1. Who Pays Corporate Income Tax
The taxpayers are defined in Art. 2 and Art. 3 of the Corporate Income Tax Act (CITA). The law distinguishes between resident and non-resident legal entities:
Resident Legal Entities (Art. 3 CITA)
Resident legal entities are taxed on their worldwide profits, regardless of whether income is generated in Bulgaria or abroad. This category includes:
- Single-member limited liability company (EOOD) and OOD — the most common form
- Joint-stock company (AD, EAD) — public and non-public
- Variable Capital Company (VCC / ДПК) — introduced in 2024
- Cooperatives and cooperative unions
- Non-profit legal entities — only when carrying on economic activity
- Unincorporated partnerships (ДЗЗД) — per Art. 2(2) CITA
Non-Resident Legal Entities (Art. 4 CITA)
Non-resident legal entities are taxed on Bulgarian-source profits. They become liable when they have:
- A permanent establishment — branch, office, construction site exceeding 6 months
- Real estate in Bulgaria — rental income and capital gains
- Dividends, interest and royalties — subject to withholding tax
Who Does Not Pay Corporate Income Tax
- Individuals — taxed under the Personal Income Tax Act
- Sole traders (ET) — 15% under Art. 26 PITA on taxable profit
- Liberal professions — PITA with statutory expense allowance (25%)
2. Tax Rate and Tax Base
Rate: 10% — Flat
Art. 20 CITA sets a flat rate of 10%. This rate has been unchanged since 2007 and remains in force for 2026 — the lowest headline corporate rate in the EU (on par with Hungary's 9%, though Hungary has a higher dividend tax).
Tax Base
The tax base is the tax financial result, derived from the accounting result through CITA adjustments:
Tax Increases (Non-Deductible Expenses)
Art. 26 CITA and following articles list expenses that are not recognised for tax purposes:
- Fines, confiscations and other sanctions for breaches
- Expenses unrelated to the business activity
- Expenses without primary documents or with defective documentation
- Entertainment / representation expenses above cap (subject to 10% "expense tax")
- Hidden profit distribution — the most severe qualification
- Impairments and provisions not recognised under CITA
- Thin capitalisation interest limitation (Art. 43)
Tax Decreases
- Carry-forward of tax losses from prior years (Art. 70-74)
- Tax reliefs (investment, social, regional aid)
- Revaluation reserves released on asset disposal
Worked Example
| Accounting profit | EUR 100,000 |
| (+) Non-deductible entertainment expenses | EUR 2,000 |
| Taxable profit | EUR 102,000 |
| Corporate income tax 10% | EUR 10,200 |
| Distributable surplus | EUR 91,800 |
| Dividend withholding 5% | EUR 4,590 |
| Total tax burden | EUR 14,790 (≈ 15%) |
3. Fiscal Year and Annual Return
Tax Period
The tax (fiscal) period under CITA is the calendar year — 1 January to 31 December. Exceptions apply to companies in transformation, liquidation or insolvency, where periods can be shorter.
Annual Tax Return under Art. 92 CITA
The annual return is filed on a form approved by the Executive Director of the National Revenue Agency (NRA). Filing is electronic only — via the NRA Portal with a qualified electronic signature (QES) or PIC.
Mandatory Schedules
- Schedule 2 — profits/losses from foreign permanent establishments
- Schedule 3 — related-party transactions (transfer pricing)
- Schedule 4 — tax reliefs
5% Early-Filing Discount
Art. 92(5) CITA provides a 5% discount on the annual tax, capped at BGN 1,000 (EUR 511), if both conditions are met: the return is filed by 31 March and the full tax is paid within the same deadline.
4. Advance Tax Payments
Advance payments are governed by Art. 83-88 CITA and depend on net sales for the year preceding the year before the current one. Thresholds for 2026:
| Turnover (prior year) | Regime | Payment deadline |
|---|---|---|
| Up to EUR 153,387 (BGN 300,000) | No advance payments | — |
| EUR 153,387 – EUR 1,533,876 | Quarterly instalments | 15th day after the quarter-end |
| Over EUR 1,533,876 (BGN 3,000,000) | Monthly instalments | 15th day of the current month |
Specifics
- Newly registered companies — no advance payment obligation during the year of incorporation, except where the entity arises from a transformation
- Q4 has no quarterly instalment — final settlement occurs through the annual return
- Monthly instalments for Q1 (January, February, March) — payable by 15 April of the current year
Forecast Adjustment — Art. 88 CITA
Taxpayers may file a declaration to adjust advance payments up or down during the tax year if the forecast profit deviates materially from the initial estimate.
5. Combined Rate with Dividend Tax
Corporate income tax is not the only burden when profits are distributed to owners. A 5% dividend tax (Art. 194 CITA and Art. 38 PITA) is withheld on dividends paid to resident individuals and to non-resident persons.
