred to in Art. 50
or in Art. 55 of the ITNPA herein have
been submitted or should be submitted.
At the request of the foreign person certificate
for paid tax on the total annual tax base
and/or paid tax on the annual tax basis
under Art. 28 shall be issued separately
for the different types of income under
Art. 8 except in cases where the income
is realized through a fixed base - Art.
58 of the Income Taxes on individuals
Act (ITNPA).
The document serves for submission to
a foreign tax administration and attests
the amount of the realised income by a
foreign individual, liable to taxation
with a final tax, as well as the amount
of the final tax paid. The document shall
be issued by the Territorial Directorate
of the NRA where the declaration was submitted
under Art. 55 of the Income Taxes on individuals Act - over the place of registration
of the payer of the income. When the payer
of the income is not obliged to withhold
and remit the tax, the competent authority
is the National Revenue Agency territorial
directorate exercising competence over
the permanent address of the attorney-in-fact
or the Sofia Territorial Directorate of
the National Revenue Agency where the
place of submission of the tax cannot
be ascertained - arg. of Art. 57 of the
ITNPA. The certificate shall be issued
within seven days after receipt of the
request, unless a shorter time limit is
provided for. Where the request is submitted
care of another territorial
directorate, the document shall be issued
within fourteen days after the submission
thereof - Art.90, paragraph 1 of the TSIPC.
The certificate shall be issued in the
Territorial Directorate where the application
was submitted. Two copies of the certificate
shall be handed to the foreign person.
1.
Taxation of foreign and local individual
on labour.
The obligation for taxation of income
from labour relations is assigned to the
very persons, recipients of the income,
the obligation for calculation, deduction
and payment of the tax however is delegated
to the employer, who acts as a revenue
authority. Pursuant to Art. 18 of the
TSIPC any person liable by law to withhold
and pay in tax or mandatory social insurance
contributions, who fails to withhold such
tax or contributions, shall together with
the holder of the obligation, be jointly
liable the for the tax or social insurance
contributions that have not been withheld
and paid. In cases where the person has
withheld the tax or mandatory social insurance
contributions but has failed to pay them,
such person shall owe the tax or social
insurance contributions not paid in, while
liability of the holder of the respective
obligation shall be discharged.
2.
Taxation of a foreign individual on incomes
or expenses from interests. The
aspect of taxation of interests as a form
of income or expense is treated in three
tax acts - ITNPA, VATA and CITA.
A) Under the Income Taxes on individuals Act (ITNPA)
The income from interests of the individuals and sole proprietors is taxable
under ITNPA. The taxation of paid-up interests
by a local person to a foreign individual is regulated in Art. 8, paragraph
6, item 4, Art. 13, paragraph 1, item
8 - 10, Art. 35, item 3, Art. 37, paragraph
1, item 3 of ITNPA.
B) Under the Value Added Tax Act
The negotiation, the granting and the
management of credit for a consideration
(interest) by the person granting it,
including the granting, negotiation and
management of credit upon supply of goods
pursuant to a lease contract shall be
exempt from Value Added Tax.
C) Under the Corporate Income
Taxation Act
The tax rate the tax on the income from
interest, any copyright and licence royalties
is 5 percent where the following conditions
are simultaneously fulfilled:
- an actual possessor
of the income is a foreign legal person
from a state - member of the European
Union, or place of business in a country
- member of the European Union, of foreign
legal person from a state - member of
the European Union;
- local legal person
- payer of income, or the person whose
place of business in the Republic of Bulgaria
is a payer of income is a person connected
with the foreign legal person - holder
of income or a person whose place of business
is the beneficial owner.
When the income, taxable to the tax is
levied at a higher rate, the income recipient
is entitled to be reimbursed the tax.
Reimbursement shall be effected under
the terms and procedure of the Administrative
Procedure Code, but not later than one
year of filing the request for reimbursement
- Art. 200a of the CITA.
3.
Taxation of foreign persons - partners
in companies
The income accruing to any non-resident
legal persons which are shareholders or
members of resident transferring or acquired
companies from acquisition of shares or
interests as a result of transformation
shall be taxed or shall be exempted from
tax withheld at source according to the
standard procedure established by the
CITA at the date of transformation.
4.
