Bulgarian Holding Company Regulations

Published on September 30, 2025 and written by Cyril Jarnias

Bulgaria, through its strategic position in Eastern Europe, offers a diverse and attractive legal environment for investors aspiring to create holding companies. Bulgarian holding company regulations stand out for their flexibility and advantageous tax potential, attracting numerous international entrepreneurs seeking to optimize their corporate structures. The growing interest in these entities lies in their ability to benefit from low taxation and bilateral agreements to avoid double taxation, while ensuring effective global management of wealth and assets. This article guides you through the subtleties of current regulations, focusing on legal requirements, tax incentives, as well as the challenges and opportunities awaiting businesses wishing to establish themselves in this dynamic framework.

Main Characteristics of Holding Companies in Bulgaria

Legal and Organizational Structure of Holding Companies in Bulgaria

In Bulgaria, holding companies play a crucial role in the country’s economic landscape. According to the Bulgarian Commercial Code, these entities can take various legal forms, the most common being the Limited Liability Company (OOD) and the Joint-Stock Company (AD).

The Limited Liability Company (OOD) is particularly valued for its flexibility and management simplicity. It requires a minimum share capital of only 2 BGN (approximately 1 euro), making it accessible to small investors. In contrast, the Joint-Stock Company (AD) is more suitable for large corporations and requires a minimum share capital of 50,000 BGN.

Tax Benefits and Accounting Obligations

The Bulgarian tax regime offers significant benefits to holding companies, including:

• A corporate tax rate of 10%, one of the lowest in the European Union
• Tax exemption on dividends received from Bulgarian or European subsidiaries
• Exemption from capital gains tax on the disposal of equity interests

These tax benefits make Bulgaria an attractive destination for foreign investors seeking to optimize their tax structure.

Regarding accounting obligations, Bulgarian holding companies must maintain accounting records in accordance with International Financial Reporting Standards (IFRS) if they exceed certain thresholds for turnover, total assets, or number of employees. Others may opt for national accounting standards.

Role in Economic Development

Holding companies play a crucial role in Bulgaria’s economic development. They facilitate foreign investment and contribute to the modernization of the Bulgarian economy by promoting technology and know-how transfers.

Sectors where holding companies are particularly active include:

• Information and communication technologies
• Real estate and construction
• Manufacturing industry
• Financial services

Current Trends and Challenges

The number of holding companies registered in Bulgaria has experienced steady growth in recent years. This trend reflects the country’s increasing appeal to international investors, attracted by its economic stability and favorable tax environment.

However, holding companies in Bulgaria face certain challenges, including:

• The need to comply with constantly evolving European regulations
• Increased competition from other jurisdictions offering similar tax benefits
• International pressures for greater tax transparency

Despite these challenges, Bulgaria remains a sought-after destination for establishing holding companies, thanks to its stable legal framework and attractive tax regime.

Tax Benefits for Bulgarian Holding Companies

Advantageous Tax Regime for Holdings in Bulgaria

Bulgaria has positioned itself as an attractive destination for holding companies through a particularly favorable tax framework. The country offers one of the lowest corporate tax rates in the European Union, set at only 10%. This competitive taxation is accompanied by other significant benefits for holdings, strengthening Bulgaria’s appeal to international investors.

Dividend Exemption and Absence of Withholding Tax

One of the main strengths of the Bulgarian tax regime for holdings is the absence of withholding tax on dividends distributed to non-resident shareholders. This provision applies whether the beneficiaries are individuals or legal entities, residing in the European Union or third countries. For dividends received by Bulgarian holdings from their foreign subsidiaries, the tax treatment is equally advantageous. These incomes are generally tax-exempt in Bulgaria, provided that the subsidiary does not dedicate more than 50% of its activities to generating investment income and that its foreign tax burden is not significantly lower than the Bulgarian rate.

Favorable Capital Gains Treatment

Bulgarian holdings also benefit from an advantageous tax regime concerning capital gains realized from the disposal of equity interests. Capital gains from the sale of subsidiary shares are generally tax-exempt in Bulgaria, provided that the subsidiary does not own real estate located in the country. This exemption also applies to capital gains resulting from the disposal of shares listed on regulated Bulgarian and EU/EEA markets.

Attractiveness for International Investors

These tax benefits position Bulgaria as a jurisdiction of choice for holding companies managing international investments. The combination of a low corporate tax rate, exemption of dividends and capital gains, and the absence of withholding tax creates a particularly competitive tax environment. This attractiveness is reinforced by the stability of the Bulgarian legal framework and its alignment with European regulations.

Eligibility Conditions and Regulatory Compliance

To benefit from these tax advantages, holdings must meet certain conditions. They must notably hold at least 10% of their subsidiaries’ capital uninterruptedly. Furthermore, Bulgaria has implemented anti-abuse measures in line with European directives, aimed at preventing the misuse of the preferential tax regime. Holdings must demonstrate real economic substance and effective presence in Bulgaria.

Impact on the Bulgarian Economy

The advantageous tax regime for holdings has contributed to attracting significant foreign investment to Bulgaria. Many international companies have chosen to establish their holding structures in the country, thereby stimulating the local economy. This tax policy has also fostered the development of the financial and legal services sector in Bulgaria, creating skilled jobs and strengthening local expertise in these fields.

Evolution Prospects

Although the Bulgarian tax regime for holdings remains very attractive, it is important to note that the country is committed to respecting international initiatives on tax transparency and combating tax evasion. Future adjustments may be made to align with regulatory developments at the European and international levels, while preserving the country’s competitiveness.

