Corporate Income Tax in Bulgaria in 2026: The Complete Guide for Foreign Business Owners

The 10% Rate, Taxable Profit Calculation, Deductible Expenses, International Income, Advance Payments, the Global Minimum Tax, and Why Bulgaria Remains the EU’s Most Competitive Corporate Tax Jurisdiction

10% corporate income tax rate

Flat no progressive bands

0% municipal surcharge

30 June annual return deadline

Introduction

Bulgaria has maintained a 10% flat corporate income tax rate for nearly two decades. It is the lowest corporate tax rate in the European Union — tied only with Hungary’s 9% headline rate, which applies subject to conditions that do not affect most businesses. For the vast majority of companies operating in Bulgaria, 10% is the rate, and it applies equally to domestic and foreign-owned entities, to all sectors, and to all income types from standard commercial activity.

In 2026, the context around Bulgarian corporate tax has strengthened further. Full Schengen membership, adopted in 2024, eliminated border friction for goods and services. Euro adoption in January 2026 completed Bulgaria’s integration into the EU’s monetary architecture, making Bulgarian-company invoices directly denominated in the EU’s common currency and eliminating BGN/EUR exchange risk. The global minimum tax (Pillar Two, 15%) has entered into force across the EU, but applies only to groups with consolidated revenue above €750 million — a threshold that excludes the overwhelming majority of the international SMEs and entrepreneurs who register Bulgarian companies.

This guide explains everything a foreign business owner needs to know about Bulgarian corporate income tax in 2026: who is subject to it, what profit is taxable, which expenses reduce the tax base, how the advance payment system works, how international income is treated, what the global minimum tax means and who it affects, and how Bulgaria compares to its EU competitors on a combined corporate-and-dividend basis.

What Is Bulgarian Corporate Income Tax?

The Legal Framework

Bulgarian corporate income tax (CIT) is governed by the Corporate Income Tax Act (Закон за корпоративното подоходно облагане — ЗКПО). It is levied on the net taxable profit of Bulgarian-resident companies and on certain income earned in Bulgaria by non-resident companies.

The taxable profit is calculated as the accounting profit (the difference between revenues and expenses in the company’s financial statements) adjusted for specific items prescribed by the ZKPO: certain non-deductible expenses are added back to profit, and certain tax deductions or preferences reduce the base. For most small and medium-sized businesses, the tax adjustments are minimal and the taxable profit closely approximates the accounting profit.

The Key Characteristics of Bulgarian CIT

Characteristic	Detail
Rate	10% flat — no progressive bands; the same rate applies whether profit is €1,000 or €10,000,000
Tax base	Net taxable profit: revenue minus deductible expenses, adjusted for ZKPO-specific items
Municipal surcharge	None — Bulgaria does not impose a municipal or local corporate tax surcharge on top of the national 10%; the 10% is the total corporate tax
Minimum alternative tax	Small alternative tax (altenrativen danuk) of 5% on revenue applies only to certain unprofitable companies in specific circumstances; does not affect profitable businesses
Territorial scope	Bulgarian-resident companies are taxed on worldwide profit; non-residents only on Bulgarian-source income through a permanent establishment
Tax year	Calendar year (1 January – 31 December)
Annual return deadline	30 June of the year following the tax year
Final payment deadline	30 June of the year following the tax year (coincides with return filing)
Advance payment system	Mandatory for companies meeting certain revenue thresholds; monthly or quarterly instalments during the tax year

Who Pays Bulgarian Corporate Income Tax?

Bulgarian-Resident Companies — Worldwide Profit

A company is a Bulgarian tax resident if it is incorporated and registered in Bulgaria — that is, if it is registered in the Bulgarian Commercial Register (Търговски регистър). This includes all OODs (multi-owner limited liability companies), EEODs (single-owner limited liability companies), ADs (joint stock companies), and other Bulgarian legal entities.

