Bulgaria Tax Law Changes 2026 — Complete Overview

What you will learn

• What changed in the VAT Act (ZDDS) — new threshold, SME scheme, new registration date.
• What changed in the CIT Act (ZKPO) — R&D relief, accelerated depreciation for electric vehicles, updated Form 1010.
• What changed in the PIT Act (ZDDFL) — euro conversion, ECB reference rate.
• What changed in the Local Taxes and Fees Act (ZMDT) — new waste fee principle, Euro 7.
• The practical impact of eurozone membership — dual circulation, filing, payments.
• A calendar of key dates for 2026.

VAT Act (ZDDS) — what changed

The amendments to the Value Added Tax Act (ZDDS) are the most substantial and affect the largest number of taxpayers. They were introduced by the ZDDS Amendment Act (State Gazette No. 106/17.12.2025), effective from 01.01.2026, transposing Directive (EU) 2020/285 on the special scheme for small enterprises.

New mandatory registration threshold

Practical significance

• Counter reset — on 1 January each year the turnover counter resets to zero. If you had EUR 48,000 in 2025, from 01.01.2026 you start from zero.
• Daily monitoring — turnover is no longer tracked on a monthly basis. You must know your turnover every day, because upon exceeding the threshold you have only 7 days to file.
• Immediate registration — the new Art. 103 ZDDS means that from the day after exceeding the threshold, you are a registered person and must charge VAT — even if the registration act has not been issued.

New transactions included in turnover

Certain transactions involving real estate and financial services, which were previously excluded from the turnover calculation, are now included (in connection with Art. 168v ZDDS). This may affect businesses carrying out mixed activities — both taxable and exempt.

SME scheme — small enterprise regime

Domestic scheme (Art. 168v ZDDS):

• Applies to persons with annual turnover of no more than EUR 51,130 (for both the current and the preceding calendar year).
• Persons under the scheme do not charge VAT and have no right to input VAT credit.
• The scheme applies automatically — no notification to the NRA is required.

EU scheme (Art. 168g–168n ZDDS):

• Turnover in Bulgaria of no more than EUR 51,130 AND total turnover across the entire EU of no more than EUR 100,000.
• Registration with the NRA is required, resulting in an identification number ending in “-EX”.
• Quarterly reporting of turnover (Art. 168l).
• Allows VAT exemption for B2C sales in other Member States.

When the SME scheme is beneficial: B2C sales, activities without significant input purchases, start-ups.

When it is NOT beneficial: B2B services, significant input purchases (input VAT credit is lost), receiving services from third countries (registration under Art. 97a is still required).

CIT Act (ZKPO) — what changed

The amendments to the Corporate Income Tax Act (ZKPO) for 2026 introduce new reliefs and technical corrections.

R&D tax relief

A new tax relief for research and development (R&D) activities. Companies carrying out R&D may deduct an additional amount from their tax base that exceeds the actual expenses incurred.

The relief targets:

• Software companies developing new products.
• Manufacturing enterprises with R&D departments.
• Biotech and pharmaceutical companies.
• Any business investing in innovation.

Conditions: The activity must meet the definition of R&D (systematic activity aimed at increasing knowledge and creating new applications). Detailed documentation of expenses and results is required.

Accelerated depreciation for electric vehicles

The annual tax depreciation rate for electric vehicles has been increased to 50%. This means the vehicle can be fully depreciated in 2 years instead of the usual 4–6 years (at a standard rate of 25% or lower).

Example: When purchasing an electric vehicle for EUR 40,000:

• Year 1: Depreciation EUR 20,000 — tax base reduction of EUR 20,000 — tax saving of EUR 2,000 (at 10% CIT).
• Year 2: Depreciation EUR 20,000 — tax saving of EUR 2,000.
• Total tax saving: EUR 4,000 (at the standard 25% rate, the same saving would take 4 years, with lower present value).

Tax exemption

Income from rent where the recipient is a religious organisation is exempt from tax — a specific exception.

Updated Form 1010 (annual CIT return under Art. 92 ZKPO)

An updated annual corporate income tax return form under Art. 92 ZKPO has been published (State Gazette No. 22/24.02.2026). Amounts for tax periods from 2026 onwards are reported in EUR.

For returns covering the 2025 tax period (filed in 2026), figures remain in BGN, but the tax is paid in EUR.

Global minimum tax

Technical refinements to the provisions on the global minimum tax (Pillar Two) for large multinational groups. The practical impact is limited to a very small number of companies in Bulgaria.

PIT Act (ZDDFL) — what changed

The amendments to the Personal Income Tax Act (ZDDFL) for 2026 are primarily technical and related to the euro transition.

Transition to the euro

• All returns for income from 2026 onwards are filed in EUR.
• For income from 2025 (declared in 2026), figures are in BGN, but the tax is paid in EUR at the fixed rate 1 EUR = 1.95583 BGN.
• Advance taxes from 01.01.2026 are paid in EUR.

ECB reference rate

For income in a currency other than EUR (e.g. US dollars), the ECB reference exchange rate for the date the income is received applies for filing purposes. This is a change from the previous practice of using the BNB exchange rate (which no longer sets its own rate for the euro).

Child tax reliefs

The amounts of child tax reliefs remain unchanged for 2026 (a new decision is expected upon adoption of the state budget).

Local Taxes and Fees Act (ZMDT) — what changed

The amendments to the Local Taxes and Fees Act (ZMDT) for 2026 affect two main areas: the waste collection fee and vehicle tax.

Waste collection fee — “polluter pays” principle

A new principle for determining the waste collection fee: based on the number of users or actual waste volume, rather than as a percentage of the property’s tax assessment value.

• Previously, the waste collection fee was set as a percentage (per mille) of the property’s tax assessment value. An owner of an expensive property in the city centre paid more, even if they generated little waste.
• From 2026, municipalities introduce a new calculation method based on the amount of waste generated or the number of occupants/users.
• The aim is fairer allocation — “the polluter pays”.

Important: The specific implementation depends on each individual municipality. Check the relevant municipal ordinance for the new rules.

Vehicle tax — Euro 7

A new environmental category “Euro 7” for motor vehicles has been introduced. Vehicles meeting Euro 7 standards receive an additional discount when calculating vehicle tax (similar to the existing discounts for Euro 4, 5, and 6).

Conversion to EUR

All local taxes and fees from 01.01.2026 are calculated and paid in EUR. Property tax assessment values are converted at the fixed rate.

Eurozone membership — practical impact

Bulgaria joined the eurozone on 01.01.2026 with the fixed rate 1 EUR = 1.95583 BGN.

Fixed rate

The rate 1 EUR = 1.95583 BGN is final and irrevocable. All amounts in BGN are converted to EUR at this rate, with mathematical rounding to the second decimal place (to the euro cent).

Dual circulation period

During dual circulation:

• Shops, institutions, and the NRA accept both currencies.
• Change (for cash payments) is given in EUR.
• ATMs dispense EUR.

Filing and paying taxes

Key amounts in EUR

Calendar — key dates 2026

Frequently asked questions

Conclusion

The 2026 tax changes are significant and affect virtually every business in Bulgaria. The new VAT threshold in EUR with daily monitoring, the SME schemes, the R&D and electric vehicle reliefs, and the comprehensive transition to the euro require adaptation of accounting systems, internal processes, and tax planning.

If you have questions about the specific application of these changes to your business, contact Innovires Legal. We will help you navigate the new rules and optimise your tax position in compliance with the law.

This article is for informational purposes only and does not constitute tax or legal advice. For specific cases, we recommend consulting a tax adviser or lawyer. The information is current as of March 2026 and reflects the legislation in force at that date.