Tax Obligations for Companies in Bulgaria: What You Need to Know

In Bulgaria, companies have various tax obligations that they must fulfill to remain compliant with the law. These tax obligations include not only corporate tax but also several other taxes related to the company’s operations and its employees. Proper management of these obligations is essential. It helps you understand the different types of taxes and how to pay them on time.

Corporate Tax

Corporate tax on profits is one of the main taxes that companies in Bulgaria must pay. This tax is imposed on the profit that the company has realized during a given year. In Bulgaria, the corporate tax rate is a flat 10%. This makes the country one of the most competitive in the EU regarding corporate tax.

Companies that generate profits must file an annual tax return. They should use the template provided by the National Revenue Agency (NRA) and submit it by March 31st of the following year. The return reports all income, expenses, and tax reliefs that can be used.

Value Added Tax (VAT)

VAT is an indirect tax imposed on goods and services sold by companies. The VAT rate in Bulgaria is 20% for most goods and services. However, for certain categories of goods and services, a reduced VAT rate of 9% has been introduced, according to Art. 66a of the VAT Act (amended – SG, issue 102 of 2022, effective from 01.01.2023). This reduced rate applies to:

• Accommodation services are provided in hotels and similar establishments. This includes vacation accommodation and renting out spaces for campsites or caravans on the territory of the country.
• The supply of books includes both physical and electronic formats. This covers textbooks, educational books, children’s picture books for drawing or coloring, as well as periodical printed publications such as newspapers and magazines. However, this excludes publications that are entirely or mainly intended for advertising or contain video or audio-musical content.
• The supply of foods intended for babies or young children, as well as baby diapers and similar hygiene products for babies.

Companies that are VAT-registered must regularly submit monthly or quarterly VAT returns, depending on their turnover.

A company registered for VAT can deduct VAT paid on its purchases and offset it against the VAT it collects from its customers. This is an important mechanism for optimizing costs and improving the company’s liquidity.

Payroll Tax

Payroll tax is the obligation of the company to withhold and remit the income tax on salaries to the tax authorities. This tax is levied on employees’ wages and usually follows a progressive rate (for incomes above certain thresholds). For 2025, the income tax on individuals in Bulgaria is generally 10% for most income that does not exceed the minimum thresholds.

Companies must also pay social and health insurance contributions for their employees, which are calculated based on their salaries.

Other Taxes That May Apply to Companies:

1. Real Estate Tax – If a company owns real estate, it must pay an annual property tax. The rate of this tax depends on the value of the property and its location.
2. Vehicle Tax – If a company owns vehicles, it must pay an annual vehicle tax, which depends on the vehicle’s power and environmental characteristics.
3. Dividend Tax – If a company distributes dividends to its shareholders or partners, it must withhold 5% tax on the dividends.

Deadlines for Filing Tax Returns

The deadlines for submitting tax returns depend on the type of tax:

• Corporate Tax – The annual return must be submitted by March 31st of the following year. For companies with high turnovers or special circumstances, the authorities may extend the deadline.
• VAT Returns – These are filed monthly, by the 14th of the following month. Alternatively, they can be filed quarterly if the company is not required to submit monthly returns.
• Payroll Tax Returns – These are filed monthly, with contributions for social and health insurance being due by the 25th of the following month.
• Other Tax Returns (e.g., property tax) – The deadlines depend on the local tax laws and are usually filed within the first quarter of the year.

How to Optimize Tax Liabilities Using Legal Means

There are several legal ways in which companies can optimize their tax obligations:

1. Utilizing Tax Reliefs and Credits – Bulgaria offers various tax reliefs, such as those for investing in new equipment, research and development, and for small and medium-sized enterprises (SMEs).
2. VAT Registration – Companies that are VAT-registered can deduct the VAT paid on their purchases. They can then recover it from the tax authorities, leading to cost optimization.
3. Expense and Depreciation Planning – Proper depreciation of the company’s assets can reduce taxable profits and, consequently, the tax burden.
4. Transfer Pricing and Group Structures – Large companies with multiple subsidiaries can use transfer pricing strategies (i.e., pricing between related entities) to minimize their global tax burden.
5. Proper Expense Management – By optimizing expenses, such as reducing unnecessary administrative costs, companies can reduce the profit on which corporate tax is levied.

Conclusion

Companies in Bulgaria must be careful when managing their tax obligations to avoid penalties. They should also take advantage of all opportunities for optimization. Understanding tax liabilities and filing deadlines is crucial for successful business management.

Reduce your tax burden legally with deductible expenses. Learn how in Tax-Deductible Expenses.