A Bulgarian-resident company is taxed on its worldwide profit: all income, from any source, anywhere in the world, is included in the Bulgarian taxable profit. A Bulgarian EOOD owned by a German entrepreneur that provides consulting services to clients in Germany, France, and the United States pays Bulgarian CIT at 10% on the entire profit from all those activities — not just on income sourced in Bulgaria.

This is a critical point for international business owners: the 10% rate applies to all the company’s income globally. There is no higher rate for foreign-source income, no separate international business tax, and no exemption for income from outside Bulgaria.

Foreign Companies — Bulgarian-Source Income Only

A non-resident company (a company incorporated outside Bulgaria) is subject to Bulgarian corporate income tax only on:

income derived through a permanent establishment (постоянно място на стопанска дейност) in Bulgaria — typically a branch, office, or agent with authority to conclude contracts in Bulgaria;
certain categories of income arising from Bulgarian sources that are subject to withholding tax at source: dividends (5% or 10%), interest (10%), royalties (10%), management fees (10%), and certain other payments to non-residents.

THE PERMANENT ESTABLISHMENT CONCEPT: A non-resident company that operates in Bulgaria through a fixed place of business or through a dependent agent may be treated as having a Bulgarian permanent establishment, making it subject to Bulgarian CIT on the profits attributable to that establishment. For international business owners who want to benefit from Bulgarian CIT without being exposed to permanent establishment risk in other countries, the correct approach is to incorporate a Bulgarian-resident entity (EOOD or OOD) rather than operating through a branch or representative office of a foreign company.

How Taxable Profit Is Calculated

From Accounting Profit to Tax Liability

The calculation of Bulgarian corporate income tax follows a straightforward sequence: start with accounting profit (revenues minus costs as shown in the financial statements), apply tax adjustments required by the ZKPO, arrive at taxable profit, apply the 10% rate.

Step	Calculation
Total revenue (turnover) for the year	€300,000
Less: all deductible business expenses	− €180,000
Accounting profit (per financial statements)	€120,000
Add back: non-deductible expenses (per ZKPO)	+ €5,000 (example)
Less: tax deductions / preferences (if applicable)	− €0 (most SMEs)
Net taxable profit	€125,000
Corporate income tax @ 10%	− €12,500
Net profit after tax (available for retention or distribution)	€112,500
Effective CIT rate on total revenue	4.2%

The example above illustrates an important point: because CIT is applied to profit (revenue minus expenses), not to revenue, the effective rate on total revenue is substantially lower than the headline 10% rate. A company with 40% expenses has a 6% effective rate on revenue; a company with 60% expenses has a 4% effective rate on revenue. The expense deductibility is therefore central to understanding the real tax burden.

Deductible Expenses — What Reduces the Tax Base

The General Principle

Bulgarian tax law follows the general principle that expenses are deductible if they are: documented with a proper invoice or other tax document; connected to the company’s economic activity; and not specifically excluded by the ZKPO. This is a broad and generally permissive standard that allows most genuine business costs to be deducted.

Commonly Deductible Expenses

Expense Category	Examples	Key Documentation Requirement
Staff costs	Salaries, bonuses, employer’s social contributions, health insurance	Employment contracts, payroll records, payment documentation
Office and premises	Rent, utilities, maintenance, cleaning	Lease agreement, utility invoices, service contracts
Professional services	Accounting, legal, consulting, auditing, IT support	Service contracts, invoices, deliverables documentation
Technology and software	Software licences (SaaS), cloud services, IT infrastructure, website costs	Licence agreements, invoices, evidence of use in business
Marketing and advertising	Digital advertising, SEO, PR, events, printed materials, website	Campaign documentation, invoices, evidence of business purpose
Business travel	Flights, accommodation, conference fees, client entertainment (subject to limits)	Travel documents, hotel invoices, boarding passes; entertainment subject to per-diem and documentation rules
Equipment and assets	Computers, servers, office equipment; depreciated over useful life per Bulgarian accounting standards	Purchase invoices; asset register; depreciation schedule
Financing costs	Interest on business loans, bank charges	Loan agreements, bank statements; thin capitalisation rules apply for related-party loans
Insurance	Business insurance, professional liability, property insurance	Insurance policies, premium invoices
Depreciation	Depreciation of tangible and intangible fixed assets	Asset register; Bulgarian depreciation rates apply (not accounting rates)

