Bulgaria Tax Regime

Bulgaria operates one of the simplest and lowest-rate tax systems in the European Union: a flat 10% corporate income tax, a flat 10% personal income tax and a 5% dividend withholding tax for individuals and non-EU corporate shareholders. Residents are taxed on worldwide income; non-residents on Bulgarian-source income through a permanent establishment or by withholding. The system is aligned with the EU Parent-Subsidiary, Interest-Royalties and Anti-Tax-Avoidance Directives and with OECD standards on transfer pricing and the Pillar Two global minimum tax, which Bulgaria has implemented from 2024. A landmark structural change is the adoption of the euro on 1 January 2026, converting all tax thresholds from the lev at the fixed rate of BGN 1.95583 per euro.

1.1 Sources

Primary legislation includes the Corporate Income Tax Act, the Personal Income Tax Act, the Value Added Tax Act, the Local Taxes and Fees Act and the Tax and Social Security Procedure Code, administered by the National Revenue Agency (NRA).

1.2 Recent developments

Bulgaria joined the euro area on 1 January 2026; tax bases, thresholds and returns are now denominated in euro, with transitional dual-display and rounding rules. Bulgaria transposed the EU global minimum taxation directive with effect from 1 January 2024, introducing a domestic top-up tax (QDMTT) and an income inclusion rule for groups above the EUR 750 million revenue threshold — significant for a jurisdiction whose headline rate of 10% sits well below the 15% minimum. Mandatory transfer pricing documentation rules, SAF-T-style digital reporting initiatives and the VAT registration threshold (EUR 51,130) round out recent changes. The 10%/10% flat-rate architecture itself has remained stable for over a decade and a half.

Headline statutory corporate income tax rate for a resident company. Where sub-national (state, provincial, cantonal or municipal) corporate taxes apply, the combined rate reported by the OECD is shown. Projected 2026–2028 rates carry the current rate forward unless a change is already enacted or officially scheduled. As-of 2026.

Top marginal statutory personal income tax rate on employment income for a resident individual. Where sub-national (state, provincial, cantonal or municipal) income taxes are a standard part of the system, the combined top rate is shown. Projected 2026–2028 rates carry the current rate forward unless a change is already enacted or officially scheduled. As-of 2026.

2.1 Rates and residence

Corporate income tax applies at a flat rate of 10% — among the lowest in the EU — with no provincial or local corporate income taxes. Companies incorporated in Bulgaria (principally the OOD/EOOD limited liability company and the AD joint-stock company) are residents taxed on worldwide income; non-resident companies are taxed on Bulgarian-source income attributable to a permanent establishment or collected by withholding. Alternative regimes replace CIT in narrow sectors: a 15% alternative tax on certain telecom-priced gambling games, fixed-sum taxes on gaming machines, and a tonnage-based 10% alternative tax for commercial maritime shipping operators. Online gambling and most land-based betting are taxed under the standard 10% CIT.

Bulgaria also levies one-off expense taxes at 10% on certain booked expenses in lieu of shareholder-level taxation: representative and entertainment expenses, certain social benefits provided to staff, and expenses connected with the personal use of business assets. These expense taxes are themselves deductible.

2.2 Dividends and participation exemption

Dividends received by a Bulgarian company from another Bulgarian company or from a company resident in the EU/EEA are excluded from taxable income without any minimum holding percentage or period — a broad exemption by regional standards. Dividends from third-country subsidiaries are included in taxable income and taxed at 10%, generally with a foreign tax credit under domestic law or the applicable treaty. There is no general participation exemption for capital gains: gains on share disposals are taxed at 10%, except gains on shares traded on a regulated market in the EU/EEA, which are exempt (and corresponding losses non-deductible).

2.3 Income determination and deductions

Taxable profit starts from the accounting result under applicable accounting standards (IFRS or national standards) and is adjusted by statutory increases and decreases. Business expenses are deductible if incurred for the activity and properly documented; non-deductible items include unrelated or undocumented expenses, hidden profit distributions (which can also trigger dividend treatment and penalties), fines, and shrinkage beyond norms. Tax depreciation follows statutory categories with maximum annual rates — for example 4% for buildings, 30% for machinery (up to 50% for certain new manufacturing investment), 50% for computers and software, 25% for vehicles, and 15% as a general residual category. The tax depreciation plan is kept separately from accounting depreciation.

2.4 Interest limitation

Two parallel limitations apply. Under the ATAD-based rule, exceeding borrowing costs are deductible only up to 30% of tax EBITDA, with a EUR 3 million safe harbour and indefinite carryforward of restricted amounts. Alongside it, the older thin-capitalisation rule restricts deduction of interest where debt exceeds three times equity (broadly, restricted interest is deductible up to 75% of EBIT), also with carryforward relief. Bank borrowings and finance leases are outside thin capitalisation unless between related parties. Structures must be tested against both rules, with the more restrictive outcome applying in the year.

