Bulgaria Crypto Tax

Located in the South-Eastern part of Europe, Bulgaria is considered as a favourable option for establishing and running a crypto company. A very attractive aspect of this jurisdiction is an exceptionally low corporate tax rate. In combination with numerous tax deductions and funding opportunities, it makes for an environment that is well-suited for consistent growth and development of crypto businesses.

Bulgarian taxes are administered by the Bulgarian Ministry of Finance. It manages both domestic companies and foreign companies who conduct business activities in the country.

Business entities are required to submit their annual returns with the Bulgarian Ministry of Finance on an annual basis. Corporate tax is calculated in line with the company’s financial year, which, in most cases, coincides with the calendar year. An exception to this rule are newly incorporated companies, which also benefit from special tax filing regulations.

Under the usual circumstances (when financial year coincides with calendar year), annual tax returns must be filed by the end of March of the following year (that is, by the end of March 2024 for 2023). Corporate tax rates must also be paid by the same deadline (end of March).

It is also worth noting that the Bulgarian system gives businesses an opportunity to make advance corporate tax payments on a quarterly or monthly basis. Another important nuance is that each company needs to file its own annual tax return because consolidated tax returns are not available. This point is important for holding companies, as 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 will allow you to avail of the preferential tax rate or tax exemption. To do so, you must supply a certificate of residence proving the location of the taxpayer’s seat for tax purposes.

Corporate income tax

Bulgarian tax resident crypto companies are subject to paying the corporate income tax on their worldwide income, while non-resident companies are taxed only on the income sourced in Bulgaria. If your company‘s registered office or place of management is located in Bulgaria, it‘s considered a resident.

In Bulgaria, corporate tax applies to the following types of income:

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

VAT

Crypto companies registered in Bulgaria are legally required to obtain a VAT number prior to starting their business activities. The standard VAT rate in Bulgaria is currently set at 20%.

Registration for VAT is mandatory for each business that has an annual turnover of 50,000 BGL or more. In order to pay VAT, a bank account must be opened.

Since Bulgarian legislation is aligned with EU law, it follows the rule by the Court of Justice of the European Union (CJEU) stating the provision of services involving the exchange of cryptocurrencies for fiat money and vice versa is VAT exempt. Other crypto products and services supplied in Bulgaria might be subject to VAT.

Social security contributions

Regardless of the specifics of planned crypto activities, crypto companies operating in Bulgaria must also take into account the rates for social security contributions. The contributions are collected to cover such categories as pension, disability and sickness benefits, maternity leave and insurance for injuries at work. The payments are made monthly and are split (in this case, into uneven parts) between the employer and the employee.

In Bulgaria, the current rate for social security contributions is 24.3%. The employer must cover 13.72% percent, and the remaining 10.58 percent must be covered by the employee. A split of 4.8% to be covered by the employer and 3.2% to be covered by the employee also applies to the national health insurance rate, which is set at a total of 8% of monthly gross salary.

Withholding tax

The withholding tax rate in Bulgaria is set at 10% of monthly gross salary. It is to be filed and paid to the state by the employer.

Tax credit and incentives

Bulgaria offers favourable conditions to startups, presenting an opportunity to have start-up expenses recognized as deductible in the year when a company is established.

Furthermore, to encourage companies to invest in regions with high unemployment, Bulgaria also offers to grant back up to 100% of the collective investment trust.

How do I pay taxes on crypto in Bulgaria in 2024?

In Bulgaria, as in many other countries, cryptocurrencies are gaining importance in the financial world, which attracts the attention of the tax authorities. In 2024, the taxation of income from cryptocurrency transactions in Bulgaria continues to evolve, adapting to the new realities of the digital economy. This article will provide a detailed overview of how to properly pay taxes on cryptocurrency income using local regulations and guidelines.

Basic provisions of cryptocurrency taxation

In Bulgaria, income from cryptocurrency transactions is subject to taxation in accordance with the general rules of the country’s Tax Code. For 2024, the tax rate for individuals on cryptocurrency income is 10 per cent. This means that all cryptocurrency transactions resulting in income must be declared and tax must be paid on this income.

Steps to pay the tax

1- Determination of taxable income

The first step is to determine the amount of taxable income from cryptocurrency transactions. This includes:

• Profit from the sale of cryptocurrency for fiat money.
• Proceeds from the exchange of one cryptocurrency for another.
• Revenue from mining and steaking.

2. Transaction documentation

A taxpayer needs to maintain detailed documentation to support income and expenses from cryptocurrency transactions. This includes:

• Transaction Dates.
• The costs of acquiring cryptocurrency.
• The amounts of the sale or exchange.
• Profit or loss from each transaction.

3. Filling in the tax return

Cryptocurrency income must be reported in the annual tax return. In Bulgaria, Form 200 for the previous calendar year is usually used, which must be filed by 30 April of the current year.

4. Payment of tax

Once the amount of income tax has been calculated, taxpayers must pay the tax according to the specified deadlines in the tax return.

Important points

• Cryptocurrency accounting: It is important to accurately account for each transaction to ensure that taxes are calculated correctly.
• Changes in legislation: It should be noted that tax legislation can change, so it is important to keep up to date on the official website of the National Revenue Agency (NRA).

 

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.