Non-Deductible Expenses — What Cannot Reduce the Tax Base

The ZKPO specifies certain expenses that are either fully or partially non-deductible, regardless of whether they appear in the company’s accounting records:

Non-Deductible Item	Reason / Rule
Fines, penalties, and interest on overdue taxes	Public policy: companies cannot reduce tax by expensing tax penalties
Dividends paid (including interim distributions)	Dividends are a profit distribution, not an expense; they come from after-tax profit
Personal expenses of the owner disguised as company expenses	ZKPO disallows expenses not connected to business activity; personal costs are not deductible
Entertainment expenses above statutory limits	Partial deductibility: entertainment expenses above 1% of revenue are non-deductible
Donations above statutory limits	Donations are deductible up to defined thresholds; amounts above are non-deductible
Related-party expenses above arm’s length price	Transfer pricing rules apply; expenses to related parties must be at market rates
Hidden profit distributions	Payments to shareholders or related parties that disguise profit distribution rather than genuine business expense

MIXING PERSONAL AND CORPORATE EXPENSES: One of the most common and costly mistakes made by owners of Bulgarian EEODs is using the company account to pay personal expenses — groceries, personal travel, personal subscriptions, family holidays. These expenses are not deductible for corporate income tax and, when discovered in an NRA audit, are typically reclassified as hidden profit distributions, triggering additional dividend tax (5%) plus penalties and interest. Keep company and personal finances strictly separate.

International Income and the 10% Rate

Bulgaria’s Treatment of Foreign-Source Revenue

One of the most practically important aspects of Bulgarian corporate taxation for international business owners is the treatment of income from outside Bulgaria. The position is clear and uncomplicated: a Bulgarian-resident company pays 10% CIT on all its profits, regardless of where the income was earned.

There is no separate rate, no additional tax, and no surcharge for international income. A Bulgarian EOOD that earns all its revenue from clients in Germany, the United Kingdom, Israel, or the United States pays 10% on the net profit from those activities — the same rate as a Bulgarian company serving only Bulgarian clients.

Business Type	Revenue Source	Bulgarian CIT Rate
IT consulting company	Clients in Germany, France, and the UK	10% on net profit
SaaS product	Subscribers in 50 countries worldwide	10% on net profit
E-commerce store	Sales to EU customers	10% on net profit (VAT applies separately)
Digital marketing agency	Clients in the US, UAE, and Israel	10% on net profit
Remote developer billed through EOOD	Single client in the Netherlands	10% on net profit
Holding company receiving dividends from EU subsidiaries	Dividend income from EU subsidiaries	EU Parent-Subsidiary Directive may exempt incoming dividends; 10% on other income
Royalty income from IP licensed internationally	Royalties from licensees in multiple countries	10% on net royalty income; foreign withholding taxes credited under DTT

Foreign Withholding Taxes and Double Taxation Relief

When a Bulgarian company earns income from another country and that country withholds tax at source (for example, a 5% withholding on royalties paid from Germany to Bulgaria under the Bulgaria-Germany DTT), the Bulgarian company can claim credit for the foreign withholding tax against its Bulgarian CIT liability. This prevents the same income from being taxed twice.

The credit mechanism is straightforward: the Bulgarian CIT liability on the relevant income is calculated at 10%; the foreign withholding tax already paid is deducted from this liability. If the foreign withholding exceeds the Bulgarian rate (which is uncommon given the 10% Bulgarian rate, but possible if the treaty rate is higher), the excess is not refunded but may be carried forward in some circumstances.

