Bulgaria is a state in south-eastern Europe, on the Black Sea coast, part of the European Union (EU). The main sectors of the economy are agriculture, industry and tourism. The income tax rate is one of the lowest in Europe – 10% Non-distributed profit of a Bulgarian company is not taxed. Incoming dividends from other countries may be taxed in Bulgaria at 0% rate, depending on the paying country. Outgoing dividends to non-EU countries are taxed at 5% and to EU countries at 0%. Financial statements are required to be filed with the state authorities for all companies that operate, auditing is compulsory if certain criteria are met.
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Accounting of Bulgarian companies is regulated by the Accountancy Act («Закон за счетоводството»).
Bulgarian companies must make financial statements on the basis of the International Financial Reporting Standards (IFRS) or on the basis of the national Bulgarian accounting standards for small and medium-sized companies.
A company’s size is determined by the following criteria:
The company must not exceed at least two of the three criteria on 31 December of the reporting period.
Enterprises that prepare and present their annual financial statements on the basis of the national financial reporting standards for micro, small and medium-sized companies apply simplified form of financial reporting.
Annual financial statements include the following:
Annual financial statements of individual entrepreneurs whose net sales revenue does not exceed 100 000 BGN per year can consist of only a profit and loss statement.
Accounting records of legal entities shall be made in Bulgarian and with the use of Arabic numerals and in the Bulgarian currency, levs (BGN). In the case of transactions made in a foreign currency with foreign counterparties, accounting records can also be drawn up in the relevant foreign language and foreign currency. If a transaction is made in a foreign currency, its equivalent in levs shall be calculated by applying to the amount in the foreign currency the central exchange rate of the Bulgarian National Bank on the date of the transaction.
All financial statements and accounting records that are subject to tax inspections (invoices, bank statements, etc.) must be kept for 10 years. All salary related documents must be kept for 50 years, and all other documents must be kept for 3 years.
Audit of Bulgarian companies is regulated by the Independent Financial Audit Act of 2016.
In accordance with article 9 of the Act, audit must be conducted in accordance with the International Standards on Auditing and other standards issued by the International Auditing and Assurance Standards Board (IAASB).
According to the Act, financial statements of the following are subject to audit:
1) companies that exceed at least two of the following criteria:
2) medium-sized and large enterprises;
3) public interest entities (PIEs), such as financial and credit institutions, pension funds and insurance companies;
4) joint stock companies and partnerships limited by shares;
5) consolidated financial statements and financial statements of entities included in consolidation.
In accordance with the Accountancy Act of Bulgaria, companies must publish their annual financial statements in the Commercial Register by 30 June of the calendar year following the reporting period.
Sanctions for failure to comply with the above norm: a fine of 200 to 3 000 BGN, and imposition on the enterprise of a monetary penalty of 0,1% to 0,5% of the net sales revenue for the reporting period to which the unpublished financial statements are related, but not less than 200 BGN.
An enterprise (parent enterprise) shall make consolidated financial statements when:
A parent enterprise shall not draw up consolidated financial statements when the sum of indicators (that are subject to consolidation) of the enterprises in the group that are subject to consolidation, according to their annual financial statements made on 31 December of the current year does not exceed two of the following criteria:
The component parts of consolidated financial statements are:
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