This Bulgaria tax guide covers the rules in force from 1 January 2026, the year Bulgaria replaced the lev with the euro and became the euro area’s 21st member. Bulgaria still levies the European Union’s lowest headline rates — 10% flat on personal income and 10% flat on corporate profits, with dividends taxed at 5% and no wealth or inheritance tax on direct-line heirs. A November 2025 plan to double the dividend tax was withdrawn after mass protests, and the eventual 2026 State Budget Act — passed only on 24 July 2026 — left the headline rates untouched.
Introduction
Bulgaria sits in the south-east corner of the European Union, bordering Romania, Serbia, North Macedonia, Greece and Turkey, with a 378 km Black Sea coastline and a population of roughly 6.4 million. It has been an EU member since 2007, a NATO member since 2004, a full Schengen member since 1 January 2025 and a euro area member since 1 January 2026, when the lev was retired at the long-standing peg of 1 EUR = 1.95583 BGN. The legal system is continental civil law and the language is Bulgarian, written in Cyrillic. Sofia sits at 550 m under the Vitosha massif; Bansko and the Black Sea resorts anchor a small but growing expatriate community. Cost of living remains among the lowest in the EU, though Sofia prices have converged quickly since 2022.
For internationally-mobile investors, this Bulgaria tax guide matters because Bulgaria is the only EU member state offering a genuine flat tax at both the corporate and personal level — no brackets, no personal allowance, no surtax on high earners. A company owner can extract profit at a combined 15% effective rate (10% corporate tax plus 5% dividend withholding), inside the single market, with the Parent-Subsidiary Directive and around 70 double tax treaties. The 2026 euro changeover removed the last currency-risk objection. Against that sit real political and reputational risks: seven parliamentary elections in under four years, a government that collapsed in February 2026, and continued FATF grey-list status pending a final on-site assessment.
Direct Taxes
Bulgarian tax residents are taxed on worldwide income; non-residents are taxed only on Bulgarian-source income, via a permanent establishment or withholding tax. There is no progressivity at all — the same 10% applies to the first euro and the millionth. A company is Bulgarian tax resident if it is incorporated in Bulgaria, so the corporate residence test is purely formal, which makes substance (real management, staff and premises) the practical battleground rather than the residence rule itself. The signature concept for investors is not a special regime at all: it is the flat rate itself, combined with a 5% dividend withholding tax that many treaty and EU-directive positions reduce to zero.
Personal income tax (2026 rates)
| Chargeable income (EUR, USD) | Rate |
|---|---|
| All employment, freelance, rental, royalty and capital-gains income — from EUR 0 (~$0) upward | 10% flat |
| Business income of registered sole traders (ET) | 15% flat |
| Dividends and liquidation proceeds | 5% final withholding |
| Interest on non-EU/EEA bank accounts | 10% final |
| Interest on EU/EEA bank accounts | 0% (exempt since 1 April 2022) |
The 10% flat rate has been in force since 1 January 2008 and was not changed by the 2026 State Budget Act. There is no personal allowance, but mandatory social security contributions are deducted from the tax base, and statutory expense deductions apply without any need for receipts: 25% for freelancers and civil-contract income, bringing the effective rate to 7.5% of gross; 10% on rental income, giving an effective 9%; and 40% or 60% for certain agricultural and authorial income. Child tax relief for 2026 reduces the annual tax base by EUR 3,067.75 (~$3,500) for one minor child, EUR 6,135.50 (~$7,000) for two and EUR 9,203.25 (~$10,500) for three or more.
Corporate income tax
| Item | Rate |
|---|---|
| Standard corporate income tax | 10% |
| Withholding tax on dividends and liquidation proceeds | 5% |
| Withholding tax on interest, royalties, technical services, rent, franchise and director fees | 10% |
| Qualified domestic minimum top-up tax (Pillar Two), groups ≥ EUR 750m (~$855m) revenue | 15% |
| Tonnage tax on qualifying maritime operations | 10% alternative regime |
| One-off tax on representative and in-kind social expenses | 10% |
| One-off tax on private use of company assets | 3% |
| Local / municipal corporate income tax | None |
Bulgaria’s 10% rate has been unchanged since 2007 and remains the joint-lowest headline corporate rate in the EU. Since 1 January 2024 Bulgaria has applied the EU Pillar Two directive through a qualified domestic minimum top-up tax, so multinational and large domestic groups with consolidated revenue of at least EUR 750 million (~$855 million) in two of the last four years top up to a 15% effective rate — but it does not touch SMEs or ordinary holding structures. Dividends paid to an EU/EEA parent holding at least 10% for two continuous years are exempt from the 5% withholding under the Parent-Subsidiary Directive; interest and royalties paid to an associated EU company (25% direct participation for two years) are exempt under the Interest and Royalties Directive. Tax losses carry forward for five successive years, and ATAD interest limitation and CFC rules apply in full.