PRACTICAL EXAMPLE: A Bulgarian EOOD receives royalty payments from a French company. France withholds 5% under the Bulgaria-France DTT. The Bulgarian company includes the gross royalty in its taxable income and calculates CIT at 10% on the net profit. Against this liability, it credits the 5% French withholding already paid. The net Bulgarian CIT on the royalty income is therefore approximately 5% (the 10% Bulgarian rate less the 5% French credit). This is the practical effect of the DTT double taxation relief: the total tax burden on cross-border income does not exceed the Bulgarian rate.

Advance Tax Payments — The Monthly and Quarterly System

Who Must Make Advance Payments

Bulgarian corporate income tax operates on an advance payment system for companies above certain revenue thresholds. Rather than paying the full annual tax liability in a single payment at the end of the year, qualifying companies make instalments during the year. The advance payments are then reconciled against the actual annual liability when the return is filed.

Company Category	Advance Payment Obligation	Basis for Calculation	Payment Schedule
New companies (first year)	No advance payment obligation in the year of incorporation	No prior-year base available	Annual payment only at 30 June deadline
Companies with prior-year revenue below BGN 300,000 (~€150,000)	No mandatory advance payments	Below threshold	Annual payment at 30 June deadline
Companies with prior-year revenue BGN 300,000 to BGN 3,000,000 (~€150,000 to ~€1.5 million)	Quarterly advance payments	Based on prior-year taxable profit divided by 4, adjusted by a correction coefficient	Q1: by 15 April; Q2: by 15 July; Q3: by 15 October; Q4: by 15 December
Companies with prior-year revenue above BGN 3,000,000 (~€1.5 million)	Monthly advance payments	Based on prior-year taxable profit divided by 12, adjusted by a correction coefficient	By the 15th of each month for the current month

The correction coefficient allows companies to adjust their advance payments downward if they expect the current year’s profit to be lower than the prior year. This is important for businesses with variable income: if a company had an unusually profitable year and expects a lower profit in the current year, it can apply the coefficient to avoid overpaying in advance.

Interest on Underpaid Advance Payments

If the total advance payments made during the year are less than 75% of the actual annual tax liability, interest is charged on the shortfall. The interest rate is the Bulgarian National Bank’s base rate plus 10 percentage points. For most small and medium businesses below the quarterly threshold, this is not relevant — they have no advance payment obligation and pay the full liability by 30 June.

Key Deadlines for Bulgarian Corporate Tax

Obligation	Deadline	Notes
Annual corporate income tax return (GDK)	30 June of the following year	Filed electronically via the NRA portal; signed with a qualified electronic certificate
Final annual CIT payment	30 June of the following year	Coincides with return filing; if advance payments exceed actual liability, the overpayment is refunded
Quarterly advance payment (Q1)	15 April of the current year	Applies only to companies above the quarterly threshold
Quarterly advance payment (Q2)	15 July of the current year	Applies only to companies above the quarterly threshold
Quarterly advance payment (Q3)	15 October of the current year	Applies only to companies above the quarterly threshold
Quarterly advance payment (Q4)	15 December of the current year	Applies only to companies above the quarterly threshold
Monthly advance payments	15th of each current month	Applies only to companies above the monthly threshold
Annual financial statements	31 March of the following year (for NSI filing); 30 June for Trade Register publication	Small companies: simplified form; larger companies: full IFRS or Bulgarian GAAP statements with auditor’s report
Statistical reporting (NSI)	31 March of the following year	National Statistical Institute annual report

ANNUAL ACCOUNTING SERVICE: Bulgaria for Business VCC provides a full annual accounting and corporate tax compliance service: preparation of monthly and annual financial statements, advance payment calculations and monitoring, annual corporate return preparation and filing, and NRA liaison. Clients do not need to interact directly with the NRA for routine compliance matters. The service cost is modest relative to the compliance obligations it covers.

The Global Minimum Tax (Pillar Two) — Does It Affect Your Business?

What the 15% Global Minimum Tax Is

Since 2024, the EU has been implementing the OECD’s Pillar Two global minimum tax, which requires EU member states (including Bulgaria) to ensure that large multinational groups pay a minimum effective corporate income tax rate of 15%. Bulgaria has incorporated the relevant EU Directive into its domestic law.

