A civil partnership is established by a contract for a partnership, as two or more persons agree to combine their activities to achieve a common business goal.
Most often, a civil partnership is terminated by achieving the objective of the company or with the expiration of the time for which the company has been formed. In these cases, if the company is at a profit, owes payment of a corporate tax, and the balance sheet profit is distributed among the partners.
This raises the question of accurately determining the source of income of the partners and whether it should be completed in an annual tax return.
When taxing the income of individuals, it is essential the reason, of the respective type of income on which it is accaunted / paid. The profit which is subject to distribution between the partners represents income from a “dividend”. A dividend is the income from participations, including from unincorporated companies, which category of companies also includes the civil partnership.
The final tax is levied on taxable income from dividends in favor of local and foreign individuals from a source in Bulgaria and of local individuals from a source abroad. The final tax on dividend income is determined on the gross amount, determined by the decision for distribution of a dividend.
The tax rate for determining the final income tax from dividends amounts to 5 percent.
The dividend income tax is deducted and paid by the enterprise – payer of the income, by the end of the month following the quarter in which the decision on dividend distribution was taken.
Dividend income earned by individuals from a source in Bulgaria is not subject to declaration in the annual tax return under the Personal Income Tax Act.
For advice in connection with the taxation of income from dividends you can contact our experts.