Only 10% corporation tax
The corporation tax in Bulgaria is only 10%, which is the lowest rate in Europe. For this reason many companies or parts of businesses have been relocated to Bulgaria to benefit from the low corporation tax rate of 10% and are therefore able to lower their general tax burden.
The average corporation tax rate in Europe is 23%
Companies that invest in regions with high unemployment and that will employ a certain minimum amount of employees will be exempted from paying corporation tax for a period of 5 years.
Lowest personal income tax of Europe
With a flat tax of only 10% Bulgaria also has the lowest personal income tax of Europe.
This is interesting, because most tax treaties that Bulgaria has signed, contain a clause that stipulates that foreign directors will pay 10% Bulgarian income tax on their renumeration as a manager of a Bulgarian company.
It must be said that the company needs to be a real Bulgarian company and business will need to comply with the requirements of the management control test. A mailbox-only company will not be enough, there has to be a sufficient amount of substance in Bulgaria
The average rate for the personal income tax in Europe is 40%.
Dividends: only 5% withholding tax
The withholding tax on dividends is also very low in Bulgaria: only 5%. When the parent/subsidiary directive applies there will be no withholding tax on dividends.
Income from interest and royalties
Income from interest and royalties are considered as normal income and are subject to the Bulgarian corporation tax.
Bulgaria has signed a large amount of tax treaties to avoid double taxation.
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