This has created concern among some foreign business owners that Bulgaria’s 10% corporate tax rate is being raised. The concern is understandable but misplaced for the vast majority of businesses. The scope of the global minimum tax is deliberately and precisely defined to affect only the largest corporations.

Who Is Affected

Group Characteristic	Subject to Global Minimum Tax?	Why
Multinational or domestic group with consolidated annual revenue above €750 million	Yes — subject to Bulgarian Pillar Two top-up tax where effective rate is below 15%	The €750 million threshold is the OECD/EU Pillar Two scope condition; groups above this threshold must ensure effective rates meet the 15% minimum
Individual company or group with consolidated annual revenue below €750 million	No — Bulgarian standard 10% CIT applies without modification	The overwhelming majority of SMEs, EEODs, OODs, and international businesses registered in Bulgaria fall below this threshold
Single-owner Bulgarian EOOD with revenue up to €5 million/year	No	Far below €750 million threshold; standard 10% applies
Group of Bulgarian companies owned by the same investor with total revenue below €750 million	No	Below threshold; standard 10% applies
Subsidiary of a large multinational (e.g. a Bulgarian R&D or services entity of a major corporation)	Potentially yes, if the global group exceeds €750 million	The top-up tax may be triggered at the group level; the Bulgarian entity itself pays 10% CIT as normal; any top-up is applied at the group level

FOR THE VAST MAJORITY OF READERS: The global minimum tax does not affect you. The €750 million revenue threshold means that a company with €50 million, €100 million, or even €500 million in revenue is entirely outside its scope. Bulgaria’s 10% CIT rate continues to apply to all businesses below this threshold, unchanged and unaffected by Pillar Two. The global minimum tax is a significant development for the largest multinationals; for the internationally mobile entrepreneurs and SMEs that represent the core market for Bulgarian company registration, it is irrelevant.

Euro Adoption and Corporate Taxation — What Changed

1 January 2026: Bulgaria Joins the Eurozone

Bulgaria adopted the euro on 1 January 2026, replacing the Bulgarian lev (BGN) at a fixed exchange rate that had been maintained for over two decades under the currency board arrangement. The transition to the euro has affected many aspects of Bulgarian business operations — but the corporate income tax rate is not among them.

Aspect of Bulgarian Corporate Tax	Effect of Euro Adoption
CIT rate	Unchanged — 10% flat rate confirmed; euro adoption did not trigger any tax rate changes
Tax base calculation	All accounting now in euros; no conversion calculations required; simplifies reporting for companies earning in euros
Advance payment thresholds	Thresholds converted to euro equivalents; same economic thresholds apply
NRA filings	All tax returns, payments, and communications now in euros; eliminates BGN/EUR conversion in tax accounting
Invoicing and contracts	All company invoices, contracts, and financial statements now in euros; eliminates FX risk for eurozone trade partners
Cross-border dividend withholding	Withholding tax calculations no longer require BGN/EUR conversion; euros remitted directly
DTT treaty rates	All treaty rates apply to euro amounts directly; no conversion required

The practical impact of euro adoption for corporate tax purposes is primarily administrative simplification: eliminating the BGN/EUR conversion that previously applied to all tax calculations, filings, and payments. For companies that earn most of their revenue in euros (which describes the majority of internationally oriented Bulgarian businesses), this simplification is meaningful.

How Bulgaria Compares to Other EU Jurisdictions

Corporate Tax Rates Across the EU

The table below compares corporate income tax rates across EU member states. The first section shows headline CIT rates; the second section shows the combined owner-level burden (CIT plus dividend tax) that determines how much profit a business owner actually retains after extracting earnings from their company.