Taxation and Tax Optimization Regulations

Tax Framework for Holding Companies in Bulgaria

Bulgaria offers a particularly attractive tax environment for holding companies, with one of the lowest tax rates in the European Union. The Bulgarian tax regime for these entities is characterized by a fixed corporate tax rate of 10% on profits. This rate applies uniformly, without distinction between small and large businesses.

Dividends received by a Bulgarian holding company from its subsidiaries located in the EU are tax-exempt, without conditions regarding holding period or minimum participation percentage. This provision falls within the framework of the EU Parent-Subsidiary Directive, aimed at avoiding double taxation of profits within groups.

For dividends from non-EU countries, a withholding tax of 5% generally applies, unless a double taxation treaty provides for a more favorable rate. Bulgaria has concluded tax treaties with numerous countries, thus offering optimization opportunities for international structures.

Tax Optimization Strategies

Holding companies in Bulgaria can implement various strategies to optimize their tax burden:

• Use of the tax consolidation regime: This mechanism allows for the consolidation of subsidiaries’ tax results at the holding level, offering the possibility to offset profits and losses within the group.
• Structuring of dividend flows: By leveraging tax treaties and the intra-EU dividend exemption regime, holdings can minimize double taxation on passive income.
• Management of intra-group debt: Interest on intra-group loans is generally deductible, subject to thin capitalization rules.
• Exploitation of preferential tax regimes: Certain zones in Bulgaria benefit from specific tax incentives, such as temporary corporate tax exemptions for investments in high-unemployment regions.

Recent Regulatory Developments

The Bulgarian government has recently strengthened its legislation to combat tax evasion, in alignment with European directives. Rules on Controlled Foreign Companies (CFC) have been introduced, aiming to prevent the artificial transfer of profits to low-tax jurisdictions. These provisions apply when a Bulgarian entity holds more than 50% of the shares of a foreign company subject to an effective tax rate less than half of the Bulgarian rate.

Bulgaria has also implemented limitations on interest deductibility, in accordance with the EU Anti-Tax Avoidance Directive (ATAD). These rules restrict the deduction of net financial expenses exceeding 30% of tax EBITDA or one million euros, whichever is higher.

Tax Incentives and Regulatory Challenges

The Bulgarian government offers attractive tax incentives to stimulate foreign investment. For example, companies investing in high-tech assets in municipalities with high unemployment rates can benefit from a full corporate tax exemption for five years.

However, holdings in Bulgaria face increasing regulatory challenges. The application of transfer pricing rules has intensified, requiring rigorous documentation to justify intra-group transactions. Furthermore, the automatic exchange of tax information between countries, under the Common Reporting Standard (CRS), increases transparency and limits opportunities for aggressive optimization.

Bulgarian tax authorities are scrutinizing holding structures more closely, particularly those involving countries considered tax havens. Companies must demonstrate the economic substance of their operations to avoid the reclassification of certain arrangements as abusive.

Despite these challenges, Bulgaria remains an attractive jurisdiction for holdings, offering a balance between advantageous taxation and a regulatory framework compliant with international standards. Companies must nevertheless remain vigilant and adapt to the constant evolution of the international tax landscape.

Tips for Creating a Holding Company in Bulgaria

Creating a Holding Company in Bulgaria: Steps and Requirements

Creating a holding company in Bulgaria involves several specific legal and administrative steps. The process begins with choosing the appropriate legal structure. The most common options are the Limited Liability Company (OOD) and the Joint-Stock Company (AD).

For an OOD, the minimum required share capital is only 2 BGN (approximately 1 EUR), while for an AD, it amounts to 50,000 BGN (approximately 25,000 EUR). This flexibility in terms of initial capital makes Bulgaria particularly attractive to foreign investors wishing to establish a presence in the European Union.

Registration with the Bulgarian Commercial Register is a crucial step. Required documents include the company’s articles of association, proof of share capital deposit, and signature specimens of the directors. It is important to note that all these documents must be translated into Bulgarian and certified.

Tax Benefits and Practical Considerations

Bulgaria offers an advantageous tax environment for holding companies. The corporate tax rate is set at 10%, one of the lowest in the European Union. Furthermore, dividends received by a Bulgarian holding from its subsidiaries located in the EU are generally tax-exempt.

To optimize these benefits, it is crucial to properly structure the holding. This may involve creating separate operational subsidiaries and establishing a strategy for managing financial flows within the group.

The choice of headquarters is an important strategic decision. Sofia, the capital, offers developed infrastructure and easy access to professional services. However, other cities like Plovdiv or Varna may also be attractive depending on the specific needs of the business.

Navigating Cultural and Linguistic Challenges

To overcome language and cultural barriers, it is highly recommended to hire local staff or collaborate with experienced Bulgarian consultants. These professionals can facilitate communication with local authorities and help navigate the subtleties of the Bulgarian legal and tax system.

Consulting lawyers and accountants specialized in Bulgarian business law is essential. These experts can provide valuable advice on regulatory compliance, optimal tax structuring, and local best practices.

Additional Requirements and Considerations

Opening a bank account in Bulgaria is a necessary step in the process. Bulgarian banks have strict due diligence procedures, especially for foreign companies. It is therefore important to prepare comprehensive documentation on the origin of funds and the ownership structure of the holding.

For holdings planning to have a significant physical presence in Bulgaria, implications in terms of labor law and social security must also be considered. Bulgarian labor law offers some flexibility, but it is important to respect local employment standards.

Finally, it is crucial to understand ongoing reporting and compliance obligations. Holdings in Bulgaria are required to file annual accounts and tax returns. Compliance with these obligations is essential to maintain the company’s status and benefit from the tax advantages offered by the country.