2.5 Losses

Tax losses may be carried forward and offset against taxable profits over the following five consecutive years, in the order incurred and up to the full amount of annual profit; there is no carryback. Foreign-source losses from treaty-exemption jurisdictions may only be offset against profits from the same source. There are no specific change-of-ownership forfeiture rules, but loss-motivated reorganisations are policed under general anti-abuse principles.

2.6 Group taxation

Bulgaria has no fiscal unity or group consolidation regime: each company is taxed on a stand-alone basis, and losses cannot be surrendered between group members. Group relationships nonetheless matter for transfer pricing, thin capitalisation, the hidden-profit-distribution rules and the withholding exemptions under the EU directives. Cross-border group financing and licensing therefore require careful pricing support even between wholly-owned affiliates.

2.7 Controlled foreign companies

Under ATAD-based CFC rules, a Bulgarian taxpayer holding (alone or with related parties) more than 50% of the votes, capital or profit rights of a foreign entity or permanent establishment includes the CFC's undistributed profits in its tax base where the foreign entity's actual corporate tax paid is lower than half the Bulgarian tax that would have been charged on the same profits. An exemption applies where the CFC carries on substantive economic activity supported by staff, equipment, assets and premises. Attributed profits carry a credit for the foreign tax paid and are excluded again on actual distribution.

2.8 Transfer pricing

Related-party transactions must be at arm's length, applying the OECD-consistent methods in the domestic ordinance. Mandatory documentation applies to larger taxpayers: a local file must be prepared by companies exceeding thresholds (broadly, balance-sheet assets above BGN 38 million and net sales above BGN 76 million — now euro-converted — with related-party transaction materiality thresholds), together with a group master file. Country-by-country reporting applies to groups with consolidated revenue of EUR 750 million or more. The local file is prepared by the corporate return deadline and produced on request; penalties for missing documentation are meaningful. Advance pricing agreements as such are not available, though general advance rulings offer limited comfort.

2.9 Incentives

The flagship incentive is CIT retention of up to 100% of the tax on profits from manufacturing activities carried out in municipalities with unemployment significantly above the national average, subject to EU State-aid conditions, continued operation and reinvestment requirements. Accelerated depreciation (up to 50%) is available for new manufacturing equipment and for assets used in R&D. Additional support takes the form of employment-linked incentives, investment-class certification under the Investment Promotion Act (administrative fast-tracking, land acquisition support) and EU-funded grant schemes. There is no patent box and no general R&D super-deduction.

2.10 Pillar Two

Bulgaria implemented the EU minimum taxation directive from 1 January 2024, applying an income inclusion rule and — critically for a 10% jurisdiction — a qualified domestic minimum top-up tax (QDMTT) that collects the difference up to the 15% effective minimum locally for in-scope groups (consolidated revenue of at least EUR 750 million in two of the previous four years). The undertaxed profits rule applies from 2025. Transitional CbCR safe harbours are available for early years. Bulgarian subsidiaries of large multinationals should expect a materially higher effective rate than the 10% headline, plus standalone registration, data and top-up return obligations; purely domestic and mid-sized groups remain at 10%.

2.11 Branch income and reorganisations

A Bulgarian branch (permanent establishment) of a foreign company is taxed at 10% on attributable profits, determined under arm's-length attribution principles; there is no branch profits or remittance tax, so after-tax branch profits can be repatriated without further Bulgarian tax. Domestic and cross-border mergers, demergers, transfers of assets and share-for-share exchanges can qualify for tax-neutral treatment under the Merger Directive-based provisions of the Corporate Income Tax Act, with carryover of tax values, provided Bulgarian taxing rights are preserved; loss carryforwards of the transferring company generally do not transfer in domestic reorganisations. Exit taxation applies at fair value on transfers of assets or business out of Bulgarian taxing jurisdiction, with EU/EEA instalment payment over five years.

3.1 Residence and rates

Individuals are Bulgarian tax residents if they have a permanent address in Bulgaria (unless their centre of vital interests is abroad), stay more than 183 days in any 12-month period, or have their centre of vital interests in Bulgaria. Residents are taxed on worldwide income; non-residents on Bulgarian-source income. The hallmark of the system is the flat 10% rate on aggregate taxable income — employment, civil contracts, rental and most other income — with no progressive schedule and no municipal income tax. Sole traders are taxed at 15% on business profits. Statutory deductions simplify compliance: 25% notional expenses for freelance/civil-contract income, 10% for rental income, and targeted reliefs for children, disability, voluntary insurance and mortgage interest for qualifying first-home families.

