Individuals must pay personal income tax (PIT) on their gross income less any mandatory social security contributions they make at their own expense. Very few other deductions are possible.
Employment income
Taxable income from work on the basis of an employment contract includes the following:
- Salary, wages, or any other remuneration for work performed, including for length of service, higher professional qualifications, unhealthy or specific work conditions, as well as any additional compensation (e.g. cost-of-living adjustments, bonuses, premiums, overtime pay).
- All fringe benefits and benefits in kind provided by the employer or for the account of the employer.
- Certain compensations received by the employee on the basis of the Labour Code (in general, for some cases of termination of the employment contract, unutilised paid leave, etc.).
- Income received by managers, controllers, and members of management and supervisory boards, as well as by shareholders of limited liability and joint-stock companies holding more than 5% of the capital.
Employment income is taxed at a 10% flat tax rate.
Business income
Business income of individuals registered as sole traders form the taxable base under the provisions of the Corporate Income Tax (CIT) Act (i.e. income minus expenses plus adjustments equals taxable profit). If the turnover exceeds BGN 50,000 in 12 consecutive months, the sole trader is subject to VAT registration. VAT registration may be required regardless of the turnover in certain cases.
Patent activities of sole traders are taxed under the provisions of the Local Taxes and Fees Act.
Sole traders file annual PIT returns. The deadline for reporting and payment of PIT due by sole traders is between 1 March and 30 June.
Sole traders can benefit from a 5% discount, provided that they report and pay their PIT due until 31 March of the following year.
Capital gains and investment income
Bulgarian tax residents (including expatriates who are considered Bulgarian tax residents) are taxed on capital gains and investment income realised from all sources during their period of residence. Foreign tax residents are taxed only on the capital gains and investment income derived from sources in Bulgaria.
Capital gains
Capital gains are taxed on an annual basis with a 10% flat tax rate if received by Bulgarian tax residents, and with a 10% final withholding tax (WHT) if received by non-residents. Certain exemptions provided in respect of capital gains are discussed under Exempt income below.
The taxable base for income from capital gains is determined as follows:
- The taxable base for income from disposal or exchange of immovable property, including limited property rights, is the positive difference between the sales price and the acquisition price, reduced by 10% statutory deductions.
- The taxable base for income arising from disposal or exchange of vehicles, works of art, antiques etc. is the positive difference between the sales price and the acquisition price.
- The taxable base for income arising from sale or exchange of stocks, shares, compensatory instruments, investment bonds and other financial instruments, and from foreign currency transactions is the total amount of capital gains realised during the year reduced by the total amount of the capital losses incurred during the year.
Note that generally the acquisition price is determined as the 'documentarily supported acquisition price' of the property. There are special rules for determining the acquisition price in case there is no documentary evidence thereof.
Dividend income
Dividends and liquidation proceeds paid by Bulgarian and foreign entities are subject to a 5% final WHT at source. When the dividends/liquidation proceeds are paid by non-resident entities who are not obligated to withhold and remit the Bulgarian taxes, the tax is payable by the recipient themselves on an annual basis. The dividend income paid by non-resident entities should also be reported in the annual tax return.
Interest income
Interest income from bank accounts in EU/EEA is tax free as of 1 April 2022.
Interest income from bank accounts outside EU/EEA is taxable with a tax rate of 10% as of 1 April 2022 instead of final tax rate of 8 % for Bulgarian tax resident, 10% final tax rate for non-Bulgarian tax residents.
Rental income
Income from rent or other rights of use against consideration (except for rent from agricultural land), as well as income from annuities and leases, is subject to quarterly advance PIT at 10% and a final tax on an annual basis at the flat rate of 10%. Advance tax is not due for the fourth quarter unless the individual confirms in writing before the payer of the income one's willingness to apply an advance tax withholding for the fourth quarter.
For tax purposes, a statutory deduction of 10% of the gross income is provided.
Royalty income
Royalties are taxed on an annual basis with a 10% flat tax rate if received by Bulgarian tax residents and a 10% final WHT if received by non-residents.
Other income
The following basic types of income are also subject to PIT (the list, however, is not comprehensive).
