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Developing a successful business in Bulgaria requires a good knowledge of this complex matter which includes tax law, customs regime, work permits, building and construction permits, bank and credit institutions, as well as litigation and arbitration. This section provides comprehensive information applicable to the activities of every investor, whether it wishes to start or already conducts a business in Bulgaria. The information provided here is summarized for the above mentioned sectors to better plan, organize and manage the businesses. Low cost of doing business Bulgaria has the most favourable tax regime in Europe. Corporate income tax rate is 10%, the lowest in the EU. Personal income tax is 10 %, flat rate. Industries in high-unemployment areas are granted 0% tax rate There is a 2-year VAT exemption for imports of equipment for investment projects over €5 million, creating at least 50 jobs Depreciation time for computers and new manufacturing equipment is 2 years 5% withholding tax on dividends and liquidation quotas (0% for EU tax residents) Bulgaria has one of the most competitive costs of labor in Central and Eastern Europe Favorable office rents and low cost of utilities. Bulgarian cost of electricity for industrial users is 70% of the European average. Located at the heart of the Balkans, Bulgaria is a strategic logistics hub. Ease of transportation of cargo is provided by - Five Pan-European corridors ( IV, VII, VII, XI, X), which pass through the country - Transport program TRACECA, which connects Europe with Caucasian and Central Asian region - Four major airports: Sofia, Plovdiv, Bourgas and Varna - Two main seaports: Varna and Bourgas - Numerous ports at the Danube River TAXATION BULGARIA - Corporate income tax in Bulgaria applies in a single rate of 10%. Profits Tax - only 10 % Bulgarian resident companies are subject to Bulgarian tax on their world-wide profits. Companies that are non-residents in Bulgaria are liable to taxes in respect of the profits gained through a permanent establishment in the Republic of Bulgaria and of the income specified in the CITA accruing from a source inside the Republic of Bulgaria. A company is resident in Bulgaria if it is incorporated (registered) pursuant to Bulgarian legislation. Resident companies are also the companies incorporated under Council Regulation (EC) No 2157/2001, as well as any cooperative society incorporated under Council Regulation No 1435/2003, where the registered office thereof is situated in the country, and they are entered into a Bulgarian register. Most of the taxation rules, including the major rules relating to tax incentives, apply equally to resident and non-resident corporations conducting activities through a Bulgarian permanent establishment. Transactions between Related Parties- There is no group taxation in Bulgaria. Each entity is taxed as a separate tax pay. Bulgaria has tax rules regulating the tax deductions and the taxable revenue from transactions between related parties (“the transfer pricing rules”). Transfer pricing rules apply to both domestic and international transactions between related parties. The Bulgarian transfer pricing rules are broadly similar to the generally accepted OECD standards that could be seen in the EU and OECD countries. Tax reporting and Tax Payments- In Bulgaria the tax year coincides with the calendar year. The taxable persons must submit an annual tax return in a standard form regarding the tax financial result and the annual corporation tax due on or before the 31st day of March of the next succeeding year. Any taxable person, who fails to submit such a tax return or fails to submit it within the legal term or fails to state or misstates any particulars or circumstances leading to underassessment of the tax due or to undue reduction, retention of or exemption from tax, shall be liable to a pecuniary penalty. The corporate income tax is paid through making monthly/quarterly provisional tax payments. Monthly tax prepayments are made by taxable persons who have formed a tax profit for the last preceding year. Quarterly tax prepayments are made by taxable persons who are under no obligation to make monthly tax prepayments. An annual balancing payment is made before the 31st day of March of the next succeeding year. It is calculated as a balance between the annual tax liabilities reported in the tax return and monthly provisional installments paid. For more information call us now ! International law office D.Vladimirov & Partners" 6 "Alexander Zhendov"Street 1113 Sofia, Bulgaria Email: office@lawyer-bulgaria.bg Phone: +359 897 90 43 91 Fax: +359 2 858 10 25 WEB:lawyer-bulgaria.co.uk