Tax deductible depreciation is available on all assets costing over BGN 700 used in the enterprise concerned for more than one accounting period. The applicable rate varies according to the type of asset from 4% (for buildings, equipment, transmission devices, energy carriers, communication lines) up to 50% (for computers and software). Enterprises may change their tax depreciation rates every calendar year but only within a maximum allowable range depending on the asset’s type. The rates of depreciation included the business accounts are ignored for the purposes of taxation.
Inventories (raw materials, goods, production and production in progress) are valued at the lower of their delivery value and net realisable value. Expenses arising from devaluation are ignored for the purposes of taxation. Defined value, FIFO, average value or LIFO are all acceptable methods of valuation for tax purposes.
Dividends received from companies resident in Bulgaria and other EEA states are exempt from taxable income.
The tax loss for the current year may be carried forward for the next five years. The amount utilised each year cannot exceed the tax profit for that year. Losses from foreign sources are deducted only from the profits arising from the same source with the exception of losses or sources of income from another EU Member State. Losses may not be carried forward in the case of certain corporate reconstructions.
FOREIGN SOURCE INCOME
Resident companies are taxed on their worldwide income and there are no special rules relating to the taxation of overseas income. Foreign legal entities are subject to corporate tax on profits realised from trading profits carried on by permanent establishments within the Republic of Bulgaria.
Incentives are given to encourage investment in municipalities with high unemployment, agricultural production, the development of the fund market and donations to charity.