3.2 Capital income and real estate

Dividends and liquidation proceeds received by resident individuals are taxed at a final 5% withholding. Interest on bank deposits is taxed at a final 8% (bank-withheld); other interest is generally taxed at 10%. Capital gains on securities are taxed at 10%, except gains on disposals through a regulated market in the EU/EEA, which are exempt. Gains on real estate are taxed at 10% on the gain after 10% notional costs, with exemptions for one residential property held more than three years and up to two properties held more than five years. Rental income bears 10% tax after the 10% notional expense deduction. There is no separate net wealth tax.

3.3 Social security and payroll

Aggregate social security and health insurance contributions amount to roughly 32.7–33.4% of insurable income (depending on the labour-category risk class), split approximately 60/40 between employer and employee, and are capped at the maximum monthly insurable income (approximately EUR 2,100–2,200 per month following euro conversion, indexed annually). Contributions cover pensions, general illness and maternity, unemployment, work accident and the 8% health insurance. Employers withhold payroll tax and contributions monthly, remitting by the 25th of the following month. The combination of the cap and the 10% flat tax keeps the marginal all-in burden on high salaries among the lowest in the EU.

3.4 Inbound individuals

Bulgaria offers no special expatriate regime; the flat 10% rate is the attraction. Non-residents suffer 10% final withholding on most Bulgarian-source income (5% on dividends), with EU/EEA residents able to opt for resident-style recalculation with deductions. Inheritance and gift taxes are municipal and modest — inheritances to spouses and direct-line relatives are exempt, and other transfers bear roughly 0.4% to 6.6% depending on relationship and municipality. Property transfers attract municipal transfer tax of 0.1% to 3%. Treaty tie-breakers and EU social security coordination govern cross-border commuters and posted workers.

Domestic withholding on payments to non-residents applies at 5% on dividends and liquidation quotas (0% where the recipient is a company resident in the EU/EEA, without minimum holding conditions) and 10% on interest, royalties, technical, consultancy and management service fees, rents and capital gains not otherwise exempt. The EU Interest-Royalties Directive eliminates withholding on qualifying intra-group interest and royalties paid to associated EU companies (25% capital link). Bulgaria's roughly 70 tax treaties typically reduce dividends to 0–10%, interest to 0–10% and royalties to 0–10%; treaty relief above a de-minimis threshold (approximately EUR 250,000 of annual income per payer) requires advance clearance from the NRA, below it self-assessment with a residence certificate suffices.

Withholding tax is due by the end of the month following the quarter of accrual, with quarterly withholding returns. Non-residents from the EU/EEA may recalculate tax on a net basis annually. Capital gains of non-residents on Bulgarian shares and real estate are collected by self-assessment where no withholding agent exists. Anti-abuse: directive and treaty benefits are denied to arrangements lacking economic substance under the GAAR and the principal-purpose test in treaties modified by the multilateral instrument; the NRA increasingly scrutinises beneficial ownership on intra-group interest and royalty flows.

5.1 General anti-abuse and hybrids

The Corporate Income Tax Act contains an ATAD-conforming general anti-abuse rule disregarding non-genuine arrangements whose main purpose is a tax advantage, alongside long-standing domestic rules on tax evasion through related-party dealings and hidden profit distributions (which are recharacterised as dividends, taxed and penalised). Hybrid mismatch rules neutralise deduction/non-inclusion and double-deduction outcomes involving hybrid instruments, entities and permanent establishments within the EU and with third countries, by denying deductions or forcing inclusions in the prescribed order.

5.2 Exit taxation and disclosure

Exit tax applies on transfers of assets, a business or tax residence out of Bulgaria, taxing the difference between market value and tax value, with five-year instalments for EU/EEA transfers. DAC6 mandatory disclosure of reportable cross-border arrangements applies with standard hallmarks and penalties; DAC7 platform-operator reporting and CRS/FATCA financial-account reporting are in force; public country-by-country reporting applies to large multinationals under the EU directive. Bulgaria has ratified the multilateral instrument, so covered treaties carry the principal-purpose test. The NRA participates actively in EU joint audits and exchange-of-information networks.

6.1 VAT

VAT follows the EU VAT Directive: the standard rate is 20%, with a 9% reduced rate for hotel accommodation, books, baby food and certain supplies, and 0% for intra-Community supplies and exports. Mandatory registration applies once taxable turnover exceeds EUR 51,130 (BGN 100,000) in the calendar year, with voluntary registration below and immediate registration for intra-EU acquisitions above the threshold. Returns and ledgers are filed monthly by the 14th of the following month, with payment by the same date; OSS/IOSS schemes, reverse charge and the EU small-business scheme apply. Input VAT is recoverable for taxable activities, with a 20-year adjustment period for real estate and 5 years for other capital goods.

