Standard Terms




Bulgarian fiscal year is identical with the calendar year. 

Direct Tax 

Individuals General Rules Territoriality and residence Under Personal Income Tax Act (PITA) persons, subject to tax liability are individuals - residents and non-residents, and corporate entities, explicitly enumerated therein. Residents, irrespective of their citizenship, are considered those persons:

  • Who have their permanent domicile in Bulgaria; 
  • Who reside in the country for more than 183 days in a 365-day period. 

Non-residents are considered those individuals who do not fit the above criteria for residents. Residents are liable for their worldwide income. 
Non-residents are liable only for their income derived from Bulgarian sources. 
Foreign experts are taxed only on their Bulgarian source income irrespective of the duration of their stay in the country. 

Bulgarian source incomes 

Any income derived by an individual from the conduct of business on the territory of Bulgaria is considered to be from a Bulgarian source. A person is considered to have carried out business on the territory of the country if: 

  • he has a permanent establishment [1] or a fixed base [2] in Bulgaria; 
  • he has assigned or performed an assignment on the territory of the country, whether in person, or through a procurator, agent or in some other way. 

Any income under an employment contract or derived from rendering services is considered to have been derived from a Bulgarian source where labour has been extended or services have been delivered on the territory of the country, regardless of the source of payment for the labour extended or services rendered. 

Notwithstanding the above, some kinds of incomes paid out by Bulgarian residents or from a permanent establishment to a non-resident on the territory of the country are considered to be from a Bulgarian source. These incomes include, for example, dividends and distribution of profits of entities with or without legal presence, interest, royalties, rentals, payments under lease, franchising, factoring, as well as emoluments of freelancers, or members of a managing or controlling body of a Bulgarian corporate; branch of a foreign entity, etc. Incomes derived from the use of real estate and capital gains from the sale of real estate located in the country, as well as incomes from transactions with quotas/shares in local companies and incomes from securities transactions with securities issued by the Bulgarian state and municipalities are also incomes from a Bulgarian source. 

Direct Tax: Corporations 

Corporate income tax 

Under the Corporate Income Tax Act (CITA) all companies and partnerships (including non-incorporated partnerships) are subject to corporate income tax. The corporate income tax rate is 23.5% [3] . Bulgarian resident entities are taxed on a worldwide basis. Other entities are taxed on their Bulgarian-source income. Non-business organizations (including governmental) are taxed for their business activities.

Property tax 

Owners of real estate property are subject to property tax at a rate of 0.15%. For companies the tax base is the net book value of non-residential immovable property plus the accumulated depreciation costs thereon. 

Corporate residence 
A company is considered to be resident in Bulgaria for tax purposes if it is registered in Bulgaria. Companies resident in Bulgaria are subject to tax on their worldwide income. Foreign entities are subject to tax on their Bulgarian-source income, but their Bulgarian branches are considered Bulgarian resident companies for tax purposes. 

Branch income 

Although branches are not legal persons, branches of non-resident companies have separate balance sheet and P&L account. They are subject to corporate income tax at the standard rate of 15%, and to other general taxes too (municipal tax; VAT, etc.) Representative offices are not subject to corporate taxation provided that they do not carry out business activities. Income determination 

The income determination is based on the taxpayers' profit and loss account. 

Capital gains 

In general capital gains are included in the corporate income and taxed at the full corporate tax rate. Exchange rate gains and losses are reported in the profit and loss account and reflected in the assessment of the taxable profit. 


Dividends received by local companies from other local companies are not subject to withholding tax. Dividends payable by local companies to Bulgarian resident individuals and certain types of charity institutions, defined by CITA, are taxed with 15% withholding tax. Dividends distributed by Bulgarian companies to foreign shareholders are subject to 15% withholding tax. 

Stock dividends 

Dividends capitalized into shares (stock dividends) are not subject to withholding tax. 

Foreign income 

Income derived outside Bulgaria by resident entities and branches of non-residents is included in the taxable base for corporate income tax purposes. Resident entities utilise tax credit for the foreign source income, which is taxed abroad. The tax credit is limited to the amount of the Bulgarian tax obligation, which would have been levied if the profit or income had originated from Bulgaria. If Bulgaria has a double tax treaty with the state where the income originates from, the provisions of the double tax treaty shall apply. Undistributed income of foreign subsidiaries of a Bulgarian resident company is not taxed. 

Payments to foreign affiliates 

Tax authorities may re-adjust payments to foreign affiliates as per the arm's length principle. Market prices would apply, whereas deviations from such prices will be tolerated if within +/- 20% (for interest payments +/-25% of the statutory interest). The same provisions apply also for transfers between the permanent establishment and other countries' parts of the enterprise of a foreign person, depending on the specific character of the permanent establishment as a part of the enterprise. 

Group taxation 

There is no group taxation legislation. All companies are assessed on individual assessable profits and losses. However, tax anti-avoidance rules cover transfer pricing and related persons. 

Tax Exemptions 

Tax incentive for investments in regions with high unemployment. 

