Corporate tax on the annual taxable profit
==> Corporate tax is levied on:
- the profit of local legal entities;
- the profit of local legal entities, that are not traders, including organizations of religions, from transactions under Article 1 of the Commerce Act, as well as from leasing out movable and immovable property;
- the profit of foreign legal entities from a permanent establishment in the Republic of Bulgaria.
Pursuant to Article 2, Para. 2 of the Corporate Income Tax Act (CITA) the unincorporated entities and the insurance funds established as per Article 8 of the Social Security Code are treated as legal entities.
==> Who pays corporate tax?
The entities liable to pay corporate tax are:
- the local legal entities –trade companies;
- the local legal entities that are not traders – for their profit from transactions under Article 1 of the Commerce Act, as well as from leasing out movable and immovable property;
- the local unincorporated entities and the insurance funds established pursuant to Article 8 of the Social Security Code;
- the foreign legal entities that carry out economic activity in Bulgaria from a permanent establishment;
- the foreign unincorporated entities that carry out economic activity in Bulgaria from a permanent establishment.
Corporate tax is not paid by entities liable to taxation only with alternative taxes for the respective activity specified in Section Five of the CITA. These are the enterprises funded by the budget, the organizers of the gambling games specified in the CITA, and the entities engaged in ships’ operation activities. Pursuant to Article 218, Para. 2 of the CITA, the organizers of gambling games and the entities engaged in ships’ operation activities are subject to corporate taxation for all the remaining activities except for the ones subject to alternative taxation. Therefore, for the activities outside those subject to alternative taxation, these entities are subject to corporate taxation.
==> Laws
The corporate taxation is regulated by the Corporate Income Tax Act.
==> Tax base
Pursuant to Article 19 of the CITA, the tax base for assessment of the corporate tax is the taxable profit.
==> Tax rate
The tax rate for the corporate tax is 10% (Article 20 of the CITA).
==> Deadlines for declaring and payment
- by 30 June of the next calendar year – submitting the annual tax return;
- by 30 June of the next calendar year – paying the corporate tax after having deducted the advance payments made.
==> Declaring:
The annual tax return is submitted by the taxable entities or by their authorized representative in the territorial directorate of the National Revenue Agency where the entity is registered.
==> Download tax return:
Annual tax return as per Art. 92 of the CITA, with annexes and instructions for use.
Pursuant to Art. 92, Para. 3 of the CITA along with the tax return the annual report on operations must be submitted (according to per § 1, Item 56 of the Additional Provisions of the CITA, the annual report on operations is the report as per Art. 20, Para. 4 of the Statistics Act).
No annual report on operations is submitted by the taxpayers who have fulfilled simultaneously the following conditions:
- had not performed any activity during the year;
- had not reported income or expenses for the year according to the accounting legislation.
==> The tax return is submitted:
- in the office of the National Revenue Agency (NRA) where the taxable entity is registered
- through a licensed post services operator
- by Internet
If you own a universal electronic signature, you have to:
- fill in and submit an application for electronic filing of tax returns,
- fill in and make confirmation in your user profile in the “Electronic Filing of Tax Returns” system.
Pursuant to Art. 92, Para. 5 of the CITA, a taxable entity that submits an annual tax return and the annual report on operations by 31 March the next year electronically, and that pays the corporate tax due within the same period, can get a reduction of 1 % of the annual corporate tax due but not more than BGN 1,000.
==> Payment of the corporate tax
The tax is paid:
- via banks
- to state budget accounts for the NRA territorial directorate where the taxable entity is registered
The payment can be made in any bank, by filling in a payment order (payment slip) for payment to the budget.
Important! Usually the banks deduct a fee for the transfers. This lowest fee is the fee in the bank where the account of the respective NRA territorial directorate (office) is.
See the list of the banks servicing the accounts of the National Revenue Agency.
- by Internet
Internet payment requires having a debit card and registration at the E-pay website and NRA website.
- by postal order for tax payment
The postal order should contain the address and the name of the respective NRA territorial directorate (office), the postal code, as well as the amount due.
