Capital Gains Taxation in Bulgaria
In Bulgaria, capital gains are subject to taxation under the Corporate Income Tax Act (CITA) and the Personal Income Tax Act (PITA). The tax treatment of capital gains depends on the type of asset sold, the holding period, and the taxpayer's status.
Definition of Capital Gains
Capital gains in Bulgaria are defined as the profit realized from the sale or disposal of capital assets. Capital assets include:
- Real estate properties
- Stocks and securities
- Bonds and debentures
- Business assets
Calculation of Taxable Capital Gains
Taxable capital gains are calculated as the difference between the selling price of the asset and its acquisition cost. The acquisition cost includes the purchase price, any expenses incurred in acquiring the asset, and any improvements made to the asset during ownership.
Tax Rates
Capital gains are taxed at different rates depending on the type of asset sold and the holding period.
- Real estate properties: Capital gains from the sale of real estate properties are taxed at a flat rate of 10%.
- Stocks and securities: Capital gains from the sale of stocks and securities are taxed at a flat rate of 10%.
- Bonds and debentures: Capital gains from the sale of bonds and debentures are taxed at a flat rate of 10%.
- Business assets: Capital gains from the sale of business assets are taxed at the corporate income tax rate of 10%.
Holding Period
The holding period for capital gains tax purposes is one year. If an asset is held for less than one year, the gain is considered a short-term capital gain and is taxed at the ordinary income tax rate. If an asset is held for one year or more, the gain is considered a long-term capital gain and is taxed at the preferential capital gains tax rate.
Legal Framework
The taxation of capital gains in Bulgaria is governed by the following laws:
- Corporate Income Tax Act (CITA)
- Personal Income Tax Act (PITA)
Policy Objectives
The capital gains tax system in Bulgaria aims to:
- Generate revenue for the government
- Encourage investment and economic growth
- Promote fairness in the tax system
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