Country	CIT Rate	Dividend Tax	Combined Owner-Level Burden
Bulgaria	10%	5%	~14.5%
Hungary	9%	15%	~22.7%
Ireland	12.5%	25%	~34.4%
Cyprus	12.5%	0% (to resident company) / 17% to individuals	~12.5-28%
Romania	16%	10%	~24.4%
Lithuania	15%	15%	~27.8%
Slovakia	21%	7%	~26.5%
Czech Republic	21%	15%	~32.9%
Estonia	0% retained / 22% distributed	Included	~22% on distribution
Poland	19%	19%	~34.4%
Netherlands	25.8%	26.9%	~45.8%
Austria	23%	27.5%	~44.2%
Belgium	25%	30%	~47.5%
Germany	~30%	25% + solidarity	>47%
France	25%	30% (PFU)	~47.5%
Spain	25%	19-28%	~39-45%
Italy	24%	26%	~43.8%
Denmark	22%	42%	~54.8%

COMBINED BURDEN IS THE RELEVANT METRIC: The corporate tax rate in isolation is useful but incomplete for business owners who intend to extract profits from their company. The combined owner-level burden — CIT plus dividend tax — is the figure that determines actual retained income after all corporate and personal taxes. On this combined measure, Bulgaria’s approximately 14.5% is unmatched in the EU. Hungary’s lower 9% CIT is offset by its 15% dividend tax, producing a combined burden of ~22.7%. Ireland’s 12.5% CIT with 25% dividend tax produces ~34.4%. Cyprus has a complex dividend regime. Bulgaria’s simultaneous minimisation of both corporate and dividend rates is its defining structural advantage.

Bulgaria vs. Romania vs. Cyprus vs. Estonia — Which Is Better for Your Business?

The Four Most Frequently Compared Jurisdictions for International Entrepreneurs

When internationally mobile entrepreneurs consider EU incorporation, these four jurisdictions appear most frequently in the analysis. Each has genuine advantages; the right choice depends on the business profile.

Factor	Bulgaria	Romania	Cyprus	Estonia
CIT rate	10%	16% (1% micro-entity rate exists for micro-companies below €500K)	12.5%	0% retained / 22% distributed
Dividend tax	5%	10%	0% (company) / 17% (individuals)	Included in 22% distribution rate
Combined on-extraction	~14.5%	~24.4%	~12.5-28% depending on structure	~22%
Personal income tax	10% flat	10% flat	0-35% (scale)	20% (from 2025)
EU / Schengen / Eurozone	All three since 2024/2026	EU + Schengen; not eurozone	EU + eurozone; not Schengen	All three
Physical residency practical?	Yes — strong lifestyle case; low cost of living	Yes — Bucharest emerging; language barrier higher	Yes — English widely spoken; higher cost	Yes — digital governance; higher cost
Company registration for non-residents	EOOD/OOD — standard; no residency required	SRL — standard; local director sometimes required in practice	Ltd — standard; local director typical	OU — e-Residency allows remote; no physical residency required
Best for growth companies (reinvesting profits)	Moderate — 10% CIT applies annually even on retained	Moderate — 16% applies annually	Moderate — 12.5% applies annually	Strong — 0% on retained profits maximises reinvestment capital
Best for mature profitable companies (distributing dividends)	Best in EU — ~14.5% combined	Good — ~24.4% combined	Competitive — depends on structure	Less optimal — 22% on distribution

PRACTICAL GUIDANCE: For entrepreneurs building a profitable business that they will regularly extract earnings from, Bulgaria offers the lowest combined tax burden in the EU. For founders focused on growth with profits reinvested (not distributed), Estonia’s 0% on retained profits gives the largest compounding advantage. Romania offers a competitive combined rate (24.4%) with the benefit of a large domestic market and familiar legal traditions for some Eastern European entrepreneurs. Cyprus suits specific structures (holding companies, IP licensing) where the dividend treatment and extensive DTT network are advantageous. Bulgaria’s profile is clearest for SMEs and entrepreneurs with steady profit generation and regular dividend distributions.

