Doing Business in Bulgaria: Taxes, VAT and Compliance Guide 2026

Doing business in Bulgaria offers one of the most competitive environments in the EU, combining low taxes with access to the single market.

• 10% corporate income tax (lowest in the EU)
• 20% standard VAT rate
• VAT registration threshold EUR 51,130
• Employer registration possible without a local company
• Full access to the EU single market

A Comprehensive Guide for SME Owners

Welcome to Bulgaria’s Business Environment

Starting or expanding your business in Bulgaria? You have chosen one of Europe’s most attractive business destinations but understanding why Bulgaria works is just as important as knowing how to operate here. If you are still evaluating whether Bulgaria is the right market for your business, our guide to Why Bulgaria is Europe’s hidden business gem covers the strategic advantages in detail.

Doing business in Bulgaria guide offers the practical side: corporate tax, VAT, payroll contributions, accounting requirements and banking rules. We have written it to be useful whether you are just getting started or reviewing how things are currently set up.

If something here raises a question specific to your business, we’re happy to help.

Companies enter the Bulgarian market in different ways. Some register a local entity and operate as a Bulgarian company. Others hire employees in Bulgaria directly as a foreign employer without opening a local office. And some trigger VAT obligations through their cross-border activity, requiring VAT registration without a physical presence.

PAYROLL BG supports all three setups — from initial registration through ongoing compliance. See our full range of services.

Part One: Understanding Your Tax Obligations 2026

For foreign investors, doing business in Bulgaria requires careful planning around company registration, VAT obligations, and ongoing reporting requirements.

Corporate Income Tax: Bulgaria’s Competitive Advantage

Bulgaria’s 10% flat corporate income tax rate remains the lowest in the European Union, making it highly attractive for international and domestic businesses alike.

Who Pays Corporate Income Tax:

• Bulgarian resident companies: Taxed on worldwide income regardless of where it’s earned.
• Non-resident companies: Taxed only on Bulgarian-source income earned through permanent establishments or specified activities.

Understanding Taxable Profit vs. Accounting Profit:

Here’s a critical distinction many business owners miss: you don’t pay tax directly on your accounting profit. Instead, you pay tax on “taxable profit”—your accounting profit adjusted according to tax law provisions.

Certain expenses that reduce your accounting profit don’t reduce your taxable profit:

• Expenses unrelated to your business activity;
• Improperly documented expenses (missing invoices, contracts, or supporting documentation);
• Entertainment and representation expenses exceeding legal limits;
• Non-deductible provisions and reserves;
• Fines and penalties.

This means you could show an accounting loss but still owe taxes, or conversely, have accounting profit but tax loss carryforward benefits. Always consult with qualified accountants when calculating tax obligations.

Getting the distinction between accounting and taxable profit right from the start is where tax and VAT compliance support makes a measurable difference.

Filing Deadlines and Procedures:

Submit your annual corporate income tax return between March 1 and June 30 following the tax year (calendar year is the tax year in Bulgaria).

Advance Tax Payments:

Most small businesses don’t pay advance installments. However:

• Quarterly installments: Companies with prior year revenue exceeding EUR 153 387,57.
• Monthly installments: Companies with prior year revenue exceeding EUR 1 533 875,64.

You determine your own advance payment amounts by filing a declaration between March 1 and April 15 based on forecasted profit.

By November 15 – companies may submit a declaration pursuant to Article 88 for changes to advance installments.

Penalties and Interest:

• Late filing: EUR 255,65 to EUR 3067,75 fines.
• Late payments: legal annual interest applies on outstanding amounts. Оfficial interest calculator provided by the National Revenue Agency
• Serious violations can trigger tax audits or criminal proceedings.

If your company is selected for an NRA inspection, how you respond matters as much as your records. Read our practical guide to tax representation and audit support in Bulgaria.

Value Added Tax (VAT): Updated 2026 Rules

VAT compliance in Bulgaria requires timely registration, accurate reporting, and proper documentation of all taxable transactions.

Current VAT Rates:

• Standard rate: 20% on most goods and services;
• Reduced rate: 9% for hotel accommodation and certain publications;
• Zero rate: Intra-EU supplies, exports outside the EU, international transport.

