Understanding Bulgaria's Tax System and Structure in 2025

Bulgaria has maintained a stable and investor-friendly tax environment since the implementation of its new Corporate Income Tax Act (CITA) on January 1, 2007, aligning with European Union legislation. The country’s taxation framework is divided into two broad categories: direct and indirect taxes. Direct taxes include corporate income tax, personal income tax, and withholding tax, while indirect taxes consist primarily of value-added tax (VAT) and excise duties. The National Revenue Agency (NRA) serves as the central authority responsible for tax collection and enforcement.

The legal foundation of Bulgaria’s tax system includes key statutes such as the Corporate Income Tax Act (CITA), the Personal Income Tax Act (PITA), the Value Added Tax Act (VATA), the Insurance Premiums Control Act (TIPA), and the Tax and Social Insurance Procedure Code (TSIPC). These laws collectively ensure transparency, compliance, and integration with EU standards.

Main Taxes and Rates in Bulgaria

Bulgaria offers one of the most competitive tax regimes in Europe, featuring low flat rates across major tax categories. The primary taxes include corporate income tax, personal income tax, VAT, excise duties, and withholding tax. Below is an overview of each.

Corporate and Personal Income Tax

Bulgaria has progressively reduced its corporate income tax rate over the years to boost economic growth and attract foreign investment. In 2004, the rate dropped from 23.5% to 19.5%, then further to 15% effective January 1, 2005. Since January 1, 2007, a flat corporate income tax rate of 10% has been in place—one of the lowest in the European Union.

For accounting purposes, straight-line depreciation is applied, with varying depreciation rates depending on asset classification. This simplifies financial reporting and enhances predictability for businesses.

On the personal income front, Bulgaria introduced a flat personal income tax rate of 10% starting January 1, 2008. This replaced previous progressive structures and eliminated the BGN 200 tax-free threshold, streamlining the system for both residents and non-residents earning income within the country.

Key Indirect Taxes in Bulgaria

Withholding Tax

Withholding tax in Bulgaria is levied at a standard rate of 10% on payments such as dividends, interest, and royalties made by domestic entities to non-residents. However, a reduced rate of 5% applies to dividend distributions from local companies to qualifying foreign investors, including capital returns on foreign direct investment. This favorable treatment supports cross-border investment and aligns with EU directives aimed at preventing double taxation.

Value-Added Tax (VAT)

Bulgaria applies a standard VAT rate of 20% on most goods and services. A reduced rate of 9% is applicable to specific sectors, particularly tourism-related activities such as hotel accommodations and catering services. Notably, travel agencies providing services within Bulgaria are subject to the 20% rate, whereas international tour packages involving third-country destinations are exempt from VAT.

Certain exports outside the EU, international transportation services, duty-free shop supplies, and intermediary services provided by brokers or agents are also zero-rated or fully exempt from VAT. These exemptions support export competitiveness and logistics efficiency.

Foreign companies operating in Bulgaria must register for VAT if their annual taxable turnover exceeds €25,000. Registration must be completed within 14 days after surpassing this threshold. Upon registration, businesses receive a unique VAT identification number and are required to maintain a dedicated VAT account. When input VAT exceeds output VAT, the surplus can offset future liabilities over the next three months. Any remaining credit is refunded within 45 days, ensuring cash flow efficiency for compliant taxpayers.

Excise Duties

Since November 15, 2005, Bulgaria has enforced excise taxes on select luxury and high-impact consumer goods. These include alcoholic beverages (excluding wine), beer, tobacco products (cigarettes, cigars, and loose tobacco), vehicles with engine power exceeding 120 kW (for passenger cars under nine seats), and certain engine components. Excise duties also apply to energy products such as commercial gasoline, coal, and electricity, with rates adjusted periodically to reflect environmental and fiscal policies.

Notably, coffee was removed from the excise list effective January 1, 2008. Meanwhile, excise on energy-intensive fuels has increased to encourage sustainable consumption. Goods exported from Bulgaria are generally exempt from excise duties, promoting international trade.

To monitor the movement of excisable goods, Bulgaria implemented the Excise Movement and Control System (EMCS) starting April 1, 2010. This digital tracking mechanism ensures real-time oversight of intra-EU shipments under suspension of excise payment, enhancing regulatory compliance and reducing fraud risks.

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