The latest research from KPMG tax consultants shows that Bulgaria is one of the top ten countries globally with the lowest tax rates. It is bettered only by tax havens like Hong Kong, the Bahamas, and Caymen Islands.
The effective tax rates are calculated using total income tax and social insurance costs over gross income before any deductions. The results factor in both the personal income tax rate and social security rates for workers earning 100,000 USD. The survey was conducted across 81 countries.
Overall the survey shows that the main area of tax rate changes in 2010 were in Europe. European citizens still pay the highest personal income taxes rates globally.
The low flat tax programmes from several Eastern European governments including Bulgaria are amongst the most competivie in the world. However in Western European the trend is towards tax increases. Last year Ireland raised its top tax rate by 1% and released several new salary levies. In the UK the top rate increased by 10% and has now reached the level of 50% which is the highest income tax rate in the world.
After Europe, the next highest tax rates are in the Asia-Pacific region, but the difference continues to widen.
The Bulgarian government introduced a 10% flat tax in 2008 and this applies to all income levels. However there is no tax free level. The old tax system in Bulgaria had several tax rates – varying from 20% to 24% . The new flat 10% rate applies to both individuals and companies. Most economists believe that the 10% tax rate has boosted the Bulgarian economy and resulted in significant inward foreign investment in Bulgaria.
The Bulgarian social security insurance is 13% for employees and employers contribute an additional 20.5% per employee. The maximum social insurance income level is fixed at 2000 BGN per month. Above this level social insurance is not applicable. The maximum insurable income is capped at approximately BGN 2,000 per month.