Bulgaria: Business Environment

Company Tax

10%

Tax Rate For Foreign Companies

Foreign companies are taxed at the same rate as national businesses, but only on their Bulgaria-sourced income.
Branches are taxed in the same way as subsidiaries.

Capital Gains Taxation

Capital gains are included in the taxable income of a company and taxed at the standard corporate income tax rate of 10%. Capital gains arising from the sale of publicly listed shares (on the Bulgarian stock exchange or any other European/EEA stock exchange) are exempt. From 2021, gains and losses on the disposal of shares listed on stock exchanges in third countries that are considered as equivalent to regulated stock exchanges and for which the European Commission has adopted a decision on the equivalence are also exempt.

Main Allowable Deductions and Tax Credits

Depreciation of tangible and intangible assets is tax-deductible at rates ranging from 4% to 50%. Goodwill cannot be amortised for tax purposes.
Start-up costs can be deducted in the first year of business activity. Interest costs and bad debt are also deductible. The deduction provided for borrowing expenses is limited to 30% of the company's tax-adjusted EBITDA (the limit only applies to net borrowing costs exceeding EUR 3 million per year). Donations to charities are deductible up to 10% of the company's profit.
Fines cannot be deducted from taxes, unlike taxes (except for corporation tax). Bad debt impairment costs can be deducted upon the expiration of the statute of the limitation period.
Tax losses can be carried forward for up to five years. Tax losses of foreign origin can only be offset by income from the same source (except losses of European origin which can be offset by any type of income). The carryback of losses is only allowed in certain cases.

Other Corporate Taxes

Social security contributions payable by the employer are between 18.92% and 19.62% (the rate varies according to the coefficient of the work injury insurance). This includes contributions for health insurance payable by the employer, at 4.8% of the salary. The base for the contribution is total income, up to a limit of BGN 3,400 per month (as from 1 April 2022; was BGN 3,000 per month between Jan-Mar 2022). Minimum thresholds per position and industry also apply.
A tax on insurance premiums is collected at a rate of 2% (life insurance, reinsurance, transport insurance are exempt).
The city tax due per night is between BGN 0.20 and BGN 3 (the amount varies depending on the type of accommodation).
The payroll tax is levied on remuneration, bonuses and certain benefits in kind at a rate of 10% (the amount retained by the employer).
The property tax varies between 0.01% and 0.45% of the taxable value of the property (the rate is determined by the municipalities). The transfer of real estate or vehicles is taxed at rates varying between 0.1% and 3% (rate determined at the municipal level).
Entertainment and representative expenses, sponsorships and business gifts, that do not bear the trade-mark of the donating company, are subject to a 10% one-off tax, same as for bonuses to staff, benefits in kind, and expenses for maintenance, repair and exploitation of cars.
A garbage collection tax also applies (at varying fees calculated by local municipalities).

Other Domestic Resources

Consult Doing Business Website, to obtain a summary of the taxes and mandatory contributions.

Tax Rate

Allowable Deductions and Tax Credits

Donations are deductible up to 65% of an individual's taxable income. Freelancers, civil contractors, notary officers, physicians, dentists or other private practitioners may deduct 25% from their gross income.
Royalties are subject to 40% statutory deductions whereas rental income is subject to 10% statutory deductions.
Mandatory social security contributions borne by individuals, both in Bulgaria and other EU/EEA countries, are tax-deductible in full. Voluntary pension and unemployment contributions, as well as health insurance and life insurance contributions, are also deductible up to certain limits.
Young married couples may deduct interest on mortgage loans for the first BGN 100,000 of the loan under certain conditions.
People with children are entitled to deductions (BGN 4,500 in case of one child; BGN 9,000 in case of two children; BGN 13,500 in case of three and more children).
A 1% tax relief (capped at BGN 500) is available for individuals who receive all of their income by bank transfer, pay at least 80% of their expenses by non-cash methods and have no outstanding public liabilities at the date of filing of the annual tax return.

Special Expatriate Tax Regime

Expatriates are subject to the same tax legislation but are only taxed on their Bulgaria-sourced income.
An individual is considered a Bulgarian tax resident if he/she resides in Bulgaria more than 183 days in any 12-month period, has a permanent address or the centre of vital interests in the country, or has been assigned abroad by a Bulgarian company or the State.