Bulgaria Crypto Tax

Bulgaria is perceived as one of the countries that have an exceptionally favorable environment for establishing and conducting a crypto business. It is situated in the South-Eastern part of Europe. One of the most attractive features in this jurisdiction is an extremely low corporate tax rate. Backed by several possible tax deductions and various funding opportunities, this provides an environment that is well adapted for sustained growth and development of crypto businesses.

Taxes in Bulgaria are regulated by the Bulgarian Ministry of Finance. It oversees both locally-owned companies and foreign investors conducting business activities within the country’s borders.

Business entities are required to submit their annual returns with the Bulgarian Ministry of Finance on a yearly basis. The corporate tax is returned in line with the company’s financial year, which typically ends at the close of the calendar year. Newly incorporated businesses, aside from the exemptions mentioned above, are also exempted from some requirements pertaining to tax filings.

Under normal circumstances, if the financial year is concurrent with the calendar year, then annual tax returns have to be filed at the end of March of the next year, i.e., at the end of March 2024 for 2023. Corporate tax rates also are to be paid at the very same due date, i.e., the end of March.

It is also crucial to highlight that the Bulgarian system provides an opportunity for businesses to make advance corporate tax payments quarterly or even monthly. The other important nuance is that each company is obliged to file its annual tax return independently because the consolidated tax return is unavailable. Such a point is significant for holding companies in light of the fact that Bulgaria does not have a holding company regime.

Standard tax rates in Bulgaria:

• Corporate-income tax – 10%
• Value-added tax (VAT) – 20%
• Withholding Tax – 10%
• Social Security Contributions – 24.3%

Bulgaria has more than 70 international agreements on the elimination of double taxation, which enables you to take advantage of the preferential tax rate or tax exemption. For this purpose, you should provide a certificate of residence that proves the location of the taxpayer’s seat for tax purposes.

Corporate income tax

Bulgarian tax resident crypto companies are obligated to pay corporate income tax on their worldwide income, while non-resident companies are taxed only with respect to the income sourced within Bulgaria. If your company’s registered office or place of management is in Bulgaria it is considered a resident.

In Bulgaria the following types of income are subject to corporate tax:

• Business profits;
• Dividend payments;
• Capital gains;
• Ownership and transfer of ownership of real estate property;
• Interest income;
• Royalties income;
• Foreign-sourced income.

VAT

Under Bulgarian law, crypto companies are required to register for a VAT number prior to the start of their business activity. As of now, the standard VAT rate is 20%.

Each separate business is obliged to register for VAT if its annual turnover is above 50,000 BGL. In the case of one being in a position to pay the VAT, it is necessary to open a bank account.

Because Bulgarian legislation is aligned with EU law, then it follows the rule of the CJEU, “the exchange of virtual currencies for fiat currencies, and vice versa, is considered a service; it shall be exempt from VAT”. With regard to other crypto products and services supplied in Bulgaria, it is uncertain whether the same exemption could apply.

Social security contributions

Regardless of the concrete variant of planned crypto activity, crypto entities operating in Bulgaria should also take into consideration the rates for social security contributions. Contributions are to be levied for pension, disability and sickness benefits, maternity leave, and insurance against accidents at work. The latter are paid on a monthly basis and are divided, in this case unevenly, between the employer and the employee.

The current rate for social security contributions in Bulgaria is 24.3%. The employer has to pay 13.72% percent, and the employee has to pay the remaining 10.58 percent. The national health insurance rate is set at a total of 8% of monthly gross salary where a split of 4.8% needs to be covered by the employer and 3.2% by the employee.

Withholding tax

The withholding tax in Bulgaria amounts to 10% of the monthly gross salary, to be filed and paid to the state by the employer.

Tax credit and incentives

Bulgaria has favorable conditions for startups and offers an opportunity to have start-up expenses recognized as deductible in the year when a company is established.

Moreover, in order to attract an investment in areas where the unemployment is higher, Bulgaria also offers to grant back up to 100% of the collective investment trust.

How to pay crypto taxes in Bulgaria for 2024?

In the financial world of Bulgaria, as well as many other countries, cryptocurrencies become increasingly important. That is why tax authorities pay more and more attention to this type of activity. For 2024, the taxation of income from cryptocurrency transactions in Bulgaria keeps on developing, adapting to the new digital economy realities. Below is a detailed review of how cryptocurrency income should be properly taxed using local regulations and guidelines.

Basic provisions of cryptocurrency taxation

According to general rules under the Tax Code in Bulgaria, income from the disposal of cryptocurrencies is taxable. During 2024, it shall be at an income tax rate of ten percent for individuals. Consequently, all incomes from the cryptocurrency transactions are subject to declaration and such an income is liable to pay tax.

Steps to pay the tax

Table with the main tax rates in Bulgaria

Also, lawyers from Regulated United Europe provide legal support for crypto projects and help with adaptation to MICA regulations.