Direct taxes are:

• Corporate income tax;
• Income tax on the revenues on the individuals;
• Withholding tax.

Indirect taxes are:

• Value added tax;
• Excise duties.
  
  

Corporate income tax

Corporate income tax is due on the accounting profit (revenues minus expenses) after adjustments for tax purposes. The applicable tax rate for the year 2024 is 10% (flat). Taxable persons are local entities, including unincorporated entities, conducting business in the country for the profits and income from all sources in Bulgaria and abroad.

Income tax on the revenues on the individuals

Income tax on individuals is 10% (flat). Bulgarian residents are subject to tax on their income from sources in Bulgaria and abroad (including the business as a sole trader) and the incomes of foreign individuals are taxed only if they are acquired from sources in Bulgaria.

Withholding tax

Bulgarian entities are obliged to withhold tax at the rate of 10% when they accrue the following types of charges which will be income to foreign persons: capital gains, rent, interest, royalties, franchising and factoring fees, fees for technical, advisory and management services. 5% WHT is due on dividends and liquidation quota distributed to foreign entities unless the latter are tax residents of a European Union in which case no WHT would be due in Bulgaria.

Value added tax

All taxable persons are subject to a mandatory VAT registration if their taxable turnover of local supplies for a period of 12 consecutive months reaches BGN 100,000 / EUR 50,000. There are three VAT rates applicable in Bulgaria – 20%, 9% and 0%.

Excise duties

Excise duties are levied upon the production and importation of certain goods such as alcohol and alcoholic beverages, tobacco products, energy products and electricity. Taxable persons for the purposes of excise duties are licensed warehouse keepers, importers of excisable goods.

For more detailed information about the tax burden in Bulgaria, please do not hesitate to contact us.

Debt financing

Most people are familiar with debt as a form of financing because they have car loans or mortgages. Debt is also a common form of financing for new businesses. Debt financing must be repaid, and lenders want to be paid a rate of interest in exchange for the use of their money. The annual market interest rate is at the range of 2% - 5%. For example, if Bulgarian company receives a loan for EUR 100 000 the monthly interest liability would be EUR 247. Adding a debt payment to your monthly expenses assumes that you will always have the capital inflow to meet all business expenses, including the debt payment.

Equity Financing

Equity is another word for ownership in a company. Giving up equity is giving up some control. Equity investors want to have a say in how the company is operated, especially in difficult times, and are often entitled to votes based on the number of shares held. So, in exchange for ownership, an investor gives his money to a company and receives some claim on future earnings. The one of the biggest disadvantages of equity financing is that you will have to consult with your investors before making decisions. Your company is no longer solely yours, and if the investor has more than 50% of your company, you have a boss to whom you have to answer.

Additional money contribution

In Bulgaria there is an alternative solution to avoid all disadvantages of debt and equity financing, it is called additional money contribution. For instance, if you have a company in Bulgaria and company in Spain and you want the Bulgarian company to fund the Spanish one you need to merge your companies as Bulgarian company buy the Spanish one. In that case there is a legal possibility to finance the Spanish company as additional money contribution to the Spanish company's capital. The Bulgarian legislation does not require interest to be charged. So that the provided money will be with 0 interest and in the long-term perspective you will save a lot of money because you will not be obliged by the law to charge any interest.

Stan Consulting may advice you what will be the most beneficial way to finance your business, so please feel free to contact us.

In case if you want to by a car, there are a few important things you should be familiar with:

- every year you must bring the car back to Bulgaria for the mandatory technical check ups, insurance and other stuff;

- you should check your local legislation in the country where you use the car for some restrictions. For example, if the car stays more than 3 consecutive months in Belgium, the car must be with Belgian plates;

-according to the Bulgarian tax legislation all expenses and VAT which are associated with the car (such as gasoline, tires, car services), are not deductible. In that case the only deductible expense will be the depreciation of the car.

On the other hand, if you lease a car you may avoid the above mentioned disadvantages. Please note that not every lease contract will be tax beneficial for you.

So if you need an advice how to choose the most profitable car rental contract, please contact us.