Bulgaria: corporate tax guide

What the tax system covers

Bulgarian-resident companies are taxed on domestic and foreign profits. A nonresident entity can have Bulgarian-source or permanent-establishment obligations without being a Bulgarian-resident company.

When a company becomes tax resident

Corporate Income Tax Act Article 3 defines resident legal entities by Bulgarian incorporation; it also includes the specified European companies and cooperatives with a Bulgarian registered seat and registration. They are liable on domestic and foreign profits. Article 4 separately taxes foreign legal entities on Bulgarian permanent-establishment profits and covered Bulgarian-source income. The domestic company-residence definition is therefore not a general rule making any foreign company resident merely because a director is in Bulgaria. Actual activity, a local establishment and an applicable treaty still require their own analysis.

Rates and the tax base

10% ordinary corporate rate. The company tax is separate from distribution tax, employment-related contributions and indirect taxes.

Outbound dividends, interest and royalties

Dividends: 5%. Domestic withholding on dividends to nonresident entities, subject to the qualifying EU/EEA corporate-recipient exclusion and anti-abuse conditions. Treaty relief is separate.

Interest: 10%. Domestic rate on covered Bulgarian-source income of a nonresident entity without an attributable local permanent establishment. Specific EU-associated-company exemptions and treaty relief require their own conditions.

Royalties: 10%. Domestic rate on covered Bulgarian-source income of a nonresident entity without an attributable local permanent establishment. Specific EU-associated-company exemptions and treaty relief require their own conditions.

Company profits and corporate CFC rules are separate

The ordinary corporate income-tax rate is 10%. Bulgarian resident companies are generally taxed on domestic and foreign profits, while foreign legal entities can have taxable Bulgarian permanent establishments and source-income obligations. Entity residence and treaty treatment must be assessed under the applicable definitions; this guide does not claim that any director sitting in Bulgaria automatically converts every foreign company into a Bulgarian-incorporated taxpayer.

The Corporate Income Tax Act’s CFC provisions include foreign entities and foreign establishments. The foreign-entity control test uses more than 50% of voting rights, capital or profit rights held alone or with associated enterprises, alongside the statutory low-tax comparison. Attribution, genuine-activity conditions and relief against double counting require review of Articles 47c–47e. These corporate provisions should not be casually presented as an identical personal-shareholder regime.

Evaluate an operating business, not just an incorporation

For a founder relocating activity, prepare a functional map of staff, customers, contracting, intellectual property and decision-making. Determine which company performs each function and bears the commercial risk. Related-party transactions need a supported allocation; routing invoices through a Bulgarian entity does not by itself move the underlying value or remove a foreign permanent establishment.

The departure country may tax an asset transfer or retained company profit even where Bulgaria’s ordinary rates are lower. Check the timing of personal residence, company creation and any transfer of contracts or assets before moving revenue. Maintain accounting records and a filing calendar for corporate, personal, payroll and VAT obligations. A low statutory income-tax rate can be useful, but it does not settle immigration permission, regulated activity, source taxation or treaty eligibility.

Separate a personal move from a corporate transfer

The Corporate Income Tax Act contains provisions addressing transfers of assets, activities or tax residence that remove relevant Bulgarian taxing rights. Those corporate rules should not be described as a universal deemed disposal of an individual’s private portfolio. However, moving the business along with its owner can require valuations and an entity-level exit analysis even where there is no external sale.

Map the functions and assets that remain in Bulgaria and those transferring abroad. A Bulgarian company can continue to have obligations while another country claims a taxable presence or management connection. Review contracts, intellectual property, staff, banking authority and intercompany pricing before the move. The corporate CFC framework also needs reassessment where the ownership chain or foreign activity changes.

CFC profit, substance and the mandatory register

Article 47d recomputes the foreign profit under Bulgarian tax rules. Where year-ends differ, inclusion follows the Bulgarian year in which the foreign period closes. The attribution uses the highest relevant voting, capital or profit-entitlement percentage and is proportionate to the period during which the foreign entity meets the CFC conditions. This is more specific than multiplying the year-end shareholding by a foreign financial statement’s bottom line.

The substantial-activity exception requires evidence of the people, equipment, assets and/or premises needed for that particular business. The cited Article 47d(7) does not restrict that exception to the EEA. A registered address is not a substitute for the operational facts. Foreign CFC losses have their own five-year and country-related restrictions rather than offsetting unrelated Bulgarian profits.

Article 47e requires a register recording control percentages and changes, profits attributed, relevant losses, foreign tax and subsequent relief. This connects the initial inclusion to credits and later dividends or disposals, avoiding double counting while preserving the audit trail.

When moving an asset creates an exit adjustment

Articles 155a and 155b distinguish an asset transfer from a transfer of an activity. For an asset, a positive market-value/tax-value difference increases the tax result and a negative difference reduces it under the statutory rules. A whole activity uses its market value and the tax values of the transferred assets and liabilities. No sale to a different owner is necessary where the transfer removes Bulgarian taxing rights.

The rules cover head-office/foreign-PE and domestic-PE/foreign-head-office transfers, a change in tax-residence jurisdiction, and migration of PE activity. The limited 12-month exception is for securities financing, collateral and prudential-capital or liquidity transfers. A commercial relocation does not qualify merely because management hopes to reverse it later. Prepare contemporaneous valuations and track any retained Bulgarian PE assets separately.

Foreign companies and income attribution

Corporate Income Tax Act Articles 47c–47e cover foreign entities and foreign PEs. A company is controlled through more than 50% of voting rights, capital or profit entitlement, alone or with associated enterprises. Actual foreign corporation tax must be below half the Bulgarian-law counterfactual. Undistributed foreign tax profit is attributed proportionally; a proven substantial business activity supported by the necessary people, equipment, assets and/or premises can prevent inclusion.

Departure, migration and continuing obligations

Articles 155–155d apply to transfers of assets/activity, corporate tax residence or PE business where Bulgaria loses the right to tax a later disposal while ownership remains with the same person. Tax adjustments use market value and tax value, with specific rules for whole activities. Retained Bulgarian PE assets are excluded from the residence-transfer limb. Qualifying incidental EU/EEA transfers can use the statutory instalment procedure; the temporary 12-month exception is narrowly defined.