Bulgaria's 10% Corporate Tax Rate: An Entrepreneur's Guide

Bulgaria boasts the lowest flat corporate tax rate within the European Union. At a flat rate of precisely 10%, standard limited liability companies enjoy unparalleled financial efficiency.

1. How Does the 10% Tax Work?

The 10% corporate income tax is levied exclusively on your company's net taxable profit, not its gross revenue. This is a critical distinction that many new founders overlook.

2. Dividend Taxes

When you wish to extract that post-tax profit from your company to your personal bank account, it must be distributed as a dividend. Bulgaria applies a flat 5% dividend tax.

3. VAT Registration Thresholds

Another major advantage of operating in Bulgaria is the relatively high VAT registration threshold. As of the current fiscal year, your company is not obligated to register for VAT until it surpasses €51,130 in taxable turnover.

4. Ongoing Compliance

Compliance with the NRA is mandatory for companies to maintain good standing and apply for bank accounts successfully.

5. Allowable Business Deductions

To leverage the 10% rate effectively, you must understand what qualifies as a deductible corporate expense under the Corporate Income Tax Act (CITA). A deduction legally lowers your net profit, thereby reducing your total tax burden.

• Operational Expenses: Server costs (AWS, Google Cloud), software licenses (SaaS tools, Adobe, Microsoft), domain names, and marketing ad spend (Facebook Ads, Google Ads).
• Travel & Accommodation: Business flights, hotels, and per diems (daily allowances) for the director when traveling strictly for business purposes.
• Equipment & Assets: Laptops, phones, office furniture, to be amortized over their legal useful life (typically 2 years for electronics).
• Professional Services: Accounting fees, legal advice, Virtual Office subscriptions, and subcontractor invoices.

6. The 5% Dividend Withholding Tax

Corporate profit belongs to the company, not to you as an individual. To access that cash personally, you must distribute dividends. Bulgaria enforces a flat 5% withholding tax on all dividends distributed to individuals.

The workflow is simple: At the end of the financial year (or via interim dividends if specific criteria are met), your accountant calculates your post-10%-tax profit. If you declare a dividend of €10,000, your company will deduct €500 (5%), remit it directly to the state, and transfer €9,500 to your personal bank account. This makes the total effective tax rate to pocket your cash 14.5%.

7. Social Security Contributions ( осигуровки )

You cannot run an active business in Bulgaria strictly on dividends without first ensuring the manager's social security obligations are met. The appointed manager must be insured. For 2024, the minimum insurable income for a self-insured person (SOL) was raised to €477. Meaning, the mandatory monthly social and health contribution is approximately €148.

Unlike corporate tax, social security must be paid monthly, regardless of whether the company generates a profit. If the company is completely dormant (0 revenue, 0 expenses), these contributions can be legally frozen.

8. Personal Income Tax (Flat 10%)

If you pay yourself a traditional salary via a labor contract rather than withdrawing dividends, that salary is subject to Bulgaria's flat 10% Personal Income Tax. When deciding between drawing a high salary versus taking dividends, nearly all foreign founders opt for dividends, as the 5% dividend tax represents significant savings compared to the 10% personal income tax combined with heavy sliding-scale social security percentages.

9. Double Taxation Treaties (DTT)

Bulgaria has signed over 70 Double Taxation Treaties worldwide. If you live in Germany, the UK, or the US, but own a Bulgarian EOOD, these treaties prevent you from being fully taxed twice on the same income. However, complex 'top-up' tax rules may apply in your home residency. We always advise consulting with a cross-border tax specialist to optimize your personal tax flow.