Bulgarian income tax

Hi guys

I am planning to open a software company with my friend in Sofia. Is that true that the income tax is 10% and dividends 5%? In practice, if we  make 150k euros,does this mean that we will divide 127.5k euros. That was what bulgarian accountant told me in our skype conversation.

Hi there,

Actually there are two different questions here. It is necessary to make a difference between corporate tax,  paid by a company, divident tax - paid by the shareholders and income tax, which is paid by the employees.

So yes, in Bulgaria corporate tax is 10 % of the profit.

The remaining amount will be taxed with additional 5 % if/when the company decides to distribute the profir between its shareholders.

Income tax is a different thing, it is also 10 %, but there are a number of other taxes/сequrity payments, which in total make about 31 % of the gross income of the employee.

So if your company makes a profit of 150 k, then you will have to pay 10 % corporate tax to the state, and additional 5 % whenever you decide to distribute the remaining amount between you and your friend. Net amount will be about 128,25 k and each of you will receive about 64,125 k as a divident.

Software related businesses are one of the best possible investment options in Bulgaria for the past 15 years an probably for the nex 15 too.

Hi Kristiann

Thanks for your help. One more issue. Both of us are Serbian tax residents. If we transfer this 64.125k here, we do not need to pay any extra taxes?
Bulgaria and Serbia have signed a contract to avoid double taxation.

Yes you are right, you already paid all the taxes in Bulgaria so you are not going to pay any other tax in Serbia

Hi Rodoljub,

Basically avoiding double taxation works that way. However since I've not been acquainted with the specific treaty I would adwise that you read it thoroughly. And if necessary consult a Serbian accountant ot tax consultant.
Just to be sure.

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