Taxation in Bulgaria: Comprehensive Guide and Practical Tips

Published on September 29, 2025 and written by Cyril Jarnias

Bulgaria, a European Union member state since 2007, has positioned itself as an attractive destination for entrepreneurs and investors thanks to its advantageous tax system. Understanding the nuances of Bulgarian taxation is crucial for any individual or company considering establishing operations there. In this article, we will explore in detail the Bulgarian tax system, its specific features, and the opportunities it offers for optimizing your costs.

Types of Taxes in Bulgaria

The Bulgarian tax system is characterized by its simplicity and transparency. The main types of taxes you will encounter in Bulgaria are as follows:

1. Personal Income Tax Bulgaria applies a single flat tax rate of 10% on individual income, regardless of the amount earned. This simple and predictable system is a major asset for employees and self-employed individuals.

2. Corporate Tax Companies in Bulgaria also benefit from a fixed tax rate of 10% on their profits, one of the lowest in the European Union. This attractive tax policy encourages investment and business creation in the country.

3. Value Added Tax (VAT) The standard VAT rate in Bulgaria is 20%. However, certain sectors, such as hospitality, benefit from a reduced rate of 9%.

4. Social Security Contributions Social security contributions in Bulgaria are shared between employer and employee. The overall rate ranges between 30% and 32% of gross salary, with a monthly contribution cap set at approximately €1,500.

5. Local Taxes Bulgarian municipalities collect taxes on real estate and vehicles. These taxes are generally moderate compared to other European countries.

Tax Rates: A Major Competitive Advantage

The Bulgarian tax system stands out for its particularly low tax rates, which constitute a significant competitive advantage compared to many other European countries.

Personal Income Tax With a single rate of 10%, Bulgaria offers one of the lowest income taxes in the European Union. This rate applies to all types of income: salaries, self-employment income, rental income, capital gains, etc. This simplicity greatly facilitates tax planning for individuals.

Corporate Tax The 10% tax rate on corporate profits places Bulgaria among the most attractive destinations for businesses in Europe. This low rate allows companies to retain a larger portion of their profits, thereby promoting investment and growth.

Dividends and Capital Gains Dividends paid by Bulgarian companies are subject to a 5% withholding tax, a particularly competitive rate. Capital gains from the sale of securities listed on regulated Bulgarian or EU/EEA markets are tax-exempt.

• France: Progressive income tax up to 45%, corporate tax of 25%
• Germany: Progressive income tax up to 45%, corporate tax of approximately 30% (including local taxes)
• United Kingdom: Progressive income tax up to 45%, corporate tax of 19%

This comparison highlights the significant tax advantage offered by Bulgaria, both for individuals and businesses.

Tax Deductions: Optimizing Your Tax Burden

Although the Bulgarian tax system is already very advantageous with its low rates, it also offers various possibilities for tax deductions allowing for further optimization of the tax burden for individuals and businesses.

For Individuals

1. Deductions for Dependent Children Parents can benefit from an annual tax reduction of 200 BGN (approximately €100) for one child, 400 BGN for two children, and 600 BGN for three or more children.

2. Charitable Donations Donations to certain approved charitable organizations are deductible up to 5% of taxable income for individuals.

3. Voluntary Pension and Life Insurance Contributions Contributions to voluntary pension funds and life insurance premiums are deductible up to 10% of taxable income.

For Businesses

1. Accelerated Depreciation Bulgaria allows accelerated depreciation rates for certain assets, enabling businesses to reduce their taxable base more quickly.

2. Research and Development Expenses R&D expenses are 100% deductible and may even qualify for an additional 50% deduction in some cases, thus encouraging innovation.

3. Job Creation Companies creating jobs in regions with high unemployment rates may benefit from specific tax relief.

4. Donations As with individuals, businesses can deduct donations to certain charitable organizations, up to 10% of their taxable profit.

5. Loss Carryforward Tax losses can be carried forward and deducted from future profits for a period of up to 5 years, offering valuable flexibility for businesses in the development phase.

Tax Returns and Obligations: Staying Compliant

Understanding and complying with reporting obligations is crucial to avoid any issues with the Bulgarian tax authorities. Here is an overview of the main returns and obligations to know:

For Individuals

1. Annual Income Tax Return Bulgarian tax residents must file an annual income tax return by April 30 of the year following the relevant tax year. The return can be filed online via the tax administration portal.

2. Provisional Payments Self-employed individuals and those receiving rental income or other non-salary income generally must make quarterly advance income tax payments.

3. Asset Declaration Certain officials and individuals holding public positions are required to declare their assets annually.

For Businesses

1. Corporate Tax Return Companies must file their annual corporate tax return no later than June 30 of the year following the fiscal year. The balance of tax due must be paid by the same date.

2. Monthly or Quarterly Advance Payments Businesses are generally required to make monthly or quarterly advance corporate tax payments, based on projected profits or those of the previous year.

3. VAT Returns VAT-registered businesses must file monthly VAT returns and make corresponding payments by the 14th of the following month.

4. Withholding Tax Returns Employers must declare and remit monthly withholdings on salaries (income tax and social security contributions) by the 25th of the following month.

5. Annual Financial Report All companies must file their annual financial statements with the Commercial Register by June 30 of the following year.

Tips for Tax Compliance in Bulgaria

Navigating the tax system of a foreign country can be complex. Here are some essential tips to ensure your tax compliance in Bulgaria:

1. Maintain Rigorous Accounting Accurate and up-to-date accounting is the foundation of good tax management. Ensure you keep all your accounting documents for at least 5 years, in accordance with Bulgarian legislation.

2. Strictly Adhere to Deadlines Late filing or payment can result in significant penalties. Set up a reminder system to avoid missing any tax deadlines.

3. Anticipate Your Tax Obligations Plan your tax payments in advance, especially provisional payments, to avoid cash flow surprises.

4. Stay Informed About Legislative Changes Tax legislation can change. Regularly follow Bulgarian tax news or seek professional assistance to stay current.

5. Use Electronic Tools The Bulgarian tax administration offers many online services. Familiarize yourself with these tools to facilitate your administrative procedures.

6. Consider Professional Assistance For complex situations or if you are unfamiliar with the Bulgarian system, do not hesitate to consult a local accountant or tax advisor.

7. Optimize Your Tax Structure Regularly evaluate your tax situation to identify legal optimization opportunities, such as available deductions or specific tax incentives for certain sectors.

8. Prepare for Tax Audits Although audits are not systematic, always be prepared to justify your returns. Good organization of your tax documents will save you valuable time in case of an audit.

Bulgarian taxation, with its attractive rates and relatively simple system, offers real optimization opportunities for individuals and businesses. However, as with any tax system, the key lies in a good understanding of the rules and proactive management of your obligations. By following these tips and remaining vigilant, you can fully benefit from the tax advantages offered by Bulgaria while ensuring your compliance with local legislation.