Income from rendered technical services
The income calculated by the tax liable
persons, specified in Art. 12, paragraph
5 of CITA, to foreign persons and companies,
provided, they have not been realized
at the place of economic activity, shall
be imposed with a final fee at the source.
Pursuant to § 1, item 9 of the CITA "Technical
assistance fees" shall be the payments
from a source inside the Republic of Bulgaria
for erection or installation of tangible
assets, as well as any services of a consulting
nature and marketing research as provided
by any non-resident person. The expenses
on training and vocational training according
to the procedure and under the terms established
by Chapter Eleven of the Labour Code shall
not be treated as technical assistance
fees.
5.
Taxation of foreign persons for income
from rents
The taxable amount for assessment of the
tax withheld at source on any income accruing
to any non-resident legal persons from
disposition of immovable property shall
be the positive difference between the
selling price and the documented cost
of acquisition of the immovable property
- Art. 199, paragraph 4 of the CITA. Any
income from rent, which has its source
inside the country, accruing to any non-resident
individual, were not accruing through
a permanent establishment, shall be subject
to levy of a tax withheld at source which
shall be final (Art. 195, paragraph 1
of the CITA). The amount of tax shall
be determined by multiplying the taxable
amount by the rate of tax (Art. 6 of the
CITA). Where the tax referred to in Art.
194 and Art. 195 herein has not been withheld
and remitted according to the relevant
procedure, the said tax shall be due in
solidarity by the persons which incur
tax liability for the relevant income
- Art. 203 of the CITA. Any payers of
income withholding the tax at source under
Art. 194 herein shall be obligated to
remit the taxes due as follows:
1.
within three months after the beginning
of the month succeeding the month during
which a decision was made on distribution
of dividends or shares in a liquidation
surplus: in the cases where the owner
of the income is a resident of a State
wherewith the Republic of Bulgaria has
an effective convention for the avoidance
of double taxation;
2.
not later than at the end of the month
succeeding the month during which a decision
was made on distribution of dividends
or shares in a liquidation surplus: in
all other cases.
Any
payers of income withholding the tax at
source under Art. 195 herein shall be
obligated to remit the taxes due as follows:
1.
within three months after the beginning
of the month succeeding the month of charging
of the income: in the cases where the
owner of the income is a resident of a
State wherewith the Republic of Bulgaria
has an effective convention for the avoidance
of double taxation;
2.
not later than at the end of the month
succeeding the month of charging of the
income: in all other cases.
The
tax due shall be remitted to the relevant
National Revenue Agency territorial directorate
exercising competence over the place of
registration or over the place where the
payer of the income is registered (Art.
202, paragraph 1, 2 and 3 of the CITA).
Interest according to the Interest on
Taxes, Fees and Other State Receivables
Act shall be due on any taxes which are
not remitted when due, including any tax
prepayments - Art. 9 of the CITA.6.
Taxation
upon transfer of real estates
Any income derived from use, sale, exchange
or other transfer of immovable property,
including any such transfer of an undivided
interest in or a limited right in rem
to any such property situated within the
territory of the country, shall have its
source inside the country - Art.8, paragraph
10 of the ITNPA. The taxable income accruing
from the sale or exchange of immovable
property, including of limited rights
in rem to any such property, shall be
determined by debiting the positive difference
between the selling price and the cost
of acquisition of any such property with
10 per cent expenses (Art. 33, paragraph
1 of the ITNPA). A final tax shall be
levied on the following income from a
source inside Bulgaria, charged/paid in
favour of any non-resident individual
any income from sale, exchange or other
onerous transfer of immovable property
(Art. 37, paragraph 1, item 10 of the
ITNPA). The income of local legal persons
from such deals is included in their gross
profit, which is subject to taxation under
CITA. The taxable amount for assessment
of the tax withheld at source on any income
accruing to any non-resident legal persons
from disposition of immovable property
shall be the positive difference between
the selling price and the documented cost
of acquisition of the immovable property
- Art. 199, paragraph 4 of the CITA.
7.
Taxation of dividends and liquidation
shares of foreign persons
Following Art. 194, paragraph 1, 2 and
3 of CITA, a tax withheld at source shall
be levied on any dividends and shares
in a liquidation surplus, as distributed
(apportioned) by any resident legal person
in favour of:
1. any non-resident legal persons, with
the exception of the cases where the dividends
accrue to a non-resident legal person
through a permanent establishment in the
country;
2. any resident legal persons which are
not merchants, including any municipalities.