Common Mistakes Foreign Owners of Bulgarian Companies Make

Mistake	Why It Happens	Consequence	Prevention
Assuming company registration creates personal tax residency	Belief that registering an EOOD and obtaining a VNJ automatically shifts personal tax obligation to Bulgaria	Person remains tax resident in prior country; expected personal tax savings not materialised; potential double taxation	Understand that company registration and personal tax residency are legally separate; establish genuine Bulgarian tax residency independently
Mixing personal and corporate expenses	Owner treats the company account as a personal account; personal costs paid through company	Non-deductible expenses disallowed by NRA; reclassified as hidden profit distributions; dividend tax + penalties	Maintain strict separation of company and personal finances; pay personal expenses from personal accounts only
Withdrawing funds without dividend documentation	Owner transfers funds from company to personal account without a participants’ resolution	Irregular withdrawal; reclassified as undocumented income or hidden dividend; penalties, interest, potential audit	Always pass a formal dividend distribution decision before any withdrawal; document everything
Ignoring double taxation treaty provisions	Owner not aware of DTTs or assumes Bulgarian 10% is the only obligation	Unexpected withholding taxes on payments from foreign clients; missed credit opportunities; potential double taxation	Analyse the DTT between Bulgaria and each country where clients are located before the first invoice is issued
Missing the annual return deadline	Owner not aware of the 30 June deadline; accountant not engaged	Penalty for late filing; interest on late payment; NRA enforcement action	Engage Bulgaria for Business VCC from company registration; annual compliance is a standard part of the service
Not registering for VAT when the threshold is exceeded	Owner not monitoring revenue; unaware of the €50,000 VAT registration threshold	Retroactive VAT liability; penalties and interest from the point the threshold was exceeded	Monitor revenue against the VAT threshold monthly; register proactively before the threshold is crossed

Why Bulgaria Remains the EU’s Most Competitive Corporate Tax Jurisdiction

Six Structural Advantages That Work Together

Bulgaria’s corporate tax competitiveness is not simply a function of the headline 10% rate. It is the product of six structural features that work together to produce an environment that is both low in cost and high in quality of market access.

Advantage	Detail	Significance Rating
10% flat CIT — no progression, no surcharges	The same rate applies from €1 to €1,000,000,000 of profit; no municipal surcharge; no special levies	Highest
5% dividend tax — lowest in EU	Combined with 10% CIT produces ~14.5% owner-level burden; no social contributions on dividends	Highest
Full EU single market access	A Bulgarian company operates within the EU legal framework; invoices EU clients without tariffs; benefits from EU regulatory equivalence	Very high
Schengen membership (since 2024)	Goods, services, and people move without border controls; logistics efficiency for trade-dependent businesses	Very high
Eurozone membership (since 2026)	Euro-denominated transactions; no BGN/EUR conversion; institutional investor eligibility; sovereign credit upgrade	High
Political and legal stability of the tax framework	10% CIT rate stable for nearly two decades; dividend rate stable; global minimum tax affects only €750m+ groups; no announced rate increases	High

Frequently Asked Questions

The Bulgarian corporate income tax rate in 2026 is 10% — a flat rate with no progressive bands, no minimum slab, and no municipal or local surcharge. The 10% applies to all net taxable profit regardless of the amount, the sector, or the nationality of the company’s owner. It is the lowest corporate income tax rate in the European Union (tied with Hungary’s 9% headline rate, which is subject to conditions that exclude most businesses). The rate has been stable for nearly two decades.

Foreign companies — companies incorporated outside Bulgaria — are subject to Bulgarian CIT only on income earned through a permanent establishment in Bulgaria (a branch, office, or dependent agent) or on certain Bulgarian-source income subject to withholding tax (dividends at 5% or 10%, interest at 10%, royalties at 10%). A foreign company that operates entirely from outside Bulgaria and has no presence or permanent establishment there has no Bulgarian CIT obligation on its profits. However, it may have Bulgarian withholding tax obligations on payments to Bulgarian entities.

Yes. A Bulgarian-resident company (incorporated in Bulgaria) is taxed on its worldwide profit at 10% — regardless of where the revenue was earned. A Bulgarian EOOD providing consulting services to clients in Germany, France, the US, or Israel pays 10% CIT on the net profit from all those activities. There is no higher rate, no separate international business tax, and no exemption for foreign-source income. Double taxation treaty relief is available to credit foreign withholding taxes paid against the Bulgarian CIT liability on the same income.

