With its business-friendly environment, skilled workforce and access to the European market as a European Union (EU) member state and Schengen Zone member, it makes sense that Bulgaria is an attractive location for foreign-owned businesses.

If you are setting up a company or branch of a foreign-owned business in Bulgaria, it is vital you understand the relevant tax regulations. Staying up to date will mean avoiding penalties and inconveniences, so your business can continue running smoothly for many years to come.

In this article, we will discuss:

1. Tax in Bulgaria: The Basics
2. Direct taxes in Bulgaria
3. Indirect taxes in Bulgaria

To get true peace of mind and ensure you are well-versed on the very latest regulations affecting your business, get in touch. We will organize you a consultation with one of Leinonen Bulgaria’s tax and accounting experts, who specialize in the nuances of foreign-owned business in Bulgaria.

Tax in Bulgaria: The Basics

Taxable Profits in Bulgaria

Taxable profits are profits made from:

• Business operations
• Investing
• Chargeable gains
• Financing, leasing, etc.

Bulgaria-based international businesses are subject to paying taxes on profits from both Bulgaria and abroad, but businesses with a branch or office in Bulgaria are subject to paying tax only on profits made from its operations there.

Direct and Indirect Taxes in Bulgaria

There are two main categories of taxes that may apply to foreign-owned businesses in Bulgaria – direct and indirect.

Direct taxes are:

• Personal income tax on the revenue of individuals
• Corporate tax on annual tax returns
• Withholding tax

Indirect taxes are:

• Excise duties
• Value Added Tax (VAT)

Who is Considered a Bulgarian tax Resident?

Bulgarian tax residents are people:

• Who have a permanent address in Bulgaria
• Who reside in Bulgaria for more than 183 days across a 12 month period
• Who are sent abroad by the Bulgarian government or Bulgarian entities
• Who have their centre of vital interests in Bulgaria

What is the tax Year in Bulgaria?

The tax year in Bulgaria corresponds with the calendar year.

Double Taxation Agreements (DTAs)

Profit generated by a permanent establishment in Bulgaria is not subject to further tax in the home country in most DTAs. At present, Bulgaria has signed double taxation treaties with more than 65 countries, including Sweden, Poland, Belgium, the United Kingdom, and more.

For example, this applies to foreign investors who derive income from two different jurisdictions. Along with the double tax treaties, Bulgaria has also signed several exchange of information protocols. These allow for a clearer image of the legal entities requesting double taxation relief.

Direct Taxes in Bulgaria

Personal Income Tax

What is the Personal Income tax Rate in Bulgaria?

Personal income tax for Bulgarian tax residents sits at a flat rate of 10%, whether the person lives and works in Bulgaria or abroad. The tax rate for non-resident individuals is also 10%, but they are only taxed on income from sources in Bulgaria.

What About Dividends and Liquidation Quotas?

These are subject to a 5% tax rate when paid to either resident or non-resident individuals.

Corporate Income Tax

What do Companies in Bulgaria pay Corporate Income tax on?

Bulgarian local companies are taxed on their worldwide income in Bulgaria, while non-resident companies are taxed only on income generated within Bulgaria.

What is the Corporate Income tax Rate in Bulgaria?

Similarly to personal income tax, corporate income tax in Bulgaria is a 10% flat rate.

Who Pays Corporate Income tax in Bulgaria?

Taxable entities in Bulgaria are both companies incorporated under Bulgarian law, and non-resident companies generating income from sources in Bulgaria or through a permanent establishment.

When are Corporate Income tax Returns due?

Corporate tax returns are required by 30 June of the following year.

Annual Corporate Income Tax Return

The annual corporate income tax return must be submitted between 1 March and 30 June of the following year to the National Revenue Agency (NRA) territorial directorate competent for the place of registration of the taxable person. In practice, filing is performed electronically via the NRA’s online portal using a qualified electronic signature (QES), together with the mandatory annual activity report.

How is Corporate Income Tax in Bulgaria Paid?

