Corporate income taxes

Last reviewed 15 Jul 2024

Object of taxation

Income

Tax rate

10 %

Corporate income tax rate for corporations as well as for partnerships with limited or unlimited liability to tax, no minimum corporate income tax.

15% global minimum tax adopted. Applicable for large multinational or national groups of enterprises and local subsidaries of these groups. More details in Chapter 5 of CIT Act.

Tax liability

Unlimited

Corporations resident or managed in Bulgaria, on worldwide income.

Limited

Foreign legal entities neither resident nor managed in Bulgaria, on certain income in Bulgaria

Financial year

Calendar year

Accounting

Generally, double-entry bookkeeping in accordance with the Bulgarian Accounting Act

Loss carryback

not possible

Loss carryforward

Possible, subject to set off / carry forward; limits: carryforwards for 5 years, with the balance in following years.

Shell company purchase

Possible, as acquisition of shares

Operating expenses

Costs or expenses incurred in connection with the generation of income, and with procuring and maintaining sources of income.

Transfer prices

Reference to OECD transfer pricing principles Thresholds for obligatory local TP documentation: assets: over BGN 38 million; net sales: over BGN 76 million; average number of personnel: 250 Two of three criteria shall be exceeded for the previous fiscal year.

Interest on debt financing of acquisition of shares

Deductible

Debt / equity

3:1

Tax depreciation

Provisions

Accounting provisions are not tax deductible in the year of accrual (limited number of very restrictive exceptions). Reversal of provisions is allowed under conditions specified in the tax law.

Motor vehicle expenses

Non-deductible expenses

See Corporate Income Tax Act for exhaustive list provisions made for financial accounting purposes Tax penalties and fines.

Expenses of unlawful activities

Expenses non-related to company's activity; non-documented expenses; Fines and penalties for breach of legislative acts; bribe. See Corporate Income Tax Act for exhaustive provisions.

Interest barrier

Interest and royalties to intra-group companies

10 %, or per applicable DTA and EU Interest and Royalty Directive (as of 1 January 2015 – 0% (subject to preconditions) withholding tax in the areas covered by the EU Interest and Royalty Directive)

Withholding taxes

Generally, 10 %

Interest

At 10%, or per applicable DTA and applying EU Interest and Royalty Directive for group purposes

Royalties

At 10%, or per applicable DTA and applying EU Interest and Royalty Directive for group purposes

Dividends

At 5% or per applicable DTA and applying the EU Parent-Subsidiary Directive for group purposes

Controlled foreign corporation (CFC) rules

Taxation of certain income of foreign corporations/permanent establishments at the level of the controlling Bulgarian corporation.

Hybrid mismatches

Mismatches which, due to differing fiscal recognition methods, lead to a different tax treatment in different countries and may under certain circumstances lead to profit shifting or profit reduction must be neutralized, i.e. as a rule, the related expenses are treated as non-tax-deductible.

National parent- subsidiary exemption

• Dividends are tax exempt
• Capital gains are subject to tax
• Capital losses, liquidation losses are generally deductible over 5 years

International investments

• Dividends are tax exempt for companies tax residents in EU or EEA countries
• Capital gains are taxable. Tax losses are deductible against tax profits from the same source and within 5 years.

International parent- subsidiary exemption and portfolio investments

• Dividends basically tax-free
• Capital gains subject to tax

Goodwill amortisation

Not possible

Group taxation / pooling

Not possible

Tax groups

N/A

Pooling

N/A