Yes. Once corporate income tax at 10% has been paid on the annual net profit, the remaining after-tax profit can be retained within the company indefinitely without any additional tax. The dividend tax of 5% only arises when the profit is distributed to the owners. A company that retains all its earnings and reinvests them pays only the annual 10% CIT; no additional tax arises on the retained balance. This is different from the Estonian model, where tax is deferred entirely until distribution, but it means that retaining profit in a Bulgarian company costs only the 10% annual CIT.

CIT is calculated on net taxable profit: revenues minus deductible expenses, adjusted for any non-deductible items under the ZKPO. The 10% rate is then applied to the resulting taxable profit figure. The company prepares its annual financial statements, the accountant makes the necessary tax adjustments, and the net taxable profit is multiplied by 10% to produce the tax liability. The annual return and final payment are due by 30 June of the following year. For most SMEs, the tax adjustments are minimal and the taxable profit closely approximates the accounting profit.

All expenses that are documented with proper tax invoices, connected to the company’s economic activity, and not specifically excluded by the ZKPO are deductible. This includes: salaries and employer social contributions; office rent and utilities; accounting, legal, and professional services; software licences and cloud services; marketing and advertising; business travel (within limits); equipment depreciation; and financing costs. Personal expenses of the owner paid through the company are not deductible and may be reclassified as hidden profit distributions, triggering dividend tax plus penalties.

A 5% dividend withholding tax applies when the company distributes its after-tax profit as dividends to individual shareholders. The company withholds the 5% at source and remits it to the NRA; the shareholder receives the net amount. The combined effect of 10% CIT and 5% dividend tax on the original profit is approximately 14.5% — the lowest combined owner-level burden in the EU. Dividends are not subject to social contributions.

No, not in terms of rates or structure. The 10% CIT rate is unchanged by euro adoption. What changed is purely administrative: all tax calculations, returns, payments, and NRA communications are now conducted in euros rather than Bulgarian lev. For companies that earned most of their revenue in euros (the majority of internationally oriented Bulgarian businesses), this eliminates the BGN/EUR conversion step in tax accounting and simplifies financial reporting.

The global minimum tax (OECD Pillar Two, implemented in Bulgaria under EU Directive 2022/2523) applies only to multinational or domestic groups with consolidated annual revenue of €750 million or more. For the overwhelming majority of businesses that register in Bulgaria — individual entrepreneurs, SMEs, startup founders, consultants, IT companies, e-commerce operators, and international investors below this threshold — the global minimum tax is entirely irrelevant. Bulgaria’s 10% standard CIT rate applies to these businesses unchanged.

For five mutually reinforcing reasons: (1) The lowest corporate income tax in the EU at 10% flat, combined with the lowest dividend tax at 5%, producing a combined owner-level burden of approximately 14.5% — roughly one-third of Germany or France. (2) Full EU single market access — a Bulgarian company operates within the EU legal and regulatory framework. (3) Full Schengen membership since 2024, eliminating border friction for goods and logistics. (4) Eurozone membership since 2026, eliminating currency risk and expanding the institutional investor pool. (5) 20+ years of rate stability — the Bulgarian tax framework has been predictable and consistent longer than most competing jurisdictions.

For entrepreneurs who regularly extract profits as dividends: Bulgaria is the best option in the EU at ~14.5% combined, ahead of Romania (~24.4%), Cyprus (~12.5-28% depending on structure), and Estonia (~22% on distribution). For growth-stage companies reinvesting all profits: Estonia’s 0% on retained earnings maximises reinvestment capital. Romania offers competitive rates with a large domestic market advantage. Cyprus suits specific holding and IP licensing structures. The right choice depends on: whether the owner will distribute or reinvest profit; whether physical residency in the country is practical; and the specific business model. Bulgaria for Business VCC advises on jurisdiction choice as part of the company registration consultation.

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