Certain types of income originating from Bulgaria and payable to foreign entities (if not realised through a permanent establishment) or individuals are subject to a 10% withholding tax. The types of income are defined in CITA as:
- technical services remunerations
- consulting services remunerations
- marketing services remunerations
- managment services remunerations
- dividends and liquidation proceeds
- interest, including such under finance leases
- payments under operating leases, franchising and factoring
- capital gains from sale of immovable property, stakes in local companies, securities and financial assets.
Capital gains from transactions with shares in public companies and tradable rights in such shares realised on a regulated Bulgarian stock market are not subject to withholding tax.
Withholding tax rates under double tax treaties between Bulgaria and the countries listed below:
|country||dividends %||interest %||royalties %|
|Albania (note 3, 6, 9)||5/15||10/0||10|
|Armenia (note 1, 6)||5/15||10/0||10|
|Austria (note 12)||0||0||0|
|Belarus (note 6)||10||10/0||10|
|Belgium (note 6)||10||10/0||5|
|Canada (note 9, 16)||10/15||10||10|
|China (note 2, 6, 9)||10||10/0||7/10|
|Cyprus (note 3, 9)||5/10||7||10|
|Czech Republic (note 9, 11)||10||10/0||10|
|Denmark (note 3)||5/15||0||0|
|Finland (note 4, 9, 12)||10||0||0/5|
|France (note 5)||5/15||0||5|
|Georgia (note 6)||10||10/0||10|
|Hungary (note 6)||10||10/0||10|
|India (note 6)||15||15/0||15/20|
|Indonesia (note 6)||15||10/0||10|
- The lower rate applies to dividends paid out to a non-resident, which is the direct owner of at least USD 40,000, forming part of the capital of the company making the payment.
- The withholding tax on royalties for use (or right to use) of industrial, commercial or scientific equipment is reduced to 7%.
- The lower rate applies to dividends paid out to a foreign company, which controls directly at least 25% of the share capital of the payer of the dividends. In the specific cases of the different countries more requirements may be in place.
- There is no withholding tax on royalties for the use (or the right to use) of scientific or cultural works.
- The lower per cent rate applies to dividends paid out to a foreign company, which controls directly at least 15% of the share capital of the payer of the dividends.
- There is no withholding tax on interest when paid to public bodies (Government, the BNB, state financial or non-financial institutions).
- 5% royalties are applicable in case the Netherlands applies withholding tax under their domestic law.
- Up to 10% branch tax may be imposed on permanent establishment profits.
- The 15% rate applies in specific cases pointed out in the respective treaty.
- The zero rate on interests applies, if the loan is extended by a bank.
- The zero rate on interest applies if the interest is paid to public bodies (Government, Municipality, the BNB or any financial institution owned entirely by the Government), to residents of the other country when the loan or the credit is guaranteed by its Government, or if the loan is extended by a company for any equipment or goods
- The Council of Ministers has stated its intention to re-negotiate the DTTs with Austria, Malta and Finland.
- 5% on royalties will apply if the Swiss Confederation introduces in its domestic law withholding tax on royalties paid to non-residents.
- The 10% rate on interest applies if the interest is received from a financial institution, including an insurance company.
- The 5% rate on royalties applies if the royalties are paid for the use of copyright for literal, art or scientific work.
- The lower rate applies to dividends paid out to a foreign company, which controls directly at least 10% of the share capital of the payer of the dividends.
Under some double taxation treaties technical service payments fall within the definition of royalty payments and are taxed accordingly.