Bulgaria’s corporate tax regime is one of the main reasons foreign companies incorporate here rather than in neighbouring jurisdictions. The headline rate is flat — there are no progressive bands — and the compliance calendar is predictable. What catches newcomers out is rarely the rate itself; it is the advance-payment regime, the withholding obligations on money leaving the country, and the documentation expected if you transact with related parties.

Who is liable

A company incorporated in Bulgaria is taxed on its worldwide profit. A foreign company is taxed on profit attributable to a permanent establishment here, and on certain Bulgarian-source income (dividends, interest, royalties, service fees and some capital gains) through withholding tax even without one. That distinction matters more than it sounds: a foreign business can trigger a permanent establishment through a fixed place of business, a dependent agent concluding contracts, or a construction site (under Bulgarian law regardless of how long it lasts; under most tax treaties only beyond a set period, such as nine months under the treaty with Greece) — often without ever having registered a Bulgarian company.

If you are operating in Bulgaria through people on the ground rather than a registered entity, the first question to settle is whether you have already created a taxable presence.

The rate and the tax year

Corporate income tax is charged at a flat rate of 10% on taxable profit. The tax year is the calendar year, with no option to elect a different accounting period.

Taxable profit starts from the accounting result and is then adjusted for permanent and temporary differences — non-deductible expenses, thin capitalisation restrictions, depreciation differences between accounting and tax rules, and provisions. In practice this reconciliation, not the rate, is where disputes with the revenue authority arise.

Filing and payment

The annual return is filed between 1 March and 30 June of the following year, and the balance of tax — after deducting the advance instalments already paid — is due by 30 June. Filing is electronic through the National Revenue Agency.

Companies above a revenue threshold also make advance instalments during the year. The test is net sales revenue for the year before the previous year: above €153,387.56 (BGN 300,000) the instalments are quarterly, and above €1,533,875.64 (BGN 3,000,000) they are monthly. Newly incorporated companies (other than those formed by a transformation) make none in the year they are set up or in the following calendar year. If the annual tax exceeds the advance instalments determined by more than 25% (for quarterly instalments, if 75% of the annual tax does), interest is due on the excess over that margin, even when the annual return is correct and paid on time — a common and avoidable cost, typically once a growing company first enters the advance-instalment regime.

Money leaving Bulgaria

Payments to non-residents are frequently subject to a final withholding tax at source: 5% on dividends, and 10% on interest, royalties, fees for technical and consulting services, and certain other income.

Two reliefs commonly apply:

  • EU rules: dividends paid to companies resident in the EU or EEA are exempt, and interest and royalties are exempt between associated EU companies (a holding of at least 25% for at least two years).
  • Double tax treaties, including Bulgaria’s treaty with Greece.

Treaty relief is not automatic. The recipient gives the Bulgarian payer a certificate of residence from its home tax authority and declarations that it is the beneficial owner of the income and has no permanent establishment in Bulgaria; where that payer’s payments to the recipient exceed €255,645.94 (BGN 500,000) in a year, the treaty grounds must instead be certified in advance by the revenue authority. Tax withheld without relief can be reclaimed, but only through a slower refund procedure.

If you trade with companies under common control — a Greek parent invoicing its Bulgarian subsidiary, for example — transfer pricing documentation may be mandatory. A local file (and, for members of a multinational group, a master file) is required from large companies with cross-border related-party dealings — those that at the previous year end exceeded at least two of €20 million in assets, €40 million in net sales revenue and an average of 250 employees — for related-party transactions above set annual values, such as €204,516.75 (BGN 400,000) for sales of goods. The local file must be ready by 30 June of the following year. Intra-group management fees, financing and licence arrangements are the areas most often challenged.

Where we usually add value

Most of the corporate tax problems we are asked to fix would have cost very little to prevent:

  • confirming whether an existing Bulgarian presence is already a permanent establishment before the revenue authority does;
  • structuring dividend and financing flows so treaty and directive relief is actually available;
  • putting transfer pricing documentation in place before it is requested rather than after;
  • reviewing the advance instalment position mid-year, when it can still be corrected.

We advise on the tax treatment alongside the underlying corporate work, so the structure and its tax consequences are decided together rather than in sequence.