Mandatory Registration Threshold (Updated January 1, 2026):

From 1 January 2026, a business established in Bulgaria must register for VAT once its annual taxable turnover in Bulgaria exceeds EUR 51,130.

When Registration Is Required:

Mandatory registration applies when:

• Bulgarian entities: When your taxable turnover exceeds EUR 51,130 annually.
• EU companies using the EU small enterprises scheme in Bulgaria:
  • its annual turnover in Bulgaria exceeds EUR 51,130, or
  • its annual EU turnover exceeds EUR 100,000.
• EU companies not using the EU small enterprises scheme and Non-EU businesses
  • making taxable supplies in Bulgaria where Bulgarian VAT is due;
  • supply goods or services where the recipient owes the VAT (reverse charge mechanism).

Action required: Register within within 7 days from the date a registration obligation has arisen or the threshold is exceeded. EU businesses not using the small business scheme, and some non-EU companies, must register for VAT before making their first taxable sale in Bulgaria— unless the transaction falls under a special scheme or the VAT is due by the recipient.

Voluntary Registration:

Even below the threshold, you can register voluntarily. Benefits include:

• Ability to reclaim VAT on business purchases (input VAT)
• Enhanced credibility with business customers who need VAT invoices
• Simplified accounting when dealing with VAT-registered suppliers
• Competitive advantage in B2B transactions

Special Rules for Foreign Businesses:

EU distance sellers: Register for VAT if your sales to Bulgarian consumers exceed the €10,000 EU-wide threshold (or the equivalent in BGN).

Non-EU businesses: Must register immediately when conducting taxable transactions in Bulgaria, regardless of turnover. You’ll need to appoint a fiscal representative who becomes jointly liable for your VAT obligations (unless Bulgaria has a mutual assistance treaty with your country—currently including USA, Switzerland, and several others).

Cross-border VAT and OSS:

Bulgarian businesses carrying out eligible cross-border B2C e-commerce transactions may use the OSS regime to report and pay VAT through a single Member State instead of registering in multiple EU jurisdictions. For Bulgaria representative OSS authority is NRA.

Monthly Filing and Payment:

Submit VAT returns electronically through the National Revenue Agency (NRA) portal by the 14th day of the following month (OSS report quarterly). The system calculates your net position—VAT collected minus VAT paid—resulting in either payment due or refund owed.

Penalties for Non-Compliance:

• Missed VAT returns: from EUR 255,65 to EUR 5112.92  fines.
• Late payments: legal annual interest applies on outstanding amounts. Оfficial interest calculator provided by the National Revenue Agency
• Repeated violations: doubled penalties and potential suspension of business registration.

VAT registration deadlines in Bulgaria are strict — and the consequences of missing them are immediate. If you’re not sure whether your business has a registration obligation, we are happy to clarify.

Need help with VAT registration or compliance in Bulgaria?

Social Security and Personal Income Tax

Personal Income Tax: 10% Flat Rate

Bulgaria applies a 10% flat tax on:

• Employment income (wages and salaries)
• Dividends from companies
• Liquidation shares
• Rental income
• Capital gains (with certain exemptions)

Social Security Contributions: The Full Picture

Beyond income tax, both employees and employers pay mandatory social security contributions that significantly impact total labor costs.

Employee Contributions: 13.78% of Insurable income.

Employer Contributions: 18.92% to 19.62% of Insurable income for the most common III Labor category, depending on employer economic activity code. For international drivers, pilots, miners will apply higher percentages.

Maximum insurable income is EUR 2111.64 (Updated January 1, 2026). Above the threshold, security contribution is not due.  The minimum social security income depends on the economic activity of the employer and qualification group of the employee but cannot be lower than the minim salary. Minimum salary in Bulgaria is EUR 620,20 (Updated January 1, 2026).

Total Tax Burden on Employment:

The combined burden reaches approximately for the most common III-rd. Labor category – 32.7%  to 33.4%:

• 10% personal income tax.
• 33-34% combined social contributions avarage (employee + employer).

For distributed corporate profits: Significantly lower at approximately 14.5% effective rate (10% corporate tax + 5% dividend withholding tax).

Monthly Deadlines:

• Personal income tax withholding and social contributions: Due by the 25th of the following month.
• Reporting to NRA: Monthly declarations due by the 25th of the following month.