- Income received by freelancers, individuals supplying personal services, and artisans.
- Income from sale of agricultural products.
- Monetary and in-kind prizes from various competition events.
- Compensations for lost profits and defaults of a similar nature.
- Income from incidental transactions.
Amounts redeemed early from voluntary pension, health, unemployment and/or vocational qualification and life insurance coverage, are subject to 10% final tax.
Exempt income
Some types of non-taxable income are listed below, subject to specific conditions and requirements set in the law:
- Capital gains realised by Bulgarian tax residents and residents of EU/EEA member states on disposal of one residential real estate property per year if it was in the possession of the individual for more than three years and up to two other real estate properties if they were in the possession of the individual for more than five years.
- Capital gains from transactions with securities of public companies on the Bulgarian Stock Exchange or on a regulated securities market in EU/EEA countries.
- Profits distributed in the form of new company shares or increase of the nominal value of existing shares.
- Income under voluntary pension schemes received upon retirement.
- Interest and discounts on bonds.
- Interest income from bank accounts in EU/EEA
- Some types of social benefits provided by the employer in kind and taxed at the corporate level.
- Business trip daily allowances, within certain limits.
- Certain payments and benefits provided by the employer in accordance with the Bulgarian labour code.
Property received on the grounds of inheritance, donation, or restitution is not considered income taxable under the PITA. However, other taxes and fees may be applicable.
FAQs
Tax rate for Bulgarians is 10% regardless of their income and whether they live and work in Bulgaria or abroad. Self-employment income is also charged with 10% tax. Non-resident individuals are taxed only on their income from sources in Bulgaria. The tax rate is 10%.
Does Bulgaria have a tax treaty with the US? ›
The agreement was signed at the beginning of 2007 and contains provisions about the avoidance of double taxation with respect to the income tax and prevention of fiscal evasion. The Bulgaria-USA double taxation agreement only applies to individuals residents of the contracting states.
Does Bulgaria tax worldwide income? ›
Bulgarian tax residents are taxed on their worldwide income. Non-residents are taxed in Bulgaria only on their Bulgarian-source income, which has a very broad legal definition.
What is income explain the basic principles of income determination? ›
Income generally refers to revenue receipts, but however under the Income-tax Act, 1961, certain capital receipts have also been specifically included within the definition of income for example capital gains i.e. gains on sale of a capital assets like land.
What is the individual income tax? ›
The individual income tax (or personal income tax) is a tax levied on the wages, salaries, dividends, interest, and other income a person earns throughout the year. The tax is generally imposed by the state in which the income is earned.
How much tax an individual pays? ›
The federal income tax rates remain unchanged for the 2022 and 2023 tax years are 10%, 12%, 22%, 24%, 32%, 35% and 37%. The income thresholds for each bracket, though, are adjusted slightly every year for inflation.
Do U.S. citizens pay taxes in both countries? ›
Do I still need to file a U.S. tax return? Yes, if you are a U.S. citizen or a resident alien living outside the United States, your worldwide income is subject to U.S. income tax, regardless of where you live.
What is tax evasion in Bulgaria? ›
Under Bulgarian law, tax evasion is treated as a criminal offense when the unpaid amount exceeds BGN 3,000 (~ USD 1,700), with the criminal liability generally only arising for individuals.
Can a U.S. citizen own property in Bulgaria? ›
Bulgarian law allows foreigners to own property in the country, but, however, there are some restrictions. A foreigner can buy a property in their own name, provided that the property doesn't come with the land it is built on. In most cases, apartments in Bulgaria are sold without land.
Is Bulgaria a low income country? ›
Bulgaria is a member of the United Nations and is one of the newest members of the European Union. It is a member of other major organizations, including the Organization for Security and Cooperation in Europe and NATO. The World Bank classifies Bulgaria as an upper-middle income nation.
At present, there are 14 tax-free countries around the world. These include Antigua and Barbuda, St. Kitts and Nevis, the United Arab Emirates, Vanuatu, Brunei, Bahrain, the Bahamas, Bermuda, the Cayman Islands, Monaco, Kuwait, Qatar, Somalia, and Western Sahara.