Social security and health contributions
| Contribution | Employee | Employer | Self-employed |
|---|---|---|---|
| Social security funds | 10.58% | 14.12%–14.82% | 19.8% (pension) |
| Health insurance | 3.2% | 4.8% | 8% |
| Total | 13.78% | 18.92%–19.62% | ~27.8% (+3.5% optional sickness/maternity) |
The employer range reflects the Accident at Work and Occupational Illness Fund, which varies from 0.4% to 1.1% by sector (0.5% for administration and services). Contributions are capped: the maximum monthly insurable base was carried over at EUR 2,111.64 (~$2,410) while Bulgaria ran on an extension budget, and rises to EUR 2,300 (~$2,620) from 1 August 2026 under the 2026 Public Social Insurance Budget Act. That caps total employee contributions at roughly EUR 3,800 (~$4,340) a year — the single most important number for high earners, because everything above the ceiling is taxed at a clean 10% with no contribution at all. The minimum insurable base for self-employed persons rises from EUR 550.66 (~$630) to EUR 620.20 (~$710) from 1 August 2026, matching the minimum wage, which the 2026 budget froze at that level.
Indirect Taxes
Bulgaria applies the EU VAT Directive in full; VAT is by far the largest single revenue source and the main indirect tax an investor will meet. Excise duties follow the EU harmonised framework, and there are no stamp duties.
Value-added tax (VAT)
| Rate | Applies to (examples) |
|---|---|
| 20% (standard) | Most goods and services, including restaurant and catering since 1 January 2025 |
| 9% (reduced) | Hotel and other accommodation, books, periodicals (print and electronic), baby foods and hygiene products |
| 0% (zero) | Exports, intra-EU supplies, international transport, qualifying aircraft and vessel supplies |
| Exempt | Certain land transactions, residential leases to individuals, financial, insurance, gambling, education and health services |
From 1 January 2026 the mandatory registration threshold is EUR 51,130 (~$58,300), and — a significant change — it is now measured over a calendar year rather than the trailing twelve months, with an application due within 7 days of breaching it. The EU cross-border SME scheme also arrived on 1 January 2026, letting a small enterprise with EU-wide turnover of no more than EUR 100,000 (~$114,000) supply other member states VAT-exempt. Cash accounting is available below EUR 500,000 (~$570,000) of annual turnover.
Excise and other indirect taxes
| Tax | Notes |
|---|---|
| Excise — cigarettes | 21.5% ad valorem plus EUR 72.09 (~$82) per 1,000 pieces, minimum EUR 113.51 (~$129) per 1,000, for 2026; a further increase applies from 1 January 2027, with tobacco excise also raised from 1 August 2026 |
| Excise — fuels | Unleaded petrol EUR 363.02 (~$414) per 1,000 litres; diesel and kerosene EUR 330.29 (~$377) per 1,000 litres |
| Excise — alcohol | Ethyl alcohol EUR 562.42 (~$641) per hectolitre; beer EUR 0.77 (~$0.88) per hl/°Plato; wine: zero rate |
| Excise — electricity | EUR 1.02 (~$1.16) per MWh; zero for households |
| Property transfer tax | 0.1%–3% of the transfer value, set by each municipality |
| Insurance premium tax | 2% on premiums covering Bulgarian risks (life, reinsurance and transport exempt) |
| Tourist tax | EUR 0.10–1.53 (~$0.11–1.75) per overnight stay, set by municipality |
| Stamp duty | None |
Bulgaria’s excise burden is at or near the EU minima across most categories, and wine is entirely untaxed — a legacy of the domestic industry. The 2026 budget raised road vignette fees by 30% and tobacco excise from 1 August 2026, both revenue measures rather than structural reform.
