TAXATION   VAT rates: 20% Taxable supplies and imports 7% Certain specific hotel services 0% Intra–Community supplies, exports and other supplies explicitly listed in the law Excise duties Excise duties are levied on certain domestic or imported goods such as alcoholic beverages, cigarettes, fuel oils, fuel, electricity, combustible gas, certain motor vehicles etc. License is required for the production/ import of excise good. Different excise rates apply for the above goods. The law provides for special provisions for exemption of excise duties. Corporate Income Tax Corporate income tax in Bulgaria applies in a single rate of 10%. Payroll related taxes and securities As of 1 January 2008 a general flat tax rate of 10% has been introduced. A different flat tax rate is applied for some other types of income – for example 5% for dividends. Social security and health insurance Mandatory social security and health insurance contributions are due up to a maximum monthly insurable income of BGN 2,000. Social security contributions are within the range of 27.4–28.1%. Health insurance contributions are at the rate of 6%. They are split between employer and employee in a ratio of 60:40. Mandatory contributions made by the individual in Bulgaria or abroad are tax deductible Allocation of social security installment liability YEAR For the insurer For the insured 2007 65% 35 % 2008 60% 40%   2009 55% 45%   2010 50% 50%   Depreciation The depreciable assets are divided into several categories: • Category I: solid buildings, including investment properties, plant, transmission facilities, electric power carriers, communication lines; • Category II: machinery, process equipment, apparatus; • Category III: means of transport excluding automobiles; surfacing of roads and of runways; • Category IV: computers, computer peripheral equipment, software, and right to use software, mobile phones; • Category V: automobiles; • Category VI: tax tangible and intangible fixed assets whereof the period of use is restricted according to contractual relationships or a legal obligation; • Category VII: all other depreciable assets. The annual rate of tax depreciation is determined on a single occasion for the year and may not exceed the following amounts: Maximum annual depreciation rates for corporate tax purposes Buildings, facilities, transmitting devices, etc.              4% Machinery, production equipment, appliances 30% Vehicles, road and runway surfaces 10% Computers, software, mobile phones 50% Automobiles 25% Tax depreciable tangible and intangible assets with legally restricted term of use Up to 33⅓% All other depreciable assets 15%   Local taxes and fees Local taxes and fees are determined and collected by municipalities. Real estate tax 0.1%-0.3% Garbage collection fees Determined  at a municipal level Transfer tax /transfer of real estate property and automobiles/ 2%-4% Donation tax and inheritance tax 0.7%–10% of the property value Motor vehicles tax depending on the type of the vehicle and its technical characteristics   INCENTIVES • A job creation tax incentive is applicable to companies hiring staff in municipalities with unemployment exceeding by 50% the average unemployment rate for Bulgaria • Production companies investing in municipalities with unemployment exceeding by 35% the average unemployment rate for Bulgaria are entitled up to 100% corporate income tax exemption. • A reduction of the corporate tax up to 10% of the value of qualifying assets is applicable provided the acquired assets are used in municipalities with unemployment exceeding by 50% the average unemployment rate for Bulgaria. • Licensed real estate investment trusts and collective investment schemes are exempt from corporate tax