6.2 Transaction, payroll and other taxes

Local taxes are municipal: annual real estate tax of 0.01% to 0.45% of the tax value, transfer tax of 0.1% to 3% on property and vehicle transfers, vehicle tax, and tourist and waste-collection fees. There is no stamp duty on share transfers and no capital duty. Excise duties apply to energy products, electricity, tobacco and alcohol under the EU framework. Employers bear the employer share of social contributions (roughly 19% including the accident fund) but no separate payroll tax. A 10% one-off tax applies to entertainment, certain social and personal-use expenses at company level. Insurance premium tax is 2%. There is no net wealth tax.

7.1 Filing, assessment and audit

The tax year is the calendar year for both companies and individuals. The annual corporate return is filed electronically between 1 March and 30 June of the following year, together with the annual activity (statistical) report, and the balance of tax is paid by 30 June. Advance instalments are based on forecast taxable profit: monthly where prior-year net sales exceed approximately EUR 1.5 million (converted from BGN 3 million), quarterly between roughly EUR 150,000 and that level, and none below — with interest charged where the forecast falls materially short of the outturn. The NRA administers audits under the Tax and Social Security Procedure Code; the general limitation period is five years from the year following the year the tax fell due, capped at ten years absolute.

7.2 Rulings, appeals and penalties

Assessment acts are appealed first administratively before the NRA appellate directorate (a mandatory step), then before the competent Administrative Court and, on points of law, the Supreme Administrative Court; EU-law questions can be referred to the Court of Justice. Advance rulings exist as general written opinions of the NRA, which bind the administration when facts are fully disclosed but offer less certainty than formal APA regimes. Interest for late payment accrues at the statutory rate (base rate plus 10 points); administrative penalties apply for late filing, documentation failures and evasion, with criminal exposure for large-scale fraud. Mutual agreement procedures and the EU tax dispute resolution directive address double taxation.

Taxpayers under the quarterly instalment regime skip a fourth-quarter instalment (the December payment is the third); year-end true-up occurs with the annual return. Corrections to a filed corporate return are permitted once, by 30 September of the same year, without penalty. Statutory financial statements are published with the Commercial Register by 30 September.

9.1 Entity choice

The OOD (limited liability company) — or its single-member variant EOOD — is the standard vehicle: minimum capital of only BGN 2 (now EUR 1), one or more managing directors, and full CIT status. The AD (joint-stock company) requires BGN 50,000 (approximately EUR 25,565) capital and suits regulated businesses and capital raising. Branches of foreign companies are registrable and taxed at 10% on attributable profits with no remittance tax. Partnerships exist but are corporate taxpayers in Bulgaria rather than transparent, an important difference from many Western European systems. Sole traders bear 15% tax and are used mainly for small local businesses.

9.2 Structuring and incentives

Bulgaria is attractive as an operating and shared-services location: 10% CIT, 0% withholding on dividends to EU/EEA parents, broad inbound dividend exemption, and low labour taxation given the contribution cap. Manufacturing in high-unemployment municipalities can reduce CIT to zero under the retention incentive, subject to State-aid conditions. Financing structures must clear both the 30% EBITDA limitation and 3:1 thin capitalisation, and intra-group services and royalties require robust transfer pricing files given NRA focus on beneficial ownership and substance. Groups within Pillar Two scope should model the QDMTT, which claws the effective rate up to 15% and dilutes the headline advantage.

9.3 Worked effective-rate illustration

A Bulgarian EOOD earns EBITDA of EUR 2,000,000, books depreciation of EUR 300,000 and net interest expense of EUR 200,000. The interest is fully deductible (below the EUR 3 million ATAD safe harbour and within thin-capitalisation capacity). Taxable profit is 2,000,000 − 300,000 − 200,000 = EUR 1,500,000. CIT at 10% is EUR 150,000, an effective corporate rate of 10.0%. If the after-tax profit of EUR 1,350,000 is distributed to a resident individual shareholder, dividend tax of 5% applies — EUR 67,500 — giving a combined burden of 150,000 + 67,500 = EUR 217,500, i.e. 217,500 / 1,500,000 = 14.5% on distributed profits. A distribution to an EU/EEA parent company instead bears 0% withholding, leaving the total Bulgarian burden at the 10% corporate layer.

9.4 Compliance

Expect fully electronic filing with the NRA (qualified e-signature), monthly VAT and payroll cycles, annual financial statements published with the Commercial Register, transfer pricing documentation above the thresholds in section 2.8, DAC6 monitoring, and beneficial-ownership register filings. Currency conversion housekeeping from the 2026 euro changeover — contract repricing, payroll systems, historical thresholds — remains a practical theme. Large groups should budget for Pillar Two registration, GloBE data collection and QDMTT computations even where transitional safe harbours apply.