Entities, investing in regions with a high unemployment, exceeding 50% the average for the country for the previous two years (these regions are listed annually in an appendix to CITA), enjoy a reduction of the corporate income tax (not the municipal tax) provided that:

  • The investment is in the form of acquisition, modernisation or reconstruction of tangible fixed assets such as buildings, equipment, transmitters, electricity transmitters, and telecommunication lines as well as machines, production facilities, cars, computers and software; and 
  • The funds for the investment are generated from the contributions made by shareholders for acquisition of new shares (including on incorporation) in the company making the investments. If the requirements for the tax reduction are met the annual corporate tax is reduced by an amount representing 10% of the amount of the share contributions used in the above manner. The compulsory insurance contributions effectively made by the employer in proportion to the new jobs created during the current year relative to the average annual personnel hired on employment contracts by the employers for the preceding year are also deducted from the financial result of the enterprise. The sum for the reduction is accounted for as reserves and if greater than the corporate tax in the respective year it can be used to reduce the corporate tax in the following five years.

Indirect Taxation: VAT and Excise Duties 

Although Bulgaria is not a member of the European Community, the Bulgarian VAT legislation in many aspects follows the provisions of the Sixth VAT Directive. 


Any person (legal or physical, resident or non-resident) who has a taxable turnover of at least BGN 50,000, without export and other turnover with VAT 0%, during the preceding twelve months is obliged to register for VAT purposes by filing a standard registration form within 14 days after the end of the calendar month in which the above threshold is reached. Under the VAT Act, such non-registered persons are subject to mandatory VAT registration, non-residents register through an agent, upon achieving the respective turnover, regardless of whether: 

  • they have a permanent establishment in Bulgaria, and . 
  • the activities are continuing and/or performed from a "fixed place" in Bulgaria.

 Voluntary registration is possible for persons with taxable turnover including export BGN 50,000. 

Tax base 

The tax base for supplies within Bulgaria is the price (exclusive of VAT) charged to the customer, and all other taxes and fees, including excise duties, subsidies and financing relating to a transaction, as well as any interest and penalties under a transaction. The tax base also includes transportation, package and other expenses related to supply if these are borne by the customer. The tax base for transactions between related parties is at least the market value of the goods and/or services involved. The tax base for imports includes the customs value, the customs duties and excise duties (if any) on the import goods. 

Place of supply 

Bulgaria has adopted the EU definitions of place of supply of goods and services. 

VAT Exemptions 

There are three types of exempt supplies: 

  • Supplies, which, according to the statutory "place of supply" rule, are provided outside the territory of Bulgaria. 
  • Supplies of goods in customs warehouses within the frame of the respective customs procedure. 
  • Supplies exempt due to their subject, such as: 
  • transfer of ownership and limited property rights over land; 
  • financial services; 
  • insurance services; 
  • lease of buildings and parts thereof, provided these are leased out for dwelling purposes; 
  • transfer of a going concern of a company, as well as businesses or parts thereof as per the Privatisation Act; 
  • provision of legal advice by registered attorneys in accordance with the Attorneys Act and of services under the Notaries Act; 
  • land processing services rendered by co-operatives by means of their own equipment, provided that the land is owned by the co-operative members; 
  • supply of grain as an in-kind rent for use of land;
  •  betting and gambling; 
  • donations in favour of certain charity institutions; 

Export of goods and services 

The export of goods and services is subject to VAT at a zero rate. 

VAT rates 

Under the VAT Act two rates are applicable to taxable supplies: 

  • 20% applicable to taxable supplies, including import of goods and services. 
  • A zero rate applicable to exports.

VAT return is possible according to double tax agreements between Bulgaria and some countries. 

Excise Duties 

Excise duties are levied on goods and services listed in the Excise Duties Tariff, which are: 

  • subject to transactions performed in Bulgaria, or subject to cross-border transactions from abroad to Bulgaria. 

Subject to excise duties are:

  • Spirit drinks, including beer, but not wine, 
  • Tobacco products, * Fuels, 
  • Some types of automobiles, 
  • Gambling machines and other casino facilities, 
  • Coffee and tea.

The Excise Duties Act provides for reimbursement of excise duties upon exportation of goods, on which excise duties have been paid, when excise stickers have been paid but not used by producers, etc. 

[1] For the purposes of PITA a "permanent establishment" means specific premises, through which a foreign enterprise conducts, partly or wholly, its business in Bulgaria. The premises may include: a place of management, a branch, an office, a studio, a bureau, a plant, a factory, a workshop, a shop, a warehouse wherein trade is conducted, an installation, a construction site, a mine, an oil or gas well, a quarry or any other place of extraction of natural resources. A "permanent establishment" will also be the conduct of a business through a procurator or an agent entitled to conclude contracts on behalf of the foreign person 

[2] A "fixed base" means specific premises, through which a foreign individual renders, partly or wholly, independent services or acts as a member of the professions (e.g. a law firm; an independent auditor or accountant) 

[3] The government proposed to cut corporate tax to 19.5% in 2004 in a bid to encourage investment and speed up economic growth.