The tax shall be final and shall be withheld
by the resident legal persons distributing
dividends or shares in a liquidation surplus.
7.1. Income from dividends
The legal person, which has calculated
dividends to the partners is obliged to
deduct an income tax, at the rate of 5
% and it is final (Art. 200 of CITA).
"Dividend" in the meaning of
§ 1, item 4 of CITA shall be the distribution
in favour of a person, arising from the
holding that such person has in the capital
of another person, resulting in a reduction
of the owners' equity of the latter, including:
a) income from shares;
b) income from participating interests,
even in unincorporated associations, and
from other corporate rights, where treated
as income from shares;
c) hidden profit distribution.
Any distribution which, according to accounting
legislation, has been accounted for at
the distributing person as an expense
shall not be a dividend, with the exception
of the cases of hidden profit distribution.
7.2. Income from share participation
The taxable amount for assessment of the
tax withheld at source on any income accruing
to any non-resident legal persons from
acts of disposition of financial assets
shall be the positive difference between
the selling price of the said assets and
the documented cost of acquisition thereof
- Art. 199, paragraph 3 of the CITA.
The non-resident legal persons which carry
out economic activity in the Republic
of Bulgaria through location of economic
activity, shall deal with property in
such place of business activity or which
receive income from a source inside the
Republic of Bulgaria are taxable persons
under CITA (Art. 2, paragraph 1, item
2 of the CITA).
Any income which has its source inside
the country, referred to in Art. 12, paragraph
2, 3, 5 and 8 herein, accruing to any
non-resident individual, were not
accruing through a permanent establishment,
shall be subject to levy of a tax withheld
at source which shall be final - Art.
195, paragraph 1 of the CITA. In the event
the person who has to deduct tax under
CITA does not perform economic activities
in Bulgaria, inclusive from place of economic
activity, the same is not taxable person
under CITA and there are no grounds for
taxation under CITA of the realized by
the seller positive difference between
the selling price or the fair market value
of the valuable consideration, as the
case may be, and the documented cost of
acquisition thereof.
7.3. Liquidation shares
A tax withheld at source shall be levied
on any dividends and shares in a liquidation
surplus, as distributed (apportioned)
by any resident legal person in favour
of:
1. any non-resident legal persons, with
the exception of the cases where the dividends
accrue to a non-resident legal person
through a permanent establishment in the
country;
2. any resident legal persons which are
not merchants, including any municipalities.
The tax shall be final and shall be withheld
by the resident legal persons distributing
dividends or shares in a liquidation surplus
- Art. 194, paragraph 1 and paragraph
2 of the CITA.
The taxable amount for assessment of the
tax withheld at source on any income accruing
from shares in a liquidation surplus shall
be the difference between the market price
of the claim by the relevant shareholder
or member and the documented cost of acquisition
of the shares or interests thereof (Art.
198 of the CITA).
Any
payers of income withholding the tax at
source under Art. 194 herein shall be
obligated to remit the taxes due as follows:
1. within three months after the beginning
of the month succeeding the month during
which a decision was made on distribution
of dividends or shares in a liquidation
surplus: in the cases where the owner
of the income is a resident of a State
wherewith the Republic of Bulgaria has
an effective convention for the avoidance
of double taxation;
2. not later than at the end of the month
succeeding the month during which a decision
was made on distribution of dividends
or shares in a liquidation surplus: in
all other cases - Art. 202, paragraph
1 of the CITA.
8. Franchising
"Franchising" shall be a totality
of industrial or intellectual property
rights relating to trademarks, trade names,
logotypes, utility models, designs, copyright,
know-how or patents, granted in return
for a royalty, to be used for sale of
goods and/or provision of services - §
1, item 10 of the CITA. Any payments received
under franchising agreements, charged
by resident legal persons, resident sole
traders or non-resident legal persons
and sole traders through a permanent established
or a fixed base in the country or paid
by resident individuals or by non-resident
individuals who have a fixed base
in the country in favour of non-resident
legal persons, shall have its source inside
the country - Art. 12, paragraph 5, item
5 of the CITA.
