Bulgaria's Corporate Income Tax: A Simple Guide for Businesses

Bulgaria has one of the most competitive corporate tax environments in the European Union. With a flat rate of 10% on taxable profits, it is often cited as a key reason why international companies choose to set up operations in the country. But as with any tax system, the details matter. This guide walks you through the essential facts every business owner or finance manager should know.

What is the corporate income tax rate?

The standard corporate income tax rate in Bulgaria is 10%. This applies to resident companies on their worldwide income and to non-resident companies on income sourced in Bulgaria through a permanent establishment. There are no regional variations or surcharges, which makes financial planning straightforward.

For small businesses, there is an alternative: a 15% tax on turnover, which often benefits micro-enterprises. However, this is subject to specific conditions, so professional advice is recommended before opting for it.

Taxable income and deductions

Corporate income tax is levied on accounting profits adjusted for tax purposes. Many common business expenses are deductible, including:

• Salaries and social security contributions
• Rent and utilities
• Materials and supplies
• Interest on loans (with some limitations)
• Depreciation of fixed assets

Certain expenses are not deductible, such as fines and penalties, entertainment costs above a threshold, and donations exceeding legal limits. Keeping accurate records is essential because tax authorities may request proof during audits.

Carrying losses forward

Tax losses can be carried forward for five consecutive years. This can be a significant advantage for start-ups and businesses in cyclical industries. Losses cannot be carried back. If a company changes ownership, the right to carry forward losses may be restricted unless certain conditions are met.

Filing and payment deadlines

The tax year in Bulgaria is the calendar year. Companies must file an annual corporate income tax return by 31 March of the following year. Monthly or quarterly advance payments are required based on the previous year's tax liability or estimated profit. The final balance is due when the annual return is filed.

Filing is done electronically through the National Revenue Agency (NRA) portal. Late submissions incur penalties, so it is wise to work with a local accountant familiar with the system.

Double taxation relief

Bulgaria has signed double taxation treaties with over 70 countries. These treaties prevent the same income from being taxed twice and often reduce withholding tax rates on dividends, interest and royalties. When making cross-border payments, you must provide a valid tax residency certificate to benefit from the treaty rates.

Key takeaway

The 10% corporate tax rate is a major draw for businesses in Bulgaria. By understanding the rules on deductions, loss carry-forwards and filing deadlines, you can stay compliant and make the most of the tax system. Always consult a certified tax advisor for decisions specific to your company.