Who is the most taxed country in the world? ›
The ten highest taxed countries in the world are Denmark, France, Belgium, Sweden, Italy, Austria, Finland, Cuba, Norway, and the Netherlands - all of them being European countries, with the exception of Cuba. Denmark has the highest tax burden rate of 46.34%, followed closely by France with 45.4%.
What are the three factors to determine income? ›
Answer and Explanation: Some of the factors that determine an individual's income level include education level, economic trends, and skills.
What are the three types of income? ›
Three of the main types of income are earned, passive and portfolio. Earned income includes wages, salary, tips and commissions. Passive or unearned income could come from rental properties, royalties and limited partnerships. Portfolio or investment income includes interest, dividends and capital gains on investments.
How do you determine your income? ›
How to calculate annual income. To calculate an annual salary, multiply the gross pay (before tax deductions) by the number of pay periods per year. For example, if an employee earns $1,500 per week, the individual's annual income would be 1,500 x 52 = $78,000.
How is individual income tax calculated? ›
How Income Taxes Are Calculated. First, we calculate your adjusted gross income (AGI) by taking your total household income and reducing it by certain items such as contributions to your 401(k). Next, from AGI we subtract exemptions and deductions (either itemized or standard) to get your taxable income.
How do I calculate my individual tax? ›
In a nutshell, to estimate taxable income, we take gross income and subtract tax deductions. What's left is taxable income. Then we apply the appropriate tax bracket (based on income and filing status) to calculate tax liability.
What is the difference between income tax and individual income tax? ›
Income tax is used to fund public services, pay government obligations, and provide goods for citizens. The federal government and many states, as well as local jurisdictions, levy their own income taxes. Personal income tax is a type of income tax levied on an individual's wages, salaries, and other types of income.
Who pays the most individual income taxes? ›
The highest-earning Americans pay the most in combined federal, state and local taxes, the Tax Foundation noted. As a group, the top quintile — those earning $130,001 or more annually — paid $3.23 trillion in taxes, compared with $142 billion for the bottom quintile, or those earning less than $25,000.
Who pays 70% of taxes? ›
The top 10 percent of earners paid 74 percent of all income taxes and the top 25 percent paid 89 percent. Altogether, the top fifty percent of filers earned 89 percent of all income and were responsible for 97.7 percent of all income taxes paid in 2020.
As an American citizen, you're required to file a US tax return even if you're living abroad. And if you already owe income tax to a foreign government, you could end up paying twice on the same income. Here's what you need to know about US double taxation—and how to avoid it.
Can IRS track foreign income? ›
Yes, eventually the IRS will find your foreign bank account. When they do, hopefully your foreign bank accounts with balances over $10,000 have been reported annually to the IRS on a FBAR “foreign bank account report” (Form 114).
How are US citizens taxed on foreign income? ›
In general, yes — Americans must pay U.S. taxes on foreign income. The U.S. is one of only two countries in the world where taxes are based on citizenship, not place of residency. If you're considered a U.S. citizen or U.S. permanent resident, you pay income tax regardless where the income was earned.
Is Bulgaria a tax haven? ›
Bulgaria is an outstanding example for a low-tax jurisdiction, and at the same time it has an excellent reputation in terms of compliancy and transparency, which makes it a first-class EU jurisdiction for doing business and settling a trading or a holding company, as well as a perfect choice for tax residency ...
Does Bulgaria have low taxes? ›
Bulgaria opens our list as the country that has one of the lowest tax rate in Europe. The country's 10% flat rate of personal income and corporate income taxes are among the lowest in the European Union.
What is Bulgaria sales tax? ›
The standard VAT rate is 20%. A reduced VAT rate of 9% applies to certain tourist services. The reduced VAT rate of 9% on baby foods and hygiene products, and on books is made permanent (it was due to expire at the end of 2022).
How long can a US citizen live in Bulgaria? ›
Entry, Exit and Visa Requirements
U.S. citizens traveling on regular tourist passports cannot stay more than a total of 90 days in Bulgaria within a 6 month-period without a Bulgarian visa. This law is strictly enforced.