9. Factoring
"Factoring" shall be a transaction
whereby single or periodic monetary claims
arising from a supply of goods or a provision
of services are transferred, regardless
of whether the person who has acquired
the claims (the factor) assumes the risk
of collection of the said claims in consideration
of the payment of a reward - § 1, item
11 of the CITA. Any payments received
under factoring contracts, charged by
resident legal persons, resident sole
traders or non-resident legal persons
and sole traders through a permanent established
or a fixed base in the country or paid
by resident individuals or by non-resident
individuals who have a fixed base
in the country in favour of non-resident
legal persons, shall have its source inside
the country - Art. 12, paragraph 5, item
5 of the CITA.
Terms
for Payment of Due Taxes
1.
For income taxable under ITNPA
The tax referred to in Art. 46 herein
on the income referred to in Art. 37,
paragraph 1, items 1 to 9 and Art. 38,
paragraphs 10 and 11 herein shall be withheld
and remitted by the enterprise or the
self-insured person which or who is a
payer of the income not later than at
the end of the month succeeding the month
in which the income was charged by the
enterprise or in which the income was
paid by the self-insured person. The tax
referred to in Art. 46 herein on the income
referred to in Art. 38, paragraph 2 herein
shall be withheld and remitted by the
enterprise which is a payer of the income
not later than at the end of the month
next succeeding the month during which
the decision on the distribution of dividend
was made. The tax referred to in Art.
46 herein on the income referred to in
Art. 38, paragraph 3 herein shall be withheld
and remitted by the enterprise which is
a payer of the income not later than at
the end of the month during which the
expenses were charged. The tax referred
to in Art. 46 herein on the income referred
to in Art. 38, paragraph 4 herein shall
be withheld and remitted by the enterprise
which is a payer of the income not later
than at the end of the month during which
the share in any liquidation surplus was
charged. The tax referred to in Art. 46
on the income referred to in Art. 8, paragraph
11 the shall be deducted and paid by the
payer of the income not later than at
the end of the month succeeding the month
in which the income was charged from the
place of economic activity or the fixed
base in the country - Art. 65, paragraph
10 the ITNPA. The tax which the payer
of the income is obligated to withhold
under Art. 42, Art. 43, Art. 44 and Art.
49, paragraph 2 and 5 herein shall be
remitted on or before the 10th day of
the month succeeding the month during
which the tax was withheld (Art. 65, paragraph
1 - 4 and paragraph 11 of the ITNPA).
Where the payer of the income is not obligated
to withhold and remit the tax, the tax
referred to in Art. 43, 44 and 46 herein
shall be remitted by the person who has
acquired the income, on or before the
15th day of the month succeeding the quarter
of acquisition of the income - Art. 67,
paragraph 1 of the ITNPA.
The final annual (licence) tax shall be
remitted in four equal payments, as follows:
1. for the first quarter: on or before
the 31st day of January;
2. for the second quarter: on or before
the 31st day of April;
3. for the third quarter: on or before
the 31st day of July;
4. for the fourth quarter: on or before
the 31st day of October - Art. 69, paragraph
1 of the ITNPA.
2.
For incomes taxable under CITA (taxes
from the source)
The taxes due under the VATA shall be
remitted by the taxable persons in revenue
to the executive budget. The taxes due
shall be credited to an account of the
National Revenue Agency territorial directorate
exercising competence over the place of
registration of the taxable persons or
over the place where the taxable persons
are registered - Art. 8, paragraph 1 and
2 of the CITA.
Monthly tax prepayments shall be remitted
on or before the 15th day of the month
to which the above mentioned prepayments
apply. Quarterly tax prepayments shall
be remitted on or before the 15th day
of the month succeeding the quarter to
which the above mentioned prepayments
apply. No quarterly tax prepayment shall
be made for the fourth quarter - Art.
90 of the CITA.
Any taxable person shall remit the corporation
tax for the relevant year on or before
the 31st day of March of the succeeding
year after deduction of the tax prepayments
remitted for the relevant year - Art.
93 of CITA.
In the event the prescribed terms for
payment of the tax have not been observed,
it is collected together with the interest
for the elapsed period of delay, specified
under the Interests on Taxes, Fees and
Other Government Collections Act. In the
event a tax return has not been filed
and with the auditing statement is determined
higher tax than the one paid currently
or in advance, the interest is due as
of the day following the day, on which
the tax should have been paid at latest.
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