Taxation of income from shares
Taxation of income from shares
Question:
Hello!
I sell shares as an individual. It's not on a regulated market, so I owe 10% tax on profits (less losses) from all trades. According to the law, "realized profit [...] is determined by reducing the sale price by the acquisition price of the financial asset" (Tax Tax Act, Art. 33(4)). How are these terms "sale price" and "acquisition price" defined? For example: I buy 10 shares at $10 (total $100), pay broker commissions $1, expense $101 ($10.10 / share) - sell the same 10 shares at $20 (total $200), pay broker commissions $2, income $198 ($19.80 / share) (I realize a profit of $97 = $9.7 / share) On what "profit" do I owe 10% tax:
1. $100 (without deducting commissions $200-$100)
2. $99 (deducting only the commission in the acquisition price $200-$101);
3. $97 (deduct both commissions paid, $198-$101).
In several places on the Internet, I see it mentioned that, unlike most other countries, the correct one for Bulgaria is (1), but I can't find anything in the law. Can $101 ($10.1 per share) be considered "acquisition cost", as "acquisition cost" includes all directly related costs, or does it mean the exact opposite in Bulgarian practice?
Thanks in advance!
Answer:
Hello,
We will start from there that if your sales are more than 2-3 per month, then you are doing business. Accordingly, if you operate as a trader without being registered as such, then according to the VAT Act you should be taxed according to the order in which Sole Traders are taxed. This means you owe 15% tax on the profit you make. It is defined as deducting from the value of the sold financial assets the value at which they were purchased.
In addition to the tax in question, you also owe social security contributions of 27.8%.
Regarding the determination of profit - you can deduct both the commission on the purchase and the commission on the sale. Also, the due insurance contributions are considered an expense.
We hope we have been helpful!
Greetings!