The Flat Tax is Implemented in Bulgaria

January 2, 2008

By Alvin Rabushka

Effective January 1, 2008, Bulgaria joins the raft of Central and Eastern European countries which have adopted the flat tax.

Bulgaria’s new 10% flat-rate personal income tax replaces the previous system of three graduated rates of 20, 22, and 24%. The new 10% flat tax applies to the first leva (BGN) of income, eliminating the previous annual tax-free threshold of 2,160 leva. ($1=BGN 1.34)

In 2006 the government reduced the corporate profits tax from 15% to 10%. Bulgaria now imposes a uniform 10% flat rate on personal and corporate income. To minimize double taxation, a 5% rate was imposed on dividends and capital gains. Sole proprietors are assessed at a flat rate of 15% on net income.

The next goal is a reduction in the social security tax to 10%.