Payroll calculations in Bulgaria involve more variables than most employers expect — minimum insurable income by qualification group, activity-specific employer rates, and monthly NRA deadlines. Our Администриране възнагражденията на служителите cover the full calculation and reporting cycle, every month.

If you employ staff in Bulgaria, one more obligation is approaching: the EU Pay Transparency Directive takes effect in June 2026. Read our practical guide for employers on what changes and what steps to take now.

Part Two: Accounting and Financial Reporting Requirements

Bulgaria’s Accountancy Act establishes comprehensive requirements that all commercial entities must follow  and the obligations differ significantly depending on your company’s size, structure, and activity.

The Accountancy Act: Your Compliance Framework

Bulgaria’s Accountancy Act establishes comprehensive requirements that all commercial entities must follow. Understanding these obligations is essential for avoiding penalties and maintaining good standing.

Annual Financial Statements: What You Must Prepare

Standard Components:

Annual financial statements must include:

• Balance sheet (statement of financial position)
• Income statement (profit and loss statement)
• Notes to the financial statements (detailed explanations and disclosures)
• Cash flow statement (required for certain categories—see below)
• Statement of changes in equity (for medium and large enterprises)

Simplified Option for Micro-Enterprises:

Micro-enterprises and Sole proprietors with net sales revenue under EUR 100,000 who aren’t subject to mandatory financial audit may prepare only an income statement consisting solely of an abridged balance sheet and an abridged profit and loss account.

Preparation Timeline:

• Preparation deadline: As of December 31 each year.
• Presentation: In thousands of EUR.
• Adoption by shareholders: Within six months (by June 30).
• Publication deadline: By September 30 of the following year.

Note the critical distinction: While financial statements must be adopted by June 30, publication to the Commercial Register may occur until September 30.

Accounting Standards Choice:

Most Bulgarian companies choose between:

• National Accounting Standards (NAS): Bulgarian standards suitable for most SMEs, simpler and less demanding than international standards.
• International Accounting Standards/IFRS: International standards often preferred by foreign investors, required for certain categories.

Mandatory IFRS users: Financial institutions, insurance companies, investment intermediaries, pension funds, and public interest entities.

Business Size Categories: Why Classification Matters

The Accountancy Act categorizes businesses based on three criteria measured over two consecutive years. Your category determines reporting requirements, audit obligations, and publication rules.

Mandatory Financial Audit Requirements

Not all companies need professional audits, but many do. Understanding when audit is required helps you budget appropriately and select auditors in advance.

Mandatory Audit Required For:

Small Enterprises exceeding TWO criteria:

• Assets: EUR 2,045,168
• Revenue: EUR 4,090,335
• Employees: 50

All Medium and Large Enterprises: Always require mandatory audit regardless of other factors.

Public Interest Entities: Always require audit (banks, insurance companies, listed companies, collective investment schemes, pension funds, and others specified by law).

Companies Under Special Laws: As required by sector-specific legislation (investment intermediaries, management companies, etc.).

Audit Timeline:

Auditors must complete their work in time for financial statement adoption by shareholders (by June 30). Start engaging auditors by before the end of financial year to ensure availability.

Companies approaching the audit thresholds are often at a stage where financial structure and growth planning matter as much as compliance. Our Финансиране и HR консултиране. covers what investors and lenders expect from your financial reporting at this stage.

Quarterly Statistical Reporting to NSSI

Beyond annual reporting, certain companies must provide quarterly statistical information to the National Statistical Institute (NSSI).

Who Reports Quarterly:

• Medium and large enterprises.
• Small enterprises in specific sectors (manufacturing, wholesale trade, certain services).
• Companies selected for statistical sampling purposes.

Reporting Content:

Quarterly reports typically include:

• Revenue data by activity codes;
• Employment information;
• Investment and capital expenditure data;
• Industry-specific indicators.

Submission Deadlines:

Quarterly reports are due within 20 days after the end of each quarter (April 20, July 20, October 20, and January 20).

Annual Activity Report to NSSI

All legal entities must submit an annual activity statement containing statistical reports and accounting documents to the National Statistical Institute.

Filing Deadline: By June 30 following the reporting year.