Combined Burden Math
| Pre-tax profit | EUR 100.00 |
| Corporate tax 10% | EUR 10.00 |
| Distributable surplus | EUR 90.00 |
| Dividend tax 5% | EUR 4.50 |
| Net to owner | EUR 85.50 |
| Total tax burden | 15% combined rate (10% + 5%) |
EU Comparison (2026, indicative)
| Country | Corporate rate | Dividend tax | Combined burden |
|---|---|---|---|
| Bulgaria | 10% | 5% | 15% |
| Hungary | 9% | 15% | ~22% |
| Ireland | 12.5% | 25% | ~31.6% |
| Germany | ~30% | 25%-26% | ~48% |
| France | 25% | 30% | ~47.5% |
6. Key Exemptions and Reliefs
Investment Relief (Art. 189 CITA)
Companies investing in municipalities with high unemployment may reassign (remit) up to 100% of the corporate tax due. Key conditions:
- Investment must be located in regions with unemployment above the national average
- Assets and jobs retained for at least 5 years
- Compliance with de minimis and regional aid state-aid rules
Regional State Aid
Maximum aid intensity in disadvantaged regions reaches 50% of eligible costs (varies per regional aid map).
Social and Health Reliefs
- Donations to non-profit organisations — base reduction up to 10% of annual profit (Art. 31 CITA)
- Hiring of unemployed persons (Art. 177) — partial tax remission for eligible hires
Accelerated Tax Depreciation
- Electric vehicles for legal entities (from 2026) — up to 50% annually (double the standard rate)
- Computers and software — up to 50% annually
- Production equipment — up to 30% annually
7. Special Regimes
Loss Carry-Forward (Art. 70-74 CITA)
Tax losses are carried forward for 5 consecutive tax years with no quantitative cap. Carry-forward is also permitted on corporate transformations — mergers, divisions, absorptions — provided the anti-avoidance rules are met.
Group Companies — No Tax Consolidation
Unlike Germany, the Netherlands and France, Bulgaria has no tax consolidation regime. Each company in a group is a separate taxpayer filing its own return, even under 100% ownership.
Transfer Pricing
Art. 15-16 CITA and Chapter 9 of the Tax-Insurance Procedure Code (ДОПК) require related-party transactions to be at arm's length. Where net sales exceed BGN 16 million, the company must maintain documentation (Master File + Local File) following the OECD standard.
Alternative Taxes (Art. 194-218 CITA)
- Tax on expenses — 10% on entertainment, social benefits above cap, and personal use of company assets by staff
- Dividend withholding tax — 5% on distributions to resident individuals and non-residents
- Withholding tax at source — 10% on interest and royalties paid abroad (can be reduced under applicable double-tax treaties)
8. Key Changes from 1 January 2026
Euro Area
Bulgaria has joined the euro area as of 1 January 2026. All amounts in CITA, annual returns and accounting records are stated in EUR at the fixed rate of 1 EUR = 1.95583 BGN. The NRA's electronic systems accept filings in euro only.
Accelerated Depreciation for Electric Vehicles
A new tax depreciation category allows legal entities to depreciate electric vehicles at 50% per year — twice the standard rate for passenger cars. The measure supports clean-transport incentives and applies to assets placed in service on or after 1 January 2026.
R&D and Innovation Relief
The scope of reliefs for companies investing in R&D and innovation has been expanded. Technology-sector start-ups benefit from a more favourable treatment of development expenditure.
No Changes To
- The 10% rate remains — legislative proposals to increase it were withdrawn
- 5% dividend tax — the proposal to raise it to 10% was rejected
- 30 June deadline for the annual return remains
9. Comparison with Other Forms of Taxation
When choosing a business structure, the total burden — tax plus mandatory social contributions — should be compared:
| Form | Tax rate | Social contributions | Suitable for |
|---|---|---|---|
| EOOD/OOD (CITA) | 10% + 5% = 15% | Management contract or self-insurance | Medium / large businesses |
| Sole trader (PITA Art. 26) | 15% | Self-insurance | Individual traders |
| Liberal profession (25% SEA) | 7.5% effective | Self-insurance | Consultants, IT |
| Royalties / licences (40% SEA) | 6% effective | None (conditional) | Authors, photographers |
| Farmer (60% SEA) | 4% effective | Self-insurance | Unprocessed produce |
| Patent tax | Fixed annual | Self-insurance | Small premises up to EUR 51K |
See our guide on company registration in Bulgaria for more detail.
10. Frequently Asked Questions
Need Corporate Tax Advice?
Bulgarian corporate tax is relatively simple, but optimization requires expertise — from proper treatment of non-deductible expenses to advance payments, tax depreciation, and international structuring. The Innovires team serves 200+ corporate clients annually — from start-ups to multinational groups. Contact us for a consultation.