Individuals who are tax resident in Bulgaria are subject to income tax on their worldwide income. Individuals who are nonresident for tax purposes are subject to income tax on their income earned in Bulgaria.
Definition of tax resident. An individual is considered tax resident for a calendar tax year if he or she satisfies either of the following conditions:
- On any day in that year, he or she has spent more than 183 days in Bulgaria in the previous 12 months.
- His or her center of vital interests is considered to be in Bulgaria.
Tax residence status is determined for an entire tax year, which coincides with the calendar year. Part-year tax residence is not possible.
Days of entry and departure count as days of stay in Bulgaria.
The center of vital interests is considered to be in Bulgaria if the individual’s personal and economic interests are tightly connected to Bulgaria based on actual facts and circumstances such as family residence, real estate owned or place of work.
Employment income. Employed individuals are subject to income tax on remuneration (money or benefits in kind) paid or provided by or on behalf of an employer. Income derived from employment activities performed in Bulgaria has a Bulgarian source. The following employment income is exempt from tax:
- The amount of per diems related to business trips within Bulgaria and abroad up to double the statutory amounts determined by law
- Travel and accommodation expenses relating to business trips covered by supporting documentation
- Certain social benefits provided by and taxed at the level of the employer
Employer-provided stock options are taxed at exercise as employment income.
Self-employment and business income. Self-employment and business income is income derived from professional services and business activities, such as the following:
- Income from activity as a sole entrepreneur
- Copyright royalties
- Agricultural income
- Forestry income
- Earnings from other self-employment and nonemployment activities
Exempt income. Income from scholarships, pensions derived from compulsory social security schemes in Bulgaria and abroad, alimony and certain insurance payments are not taxable.
Tax rates. The rate of income tax is a flat 10%, except for dividend income, which is taxed at a rate of 5%.