What is the corporate tax rate in Bulgaria?

Bulgaria levies corporate income tax (CIT) at a flat rate of 10% on taxable profits. This is the lowest corporate tax rate in the European Union and makes Bulgaria one of the most tax-competitive jurisdictions in Europe for company incorporation.

How the 10% rate works

The 10% rate applies to all Bulgarian-resident companies on their worldwide taxable income. Non-resident companies are taxed only on Bulgarian-sourced income. The tax year follows the calendar year (1 January to 31 December). The annual corporate tax return (Form 1) must be filed and the tax paid by 31 March of the following year.

Taxable profit is broadly calculated as accounting profit adjusted for non-deductible expenses, tax depreciation differences, and other statutory adjustments defined in the Corporate Income Tax Act (CITA).

Dividend withholding tax: 5%

When a Bulgarian company distributes profits to shareholders, a 5% withholding tax applies to the dividend payment. This withholding tax is deducted at source by the company before the net dividend reaches the shareholder.

For EU/EEA resident corporate shareholders, dividend withholding tax is typically reduced to 0% under the EU Parent-Subsidiary Directive, provided the shareholder holds at least 10% of the Bulgarian company for at least one year.

For individual shareholders (including founder-directors), the 5% withholding tax is a final tax. No further personal income tax is due on the dividend received.

The combined founder extraction rate: approximately 14.5%

For a founder who owns an EOOD or OOD entirely and wants to extract all post-tax profits as dividends, the total tax cost works out as follows:

Assume BGN 100 of pre-tax profit. - Corporate income tax at 10%: BGN 10.00 - Remaining after CIT: BGN 90.00 - Dividend withholding tax at 5% on BGN 90.00: BGN 4.50 - Net dividend received by founder: BGN 85.50 - Total tax paid: BGN 14.50

This gives an effective combined rate of 14.5%, compared to 45%+ in the UK, 30%+ in Germany, and over 50% in some Scandinavian countries. It makes Bulgaria exceptionally attractive for international entrepreneurs and digital nomads structuring their business activity.

Social insurance considerations for directors

Directors of Bulgarian companies who receive a salary are required to pay social and health insurance contributions on that salary. The mandatory minimum insurable base for self-employed individuals and directors is BGN 933 per month in 2024, with a ceiling of BGN 3,750 per month.

If a founder takes only dividends and no salary, no social insurance contributions are due on the dividends themselves. However, they must ensure other sources of social insurance coverage exist, or register as self-insured and pay contributions on the minimum base separately.

Micro-enterprise tax (alternative regime)

Very small companies with annual turnover below BGN 300,000 may elect to pay a micro-enterprise tax of 1% or 3% on turnover rather than standard CIT. This is rarely used in practice because the 10% standard CIT on profit is already extremely low, and the turnover-based tax can be punishing at low margin levels.

Advance instalment obligations

Companies with taxable profit in the prior year must make advance CIT instalments during the year: quarterly for medium companies (prior year tax above BGN 30,000) and monthly for large companies (prior year tax above BGN 300,000). A 20% safe harbour applies: if your advance payments equal at least 80% of the current year's actual tax liability, no underpayment interest is charged. See the dedicated question on advance instalments for full details.

When does the 10% rate not apply?

Certain income types are subject to different rates. Withholding tax of 10% applies to royalties, interest, and service fees paid to non-residents not covered by a tax treaty. Gambling operators face additional levies. However, for the vast majority of trading companies, the 10% flat rate on taxable profits is the applicable rate.