Other Taxes Worth Knowing
| Tax | Bulgarian treatment |
|---|---|
| Capital gains tax | 10% flat — but exempt on shares, fund units and government securities disposed of on a regulated market in Bulgaria, the EU/EEA, an equivalent third-country market, or an SME growth market (made permanent from 1 January 2026) |
| Dividends (resident individual) | 5% final withholding — no further tax, not aggregated with other income |
| Interest (resident individual) | 0% on EU/EEA bank accounts since 1 April 2022; 10% on non-EU/EEA bank accounts; bond interest and discounts exempt |
| Rental income | 10% with a 10% statutory deduction — effective 9%; quarterly advance payments |
| Real estate gains | Exempt on one residential property per year held more than three years, and up to two other properties held more than five years; otherwise 10% on the gain after a 10% statutory deduction |
| Wealth / net worth tax | None |
| Inheritance tax | 0% for spouses and direct-line heirs. Siblings and their children: 0.4%–0.8% on amounts above EUR 127,823 (~$145,700). All others: 3.3%–6.6% |
| Gift tax | 0% between spouses and direct-line relatives; 0.4%–0.8% between siblings and their children; 3.3%–6.6% otherwise |
| Immovable property tax (annual) | 0.01%–0.45% of the municipal tax value, set locally, plus a separate garbage collection fee |
| Exit tax | Applies to corporates under ATAD on transfers of assets, tax residence or business out of Bulgaria |
The practical effect is that a listed-equity portfolio held by a Bulgarian tax resident produces zero capital gains tax and, for EU/EEA-held cash, zero interest tax — the only leakage is the 5% on dividends. Inheritance and gift tax are municipal, not national, and are irrelevant to the standard nuclear family: the exemption for spouses, children and parents is unlimited. Annual property tax on a EUR 200,000 (~$228,000) Sofia apartment typically runs well under EUR 200 (~$230), because the municipal tax value sits far below market price.
Disadvantages & Risks
Bulgaria is politically unstable in a way that is hard to overstate. The country has held seven parliamentary elections in under four years; the Zhelyazkov government fell in February 2026, a caretaker cabinet ran the country until May, and the 2026 State Budget Act was only adopted on 24 July 2026 — seven months into the tax year — with a record 5.7% deficit, EUR 10.1 billion (~$11.5 billion) of new borrowing and an immediate Constitutional Court challenge from GERB. The November 2025 attempt to double the dividend tax from 5% to 10% collapsed only because more than 20,000 people took to the streets; the proposal is dormant, not dead, and the fiscal arithmetic that produced it has got worse, not better. Anyone building a structure on the 5% dividend rate should assume it can be revisited in a future budget.
Reputationally, Bulgaria remains the only EU member state on the FATF grey list, added in October 2023. The FATF concluded in June 2026 that Bulgaria had substantially completed its action plan and scheduled a final on-site assessment, and MONEYVAL rated the country Compliant or Largely Compliant on all 40 recommendations — but formal delisting had not been confirmed as of July 2026. In practice this still means slower banking onboarding, heavier correspondent-bank scrutiny and occasional payment friction for non-resident-owned entities. Bulgaria is not, and as a member state cannot be, on the EU list of non-cooperative jurisdictions — but grey-list status does most of the same damage. Add a small economy exposed to energy prices and to the war on the Black Sea’s northern shore, persistent rule-of-law concerns, a concentrated banking sector, and substance requirements that bite hard: a Bulgarian company with no local director, staff or office will be challenged by the owner’s home revenue authority long before the Bulgarian one objects.
Strategy & Ideal Profile
The workhorse structure is the EOOD — a single-member limited liability company, incorporable with EUR 1 (~$1.14) of share capital in a few days — used as an operating company, with profits taxed at 10% and distributed at 5%, for a 15% all-in effective rate on extracted profit. Where a group is involved, a Bulgarian holding company benefits from the Parent-Subsidiary Directive on inbound dividends and from ~70 treaties on outbound flows, while interest and royalties to associated EU companies (25% for two years) escape withholding entirely. Owner-managers typically pay themselves a modest management salary up to the social-security ceiling of EUR 2,300 (~$2,620) a month, then take the balance as dividends — capping contributions at roughly EUR 3,800 (~$4,340) a year while the rest moves at 5%. Freelancers who do not need a company can register as a self-employed person and pay 10% on 75% of gross, an effective 7.5%, which is the lowest personal rate on active income anywhere in the EU.
It suits company owners with genuine operations they can relocate — software, e-commerce, consulting, logistics — because the 15% combined rate only holds if the substance is real. It suits investors and traders, who pay nothing on gains from EU/EEA-listed securities and nothing on EU/EEA bank interest. It suits dividend earners taking distributions from foreign companies, taxed at the same flat 5%. And it suits retirees with portfolio income, given the absence of wealth tax and the zero inheritance tax on direct-line heirs. Residency is straightforward: EU/EEA citizens register locally under freedom of movement, while non-EU nationals typically enter through a company, a self-employment permit or the digital-nomad route. Tax residence attaches if you spend more than 183 days in Bulgaria in any 12-month period — becoming resident in the calendar year the 183rd day falls — or if your centre of vital interests is in Bulgaria, judged on personal and economic ties. A permanent Bulgarian address alone is not enough without that centre of vital interests, and any treaty tie-breaker overrides the domestic test.