==> Advance payments for corporate tax
Advance payments are not made by:
- taxable entities whose net sales income for the previous year does not exceed BGN 300 000;
- newly incorporated taxable entities for the year of their incorporation, except for those that are newly established as a result of transformation as per the Commerce Act (BG).
There are monthly and quarterly advance payments for corporate tax. The payments are assessed based on taxpayer’s expected taxable profit for the current year.
Monthly advance payments – they are made by taxable entities whose net sales income for the previous year exceeds BGN 3 000 000.
Quarterly advance payments – they are made by taxable entities that have no obligation to make monthly advance payments. Notably, these are the taxpayers whose net sales income for the previous year is in the range between BGN 300 000,01 and BGN 3 000 000 inclusively.
Quarterly advance payments can be also made by taxpayers that are released from paying in advance. In this case the respective previsions for assessment, payment and declaring must be applied, but no penalty interest as per Art. 89 of the CITA is applicable to these taxpayers.
==> Deadlines for payment
- Monthly advance payments: for January, February and March – until April 15th, and for the months from April to December - until the 15th day of the current month;
- Quarterly advance payments: for the first and second quarter - until the 15th day of the month following the quarter, and for the third quarter – until December 15th. No quarterly advance payment is made for the fourth quarter.
==> Declaring
The advance payments are declared with the annual tax return (declaration) for the previous year.
Tax return (declaration) is also submitted in the case of changes (increase or reduction) of the amount of the advance payments declared with the annual tax return for the previous year. This is the declaration as per Art. 88 of the CITA for changes in the advance payments and as per Art. 87а, Para. 2 and 3 of the CITA for initial declaring of quarterly advance payments.
==> Download declaration:
Declaration as per Art. 88 of the CITA for changes in the advance payments and as per Art. 87а, Para. 2 and 3 of the CITA for initial declaring of quarterly advance payments.
==> Deadlines for declaring: there is no explicit deadline for submitting the declaration for changes in the advance payments, however, one can benefit from the changes in the payments only after the declaration has been submitted.
When initially declaring quarterly advance payments, the tax return (declaration) must be submitted within the deadline for making the first advance payment.
==> The tax return is submitted:
- at the National Revenue Agency office where the taxable entity is registered
- by mail with return receipt
- by Internet
==> Making the advance payments
See “Payment of the corporate tax” above.
==> Sanctions
According to Art. 261, Para. 1 of the CITA, a taxable person who does not submit corporate income tax return, does not submit the return in time, does not declare or declares incorrectly data or circumstances resulting in assessing the tax due in a smaller amount or in a wrongful reduction of, retention of or exemption from tax, shall be sanctioned with a penalty in the amount from BGN 500 to 3000. In case of repeated violation (§ 1, Item 44 of the Additional Provisions of the CITA) under Para. 1, the penalty shall be in the amount from BGN 1000 to 6000 (Art. 261, Para. 2 of the CITA).
Based on Art. 262 of the CITA, a taxpayer who does not submit an appendix to the annual tax return or declares in this appendix incorrect data or circumstances, shall be sanctioned with a penalty in the amount from BGN 100 to 1000. In case of repeated violation, the penalty shall be in the amount from BGN 200 to 2000.
According to the provisions of Art 263 of the CITA, a taxpayer who accounts an economic operation in contradiction to his accounting policy and this results in incorrect assessment of his financial and accounting result, shall be sanctioned with a penalty in the amount from BGN 100 to 1000 for every violation. In case of repeated violation, the penalty shall be in the amount from BGN 200 to 2000 for every violation.
A taxpayer who does not fulfil his obligations as per Art. 92, Para. 3 (to submit an annual report on operations), shall be sanctioned with a penalty in the amount from BGN 500 to 2000, and in case of repeated violation - in the amount from 1500 to 5000 (Art. 276 of the CITA).
According to Art. 278 of the CITA, the statements of violations established are composed by the National Revenue Agency (NRA) authorities, and the penal orders are issued by NRA’s Executive Director or by an official authorized by him.
The establishing of violations, as well as the issuing, appealing and execution of the penal orders are being made according to the Administrative Offences and Sanctions Act.