Can Americans retire in Bulgaria? ›
Bulgaria is one of the cheapest countries to retire in, making it a perfect place to spend your retirement years without worrying about money. To retire in Bulgaria, you need to apply for a Bulgarian Pensioner D visa.
Why are houses so cheap in Bulgaria? ›
Reasons why in Bulgaria cheap property, a few: The consequences of the 2008 crisis and the sharp drop in demand, causing prices have fallen by 40%. Lower purchasing power of the population compared to an average level. The socialist heritage of the country.
What is the minimum income in Bulgaria? ›
Minimum wage in Bulgaria
Bulgaria has a government-mandated minimum wage, and no worker can be paid less than the mandatory minimum rate of pay. As of April 2023, the minimum wage in Bulgaria is 780 BGN (USD 437) per month for full time employees (according to WageIndicator.org).
Leading sectors in industry are: transport equipment and machine building, electronics and electrical engineering, chemical industry, food and agriculture. Bulgaria's resources sector is led by mining and alternative energy.
Is Bulgaria a socialist or capitalist country? ›
According to article 1, "The People's Republic of Bulgaria is a socialist state, headed by the working people of the village and the city. The leading force in society and politics is the Bulgarian Communist Party." The BCP created an extensive nomenklatura on each organizational level.
What country has the simplest taxes? ›
By contrast, 95% of taxes are filed online in Estonia, and the process can take as little as three minutes. The rules are simple for individual entrepreneurs and investors based in Estonia, too: individual income is taxed at a flat 20% rate.
Which European country has the lowest income tax? ›
Bulgaria
At a flat 10%, Bulgaria has the European Union's lowest personal income tax rate. Bulgaria's corporate tax rate is also 10%, meaning it has the second-lowest corporate tax rate in the EU, after Hungary.
How much foreign income is tax free in USA? ›
If you're an expat and you qualify for a Foreign Earned Income Exclusion from your U.S. taxes, you can exclude up to $108,700 or even more if you incurred housing costs in 2021. (Exclusion is adjusted annually for inflation). For your 2022 tax filing, the maximum exclusion is $112,000 of foreign earned income.
Is the US the most taxed country? ›
The United States ranked 32nd¹ out of 38 OECD countries in terms of the tax-to-GDP ratio in 2021. In 2021, the United States had a tax-to-GDP ratio of 26.6% compared with the OECD average of 34.1%. In 2020, the United States was also ranked 32nd out of the 38 OECD countries in terms of the tax-to-GDP ratio.
Who has the highest tax rate in the US? ›
New York has the highest state income tax burden out of any other state.
What country has the worst tax rate? ›
Top 10 Countries with the Highest Personal Income Tax Rates - Trading Economics 2021:
- Ivory Coast - 60%
- Finland - 56.95%
- Japan - 55.97%
- Denmark - 55.90%
- Austria - 55.00%
- Sweden - 52.90%
- Aruba - 52.00%
- Belgium - 50.00% (tie)
Net primary income includes the net labor income and net property and entrepreneurial income components of the SNA. Labor income covers compensation of employees paid to nonresident workers.
What determines high income? ›
A high-income economy is defined by the World Bank as a nation with a gross national income per capita of US$13,205 or more in 2022, calculated using the Atlas method.
Nontaxable income won't be taxed, whether or not you enter it on your tax return. The following items are deemed nontaxable by the IRS: Inheritances, gifts and bequests. Cash rebates on items you purchase from a retailer, manufacturer or dealer.
What are the 7 streams of income? ›
The 7 Streams of Income to Get Rich
- Earned Income. Earned income is the most common and traditional form of income that most people receive through their employment. ...
- Capital Gains. ...
- Interest Income. ...
- Dividend Income. ...
- Rental Income. ...
- Business Income. ...
- Royalty Income.
Overall Limit
As an individual, your deduction of state and local income, sales, and property taxes is limited to a combined total deduction of $10,000 ($5,000 if married filing separately).
What is the annual income for $22 an hour? ›
Frequently Asked Questions. $22 an hour is how much a year? If you make $22 an hour, your yearly salary would be $45,760.