Penalties:

Failure to submit: approx. EUR 100 to EUR 1,000 fines. Repeated violations result in doubled penalties.

SAF-T Digital Reporting: Prepare Now

The Standard Audit File for Tax (SAF-T) represents Bulgaria’s move toward comprehensive digital tax compliance. Starting 2026, Large enterprises must provide detailed accounting information to the NRA electronically in standardized XML format. The expansion of the scope will continue until 2030 when all VAT-registered enterprises, including micro-enterprises must provide SAF-T.

Financial Statement Publication Requirements

Most companies must publish their adopted annual financial statements in the Commercial Register within specified deadlines.

Publication Deadline: By September 30 of the year following the reporting period.

Where to Publish:

• Commercial Register (for traders registered there).
• Register of Non-Profit Legal Entities (for applicable entities).
• Economic publication or Internet (for certain enterprise categories).

Penalties for Non-Publication:

• For officials: approx. EUR 100 to EUR 1,500
• For legal entities/sole traders: 0.1% to 0.5% of net sales revenue
• Repeated violations: Doubled penalties

Managing annual financial statements, NSSI reporting, SAF-T preparation, and Commercial Register publication requires careful coordination of deadlines throughout the year. Our accounting services in Bulgaria cover the full reporting cycle — so nothing is missed.

Part Three: Banking and Foreign Exchange Requirements

When operating in Bulgaria, banking relationships and cross-border reporting obligations deserve as much attention as taxes and payroll — yet they are often the last thing companies set up properly.

Opening and Maintaining Bulgarian Bank Accounts

Having a proper banking relationship is crucial – and legally required – for business operations in Bulgaria.

Why Bulgarian Bank Accounts Are Essential:

• Depositing initial capital during company registration
• Paying taxes and social security contributions
• Receiving customer payments
• Paying suppliers and employees
• Compliance with anti-money laundering regulations

Cross-Border Payment Requirements and BNB Declarations

Bulgaria maintains reporting requirements for certain cross-border transactions to the Bulgarian National Bank (BNB) for statistical purposes and currency control compliance.

When BNB Declaration is Required (Ordinance No. 27):

For cross-border transfers: Receivables and payables to foreign persons where the equivalent amount equals or exceeds EUR 25,000, you must submit a declaration under Ordinance No. 27.

Opening foreign bank accounts: Any account opened abroad must be declared to the BNB within the statutory deadline.

Initial foreign investments: Reporting is required when a Bulgarian company makes a direct investment abroad.

Quarterly Reporting to BNB: Foreign Accounts and Large Transactions

On a quarterly basis, certain entities must report specific transactions to the BNB using statistical templates:

What Must Be Reported Quarterly:

• Foreign Loans: equals or exceeds the euro equivalent of BGN 500,000 at the moment of declaration.

• Foreign Bank Accounts: All accounts must be reported regardless of balance size.

• Commercial Credits:Reporting applies when total exposure to foreign counterparties exceeds approximately the euro equivalent of BGN 200,000.

Penalties for Non-Reporting:

Initial declarations are typically due within 15 working days after the transaction or event. Quarterly reports are submitted by the 20th day of the month following the reporting period

Failure to submit required BNB declarations can result in administrative fines and compliance orders.

BNB reporting is often overlooked, especially by companies engaged in cross-border financing, intra-group transactions, or international trade. However, these obligations are closely monitored and can apply even when no actual payments are made, but only balances exist.

BNB reporting obligations apply even when no payments are made — outstanding balances alone can trigger a declaration requirement. If your company has foreign loans, intra-group transactions, or accounts abroad, it’s worth verifying your reporting position. Our accounting and bookiping services include cross-border reporting support.

Document Retention Requirements

Bulgarian law specifies minimum retention periods for various business documents:

5 Years:

• Tax returns and supporting documentation;
• VAT records and Purchase and sales journals;
• Commercial contracts.

10 Years:

• Primary accounting documents (invoices, receipts, cash orders, others);
• Cash books and cash register reports;
• Аnnual financial statements;
• Protocols of governing bodies;
• Commercial contracts.

50 Years:

• Payrolls.
• Employment contracts and additional agreements. Orders for appointment, re-appointment and termination of employment.
• Unpaid leave taken.