Corporate income tax in Bulgaria is paid through advance tax instalments during the year, calculated on the basis of the company’s projected taxable profit for the current year.

The obligation to make advance payments depends on the company’s net sales revenue in the base year, as follows:

• No advance payments are required when net sales revenue is up to EUR 153,387 (BGN 300,000)
• Quarterly advance instalments apply when net sales revenue is between EUR 153,388 and EUR 1,533,875
• Monthly advance instalments apply when net sales revenue exceeds EUR 1,533,875

Newly established companies are exempt from advance corporate income tax instalments in the year of incorporation.

Any difference between the advance payments made during the year and the final corporate income tax due is settled upon submission of the annual corporate income tax return.

Tax losses may be carried forward for up to five consecutive years, subject to the conditions set out in Bulgarian tax legislation.

Tax on Corporate Expenses

Bulgaria imposes 10% annual tax on the following expenses:

• Business entertainment expenses
• Fringe benefits for employees and hired persons (e.g., expenses on supplementary voluntary social insurance, health insurance, and food vouchers)
• Expenses associated with own assets, leased assets, or assets provided for use by staff, workers, employees, and hired persons

Withholding Taxes

In Bulgaria, withholding tax (WHT) generally applies to certain types of income paid to non‑residents that do not carry on business through a permanent establishment (PE) in the country.

The main withholding tax rates are:

• Dividends and liquidation quotas – 5%
• Interest, royalties, technical services, and management services – 10%
• Capital gains derived from Bulgarian sources – 10% (unless an exemption or DTA relief applies)

Salaries are not subject to withholding tax. Employment income is taxed through payroll via social security contributions and 10% personal income tax.

Are There any Reductions or Exemptions for Withholding Taxes in Bulgaria?

Certain exemptions apply under EU law and Bulgarian tax legislation:

• Dividends and liquidation quotas paid to EU/EEA legal entities are exempt from withholding tax, provided that the payment does not qualify as a hidden profit distribution
• Interest and royalties payments are exempt when:
  • The recipient is an associated company resident in another EU Member State
  • A direct minimum holding of at least 25% exists
  • The holding has been maintained for at least two years
• These exemptions are applied in line with the relevant EU Directives and Bulgarian Corporate Income Tax Act provisions

Payments to non‑EU/EEA entities or to natural persons remain subject to Bulgarian withholding tax at the applicable rates.

Double Taxation Treaties (DTAs)

Where a Double Taxation Agreement exists between Bulgaria and the recipient’s country of tax residence, reduced rates or full exemptions may apply.

To benefit from treaty relief, the recipient must typically provide:

• A valid tax residence certificate
• Additional declarations as required by Bulgarian tax authorities

Withholding tax also applies to:

• Dividends and liquidation quotas
• Interest and royalties
• Franchising and factoring fees
• Management and technical services provided to Bulgarian companies
• Service fees paid to non‑resident providers without a PE
• Rental income
• Capital gains from Bulgarian sources

Terms of Payment

The deadlines for payment of withholding tax depend on the nature of the income and the residence status of the recipient:

• Three months from the beginning of the month following the decision to distribute income, where the recipient is resident in a DTA country
• One month from the beginning of the month following the decision in all other cases

These rules are governed by Articles 194 and 195 of the Corporate Income Tax Act (CITA).

Transfer Pricing

Transfer pricing rules apply and are applicable to all transactions between related parties. Guidelines recommend preparing and maintaining all relevant transfer pricing documentation. Taxpayers must prove that their transactions are negotiated according to arm’s length prices. If tax officials conclude that prices are not at arm’s length, they may recalculate profits and impose additional levies.

Indirect Taxes in Bulgaria

Excise Duties

The following groups are subject to excise duties:

• Alcoholic beverages
• Tobacco products
• Energy products and electricity

Some luxury products and other goods fall under excise tax, which is paid on the import of dutiable products or on the first sale of local products.