What is the tax rate in Bulgaria 2023? ›
Latest data on Personal Income Tax Rate (%)
Personal Income Tax Rate in Bulgaria remained unchanged at 10 % in 2023. The maximum rate was 50 % and minimum was 10 %. Data published Yearly by National Revenue Agency.
What is the average income in Bulgaria? ›
If you're looking to outsource to Bulgaria, you might be interested in the average salary in Bulgaria. The average salary in Bulgaria is 39,600 BGN (Bulgarian Lev) per annum. It equates to approximately USD 22,208, according to the exchange rate in April 2023.
What is the average salary in Bulgaria? ›
What is average wage in Bulgaria? Average Wages in Bulgaria increased to 1953 BGN/Month (1072.123 USD/Month) in March 2023. The maximum rate of average wage for employees was 1500 BGN/Month and minimum was 30 BGN/Month. Data published Monthly by National Statistical Institute.
Which country has the highest individual income tax rate? ›
17 Countries with the Highest Tax Rates in The World in 2023
- Aruba.
- Sweden.
- Austria.
- Denmark.
- Japan.
- Finland.
- Ivory Coast.
- Why Pay More?
The 2023 tax year—the return you'll file in 2024—will have the same seven federal income tax brackets as the 2022-2023 season: 10%, 12%, 22%, 24%, 32%, 35% and 37%. Your filing status and taxable income, including wages, will determine the bracket you're in.
Which European country has the lowest taxes? ›
So, keep reading to determine countries with lowest taxes in Europe and choose the perfect destination for your tech outsourcing in 2023.
- List of Countries with Lowest Taxes in Europe.
- Bulgaria.
- Hungary.
- Czech Republic.
- Poland.
- England.
- Romania.
- Cyprus.
Capital gains are taxed on an annual basis with a 10% flat tax rate if received by Bulgarian tax residents, and with a 10% final withholding tax (WHT) if received by non-residents.
How much money do you need to live comfortably in Bulgaria? ›
A family of four estimated monthly costs are 2,045.1$ (3,718.2лв) without rent. A single person estimated monthly costs are 583.8$ (1,061.4лв) without rent. Cost of living in Bulgaria is, on average, 45.2% lower than in United States. Rent in Bulgaria is, on average, 79.2% lower than in United States.
What is the income of the top 1% in Bulgaria? ›
1% of Bulgarians receive incomes of over 13,000 euros per month - News.
What is the best money to use in Bulgaria? ›
The best currency to take to Bulgaria is the local currency, the Bulgarian lev. US dollars are also highly exchangeable at local banks and currency exchange offices. However, instead of converting physical banknotes, the cheapest way to pay in Bulgaria is to use a multi-currency travel debit card like Revolut or Wise.
How much money do you need per day in Bulgaria? ›
Food and Drinks
If you plan on eating out for three meals per day every day that you're in Bulgaria, you should only need to reserve about $25 per person per day. If you'd like alcoholic drinks and snacks, you'll need to allocate a bit more.
How much income per month in Bulgaria? ›
Wages in Bulgaria averaged 690.14 BGN/Month from 1997 until 2023, reaching an all time high of 1953.00 BGN/Month in March of 2023 and a record low of 30.00 BGN/Month in January of 1997.
What country has lowest income tax? ›
Among the countries with the lowest tax rates in the world are Malta, Cyprus, Andorra, Montenegro and Singapore. Aside from zero income tax, in Antigua and Barbuda, individuals are also free from paying taxes on wealth, capital gains, and inheritance.
Who pays most tax in Europe? ›
Top Personal Income Tax Rates in Europe
| European OECD Country | Top Statutory Personal Income Tax Rate |
|---|
| Switzerland (CH) | 44.8% |
| Turkey (TR) | 40.8% |
| United Kingdom (GB) | 45.0% |
| Source: PwC, “Worldwide Tax Summaries,” accessed Feb. 15, 2023, taxsummaries.pwc.com. |
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In contrast to the US combined rate of 15.3%, European rates range between 13.97% (not including medical insurance and pension contributions) in Switzerland and a whopping 65-68% in France, based on the 2022 table by Trading Economics. Speaking about European taxes vs.
