Bulgaria's 10% Flat Tax: One of the Lowest in the EU

Corporate income tax

Bulgaria applies a single 10% rate to taxable corporate profit. There are no progressive bands, no turnover thresholds, and no municipal or trade-tax surcharge of the kind Germany adds on top of its federal rate. The rate has been 10% since 2007 and has survived four changes of government, which is the more useful fact — it is a settled part of the fiscal model rather than an incentive with a sunset clause.

Taxable profit is calculated from the statutory accounts with a defined set of adjustments. Depreciation follows fixed statutory rates by asset class, loss carry-forward runs five years, and there is no group relief — each entity files separately. For a manufacturing or trading company the effective rate lands very close to the headline rate, which is not true of every low-tax jurisdiction.

Dividend and withholding taxes

Distributions to non-resident shareholders carry a 5% withholding tax. Distributions to a parent company resident in another EU or EEA member state are exempt entirely under the Parent-Subsidiary Directive, provided the participation conditions are met. Interest and royalties paid abroad attract 10%, again subject to treaty reduction and to the EU Interest and Royalties Directive where it applies.

For a Chinese, Turkish, Korean or Indian parent, the relevant treaty usually reduces the dividend rate below the statutory 5% or provides a credit at home. This is the single most important number to confirm before you structure the shareholding, and it is jurisdiction-specific — we check it on the discovery call.

Personal income tax and social security

Personal income tax is also flat at 10%, with no allowance-based bands. Social security contributions are shared between employer and employee at a combined rate of roughly 32.7–33.4% of gross salary, but — crucially — they are capped at a statutory maximum insurable income. Above that ceiling, additional salary carries only the 10% income tax. For senior staff and directors this makes the total employment cost markedly lower than in most of the EU.

VAT

The standard rate is 20%, with 9% on accommodation and a small number of other categories. Registration is mandatory above the turnover threshold and available voluntarily below it — most foreign-owned entities register immediately, because a VAT number is what makes intra-EU trading work. Intra-community supplies to other member states are zero-rated, and reverse charge applies on acquisitions, so a company trading within the EU largely nets out.

Filing is monthly, by the 14th, with the VIES and Intrastat returns due alongside. Refunds of input VAT are made within statutory deadlines, though a first refund to a newly registered foreign-owned company usually attracts a documentation review.

How it compares

Statutory rates for 2026, before treaty relief. Hungary’s 9% corporate rate is offset by a local business tax on turnover and a higher personal burden; Bulgaria remains the lowest on a combined basis. All figures require verification against official sources at publication.