It does not suit anyone looking for a paper company. Bulgaria has no non-dom regime, no remittance basis and no territorial carve-out: once you are resident, worldwide income is taxable at the flat rate, foreign income included. It does not suit groups above the EUR 750 million (~$855 million) Pillar Two threshold, where the advantage disappears above 15%. And it does not suit anyone needing certainty over a ten-year horizon: the headline rates are attractive precisely because they are politically contested, and the 2026 budget cycle showed how quickly a dividend-tax increase can reach a parliamentary vote.
FAQ
Is Bulgaria a tax haven?
No. Bulgaria is a full EU member state applying the EU VAT Directive, ATAD, DAC6/DAC7 exchange of information and the Pillar Two global minimum tax. It is a low-tax jurisdiction, not an opaque one — it exchanges financial account data under CRS and cannot appear on the EU list of non-cooperative jurisdictions. It is, however, still on the FATF grey list as of July 2026, pending a final on-site assessment.
What is the corporate tax rate in Bulgaria in 2026?
A flat 10%, unchanged since 2007 and the joint-lowest in the EU. Large groups with consolidated revenue of at least EUR 750 million (~$855 million) pay a domestic top-up tax bringing their effective rate to 15% under Pillar Two, but ordinary companies are unaffected.
How does Bulgaria’s flat tax work?
There are no brackets and no personal allowance: 10% applies to every euro of chargeable income. Mandatory social security contributions are deducted first, as are statutory expense deductions — 25% for freelancers (effective 7.5%), 10% for rental income (effective 9%). Registered sole traders are the exception, taxed at 15%.
What is the 183-day rule in Bulgaria?
You become a Bulgarian tax resident if you spend more than 183 days in Bulgaria in any rolling 12-month period, with residence attaching from the calendar year in which the 183rd day falls. Residence also arises if your centre of vital interests is in Bulgaria, or if you have a permanent Bulgarian address and your centre of vital interests here. Double tax treaty tie-breakers override the domestic rules.
Does Bulgaria tax capital gains?
Yes, at 10% — but with a wide exemption. Gains on shares, collective investment scheme units and government securities disposed of on a regulated market in Bulgaria, the EU/EEA, an equivalent third-country market or an SME growth market are exempt, and the SME growth market exemption became permanent on 1 January 2026. Gains on one residential property per year held more than three years, and up to two other properties held more than five years, are also exempt.
Is there inheritance or wealth tax in Bulgaria?
There is no wealth or net worth tax. Inheritance and gift tax are municipal and set at 0% for spouses and direct-line relatives — children, parents — regardless of amount. Siblings and their children pay 0.4%–0.8% above EUR 127,823 (~$145,700); unrelated beneficiaries pay 3.3%–6.6%.
How are dividends taxed for a Bulgarian resident investor?
At a flat 5% final withholding tax, whether the paying company is Bulgarian or foreign. The tax is final — dividends are not aggregated with other income and attract no social security contributions. Where a foreign payer does not withhold Bulgarian tax, the recipient declares and pays it annually. Combined with the 10% corporate rate, that gives a 15% all-in effective rate on distributed company profit.
Sources
All figures should be checked against the primary government sources below.
- National Revenue Agency (NRA) — personal income tax, corporate income tax, VAT, withholding tax, registration and filing — nra.bg
- National Social Security Institute (NSSI) — contribution rates, minimum and maximum insurable income, pension rules — nssi.bg
- Ministry of Finance — tax policy, withholding tax, inheritance tax, draft and adopted budget laws — minfin.bg
- State Gazette (Darzhaven Vestnik) — the 2026 State Budget Act, the 2026 Public Social Insurance Budget Act and all tax law amendments as enacted — dv.parliament.bg
- National Assembly of the Republic of Bulgaria — passage of the 2026 budget package, second reading 24 July 2026 — parliament.bg
- InvestBulgaria Agency — investment incentives, company formation and residence routes — investbg.government.bg
- Bulgarian National Bank (BNB) — euro adoption, the fixed lev conversion rate of 1 EUR = 1.95583 BGN, and the euro reference exchange rates used for USD conversions — bnb.bg
- Financial Action Task Force (FATF) — grey-list status and the June 2026 assessment of Bulgaria’s action plan — fatf-gafi.org
USD figures are indicative conversions at ~1 EUR = 1.14 USD (ECB/Bulgarian National Bank euro reference rate, 29 July 2026) and rounded. Bulgaria adopted the euro on 1 January 2026; all pre-2026 lev figures were converted at the fixed rate of 1 EUR = 1.95583 BGN.
Last verified: 31 July 2026.
This is general information, not personal tax or legal advice. Tax outcomes depend on your specific facts; consult a qualified Bulgarian tax adviser before acting.
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