Working with Professional Advisors

While you can theoretically handle some tasks yourself, professional support delivers value far exceeding costs.

Frequently Asked Questions

1. What’s the real total tax burden on employment in Bulgaria? Approximately 43-44% combined: 10% personal income tax plus 33-34% social contributions (employee + employer portions). However, corporate profits distributed as dividends face only 14.5% effective rate (10% corporate + 5% dividend tax), making Bulgaria’s system quite efficient for owner-managers.
2. Can I operate my Bulgarian company remotely from another country? Yes, though your company must maintain a real management address and local representation in Bulgaria. However, consider tax residence implications—extensive remote management from another country might create permanent establishment issues there, subjecting you to that country’s taxes as well.
3. How long does SAF-T preparation take, and what does it cost? Plan 3-6 months minimum for proper implementation. Costs vary significantly based on current software capability: if your system already exports SAF-T formats, minimal expense; if you need new software or substantial customization, budget BGN 5,000-15,000+. Start preparation at least one year before your mandatory date.
4. What happens if I miss the September 30 financial statement publication deadline? Officials face fines of BGN 200-3,000, while the company faces 0.1%-0.5% of net sales revenue as penalties. Repeated violations double these amounts. More importantly, unpublished statements can affect bank relationships, supplier credit terms, and business reputation.
5. Do I really need quarterly BNB reporting if my foreign account has small balances? Yes, the quarterly reporting obligation applies to ALL foreign accounts held by Bulgarian residents, regardless of balance size. Even accounts with zero activity must be reported. Non-reporting can trigger administrative fines and compliance orders.
6. Can I avoid VAT registration by keeping turnover just below EUR 51,300? Technically yes, but consider the disadvantages: you can’t reclaim VAT on business purchases, B2B customers may prefer VAT-registered suppliers, and deliberate revenue limitation restricts business growth. Many businesses voluntarily register even below the threshold to avoid these limitations.
7. How do I know which accounting standards to use—NAS or IFRS? Most Bulgarian SMEs use National Accounting Standards (NAS) as they’re simpler and less costly to implement. Use IFRS if you’re a public interest entity (mandatory), seeking international investment (investor preference), or your parent company requires group reporting under IFRS. Switching between standards requires NRA approval.
8. What should I do if my bank refuses to open an account without clear reasons? Unfortunately, Bulgarian law provides no formal appeal process for bank account refusals. Options include: (1) Try different banks—policies vary significantly; (2) Use professional introducers with banking relationships; (3) Establish company with Bulgarian founders first, then transfer ownership; (4) Improve documentation quality—comprehensive business plans, verified references, and clear beneficial ownership often help.
9. Are there exemptions from mandatory audit for small businesses? Yes, small enterprises need audits only when exceeding TWO criteria: EUR 2,045,168 assets, EUR 4,090,335 revenue, or 50 employees. If you meet only one criterion, no audit required (except for public interest entities or companies under special laws requiring audit regardless of size).
10. How far in advance should I engage an accountant before company registration? At least 2-3 weeks before intended registration date. Your accountant will help structure the company optimally, prepare required documentation, coordinate bank account opening, and ensure smooth registration. Trying to find accountants after registration often creates delays and complications.
11. What are my options if I want to close or transfer my Bulgarian business? Liquidation in Bulgaria follows a formal legal process that typically takes 6-12 months. Alternatives include selling the company, transferring ownership, or restructuring. Planning ahead matters — rushed liquidations often cost more and take longer. Our practical guide to company liquidation and succession planning in Bulgaria walks through all available options.

Working with PAYROLL BG

Bulgarian compliance involves multiple authorities, overlapping deadlines, and rules that change regularly. Most of our clients come to us after discovering a gap — a missed BNB declaration, an incorrectly calculated social contribution, or a VAT registration that should have happened earlier.

We are here to make sure that doesn’t happen to you — or to fix it quietly if it already has.

PAYROLL BG supports international companies at every stage: company formation, employer registration, VAT registration, monthly payroll, accounting, and tax compliance. One team, one point of contact, full coverage.

Whether you are just getting started or reviewing how your Bulgarian operations are currently set up, we offer a one-hour free initial consultation — no obligations, just a clear picture of what applies to your business.