Customs Duties

International EU customs legislation applies directly in Bulgaria.

Value Added Tax (VAT)

VAT legislation in Bulgaria is largely aligned with EU VAT law. VAT does not apply automatically to all goods and services; instead, it is determined based on EU place‑of‑supply rules, which define where a transaction is deemed to take place for VAT purposes.

VAT Rates

The standard VAT rate in Bulgaria is 20%, but reduced rates can be applied to certain goods and services, for example:

• 9% VAT rate can be applied to things like hotels and delivery of books and periodicals
• 0% VAT rate can be applied to intra-community supplies and international transport

Some of the categories for reduced VAT rates contain restrictions (e.g., delivery of publications entirely or mainly intended for advertising are not subject to the reduced rate). For specific advice, speak to an expert on accounting and foreign-owned business in Bulgaria.

In 2026, additional categories—such as certain real‑estate transactions and financial services—are now included in taxable turnover for VAT registration purposes

Terms of Payment

• A tax period is one calendar month, unless otherwise specified
• Tax statements must be submitted by the 14^th day of the month following the tax period relevant to the statement
• If tax is payable, it should be paid to the relevant NRA Regional Directorate within the tax filing term specified above

VAT Registration

Registration under the Value Added Tax Act is mandatory when a company’s taxable revenue exceeds EUR 51,130 per calendar year (replacing the previous BGN 100,000 threshold) due to the 2026 VAT reform and Bulgaria’s euro adoption.

As of 2026, registration takes effect the day after the threshold is exceeded, regardless of NRA processing time, due to the new immediate‑registration rule. It must state the grounds for registration, and be submitted together with information about the taxable turnover for the current calendar year, since the 12‑month rolling period was abolished in 2026.

VAT Exemptions

The list of VAT exemptions is the same as in the EU directives.

Some examples of VAT-exempt goods and services are:

• Education
• Financial services
• Health, dental, hospital, and social welfare
• Gambling
• Welfare services
• International passenger transport
• Public broadcasting

SME VAT Regime (2026)

In 2026, Bulgaria introduced an EU‑harmonised SME VAT regime for businesses with an annual turnover of up to EUR 51,130, allowing them not to charge VAT and removing the right to deduct input VAT.

EU‑Wide SME Regime

From 2026, an EU‑wide SME VAT regime applies to businesses with up to EUR 100,000 cross‑border turnover, with clear rules preventing parallel use of the national SME regime and OSS.

Special Regimes for VAT Registration

• When an unregistered company provides or purchases services from another EU member state, the application must be submitted seven days before the service is rendered or received
• EU single One Stop Shop (OSS) VAT return for every taxable person not based in the country who provides digital, telecommunication, or radio and television broadcasting to recipients who are non-liable tax persons residing in Bulgaria – this regime was formerly known as MOSS

VAT Reporting

As discussed in ‘terms of payment’, companies registered for VAT in Bulgaria should declare and pay their VAT monthly by the 14^th of the following month. All sales invoices (including overseas) and credit notes received within the current month must be included. Purchase invoices may be included within the next 12 months.

VAT Refunds

The Bulgarian Tax Authority is required to refund recoverable VAT within four months (three months for offsetting and 30 days for effective refunding) after the declaration is submitted. A shorter procedure of VAT reimbursement is provided for intra-community dispatch and supply of goods.

Intra-community supplies of goods and services to recipients registered for VAT purposes in other EU member states should be included in VAT Information Exchange System (VIES) declarations.

VAT rules and regulations change often, and serious penalties apply for violating the VAT Act. To get peace of mind and make sure your business stays compliant, consult with a Bulgarian tax expert.

Get Informed on Tax in Bulgaria With Leinonen

Leinonen Bulgaria has been an indispensable ally to foreign-owned businesses in Bulgaria for over 16 years. Our close knit team of 11 local experts on accounting, payroll and tax in Bulgaria are here to support your next business venture.

Organize a consultation today to get true peace of mind and boost your success in the Bulgarian market.