What is corporate tax? Corporate tax rate in Bulgaria

What is corporate tax? Corporate tax rate in Bulgaria

If you own a business, you need to be aware of the relevant regulations and the specific taxes you have to pay by law.

Different countries have different tax systems but most impose a tax on corporate profits.

In this article, we will answer the question “What is corporate tax?” and discuss its main aspects, as well as the corporate tax rate and specifics in Bulgaria in particular.

What is corporate tax?

A corporate tax, also called corporation tax or company tax, is a direct tax on the income or capital of a corporation or similar legal entities.

Most countries impose such taxes at the national level, and a similar one can exist on a local or state level. They can be also referred to as income tax or capital tax.

A country's corporate tax may apply to:

  • corporations incorporated in this country;
  • corporations doing business in the country on income from that country;
  • foreign corporations with a permanent establishment in this country;
  • corporations who are resident for tax purposes in the country.

Generally, the tax is imposed on net income of a company. In other words, taxes are based on operating earnings after expenses have been deducted.

The company income that is subject to tax is often determined similarly to the taxable income for individual taxpayers. However, rules can differ significantly between different countries. That’s why consulting a good local corporate lawyer is always a good idea.

Now you know what corporate tax is, we will discuss its main aspects in more detail.

Do you need legal advice and assistance? Contact our experienced lawyers.


Corporate tax rate

Corporate tax rates vary greatly by country. Some countries are even considered to be tax havens due to their low rates.

Corporate taxes can be lowered by various deductions, government subsidies, and tax loopholes. That’s how the effective corporate tax rate (the rate a corporation actually pays) is usually lower than the statutory rate, which is the stated rate before any deductions.

According to KPMG, the current average corporate tax rates around the world are as follows:

  • Bulgaria - 10.00
  • EU - 20.94
  • Europe - 19.12
  • Africa - 28.25
  • Asia - 21.13
  • North America - 26.75
  • South America - 27.36
  • Oceania - 28.43
  • United Kingdom - 19
  • United States - 27
  • Global - 23.79

Corporate tax in Bulgaria

According to the Bulgarian law, foreign shareholders can acquire Bulgarian entities. This applies for commercial activities like real estate as well.

They are subject to a corporate tax, which in Bulgaria is applied based on the profit of the company. The after-tax profit can be distributed as a dividend or kept within the corporation.

What you should know is that a company incorporated in Bulgaria or one that has a management place here will be subject to the Bulgarian corporate tax on its worldwide profits. This might be an advantage for you if you are considering registering a company here, since Bulgaria has one of the lowest corporate tax rates in the EU.

Danailova, Todorov & Partners Law Firm is based in Bulgaria and can help you with the registration process and any questions you might have.

Note that non-resident companies, meaning foreign ones that operate through branch offices in Bulgaria, pay corporate tax only on the business profits and other types of income they earn in the country.

Corporate tax rate in Bulgaria

In Bulgaria, you can find one of the lowest standard corporate tax rates in Europe. However, depending on the industry they operate in, corporations are subject to other levies as well.

Companies registered in or trading in the country through a branch pay a corporate tax of 10%.

If your business is not registered here and does not perform trading activities in Bulgaria through a branch, but it gains income from sources in Bulgaria, you are required to only pay a tax based on the respective revenue.

Moreover, legal entities with no trading activities but generating profits on transactions or on rental of (im)movable property still owe a corporate tax (Article 1 of the Bulgarian Trade Act).

This also applies to:

  • Bulgarian legal entities conducting commercial activities;
  • Bulgarian non-legal entities generating profits on transactions governed by Art. 1;
  • unincorporated companies in the country;
  • foreign entities with trading activities through a branch;
  • foreign unincorporated entities with trading activities through a branch.

Additional information

Some companies pay other taxes instead of a corporate income tax.

For state budget-funded entities (e.g. departments), there is a 3% tax rate, while for municipal authorities, that’s 2%.

Those involved in gambling activities owe a gambling tax, which is calculated on the number of bets placed or the number of machines operated. For them, the rate is 15%.

Furthermore, a 10% tax on vessel operations applies to maritime companies for commercial activities and is based on the net vessel tonnage.

Also, the tax is 10% for foreign legal entities and unincorporated companies.

Different regional and municipal taxes or surcharges apply in Bulgaria, compared to other European countries.

Income determination

The taxable income of companies is calculated after they file their annual corporate tax returns.

Bulgarian legal entities can file their tax returns in accordance with the National or International Financial Reporting Standards (IFRS). This is a mandatory requirement for financial companies operating in Bulgaria, such as insurance brokers and banking institutions.

The Bulgarian corporate tax is imposed on types of income listed below:

  • business profits;
  • capital gains;
  • dividend payments;
  • real estate property ownership;
  • transfer of ownership of real estate;
  • interest income;
  • royalties income;
  • income from foreign sources.

Note that for both domestic and foreign companies, double tax treaty provisions can significantly decrease the tax rates applied on certain incomes.

Besides, in some situations, incomes can be exempt from taxation or eligible for tax deductions.

Bulgaria offers various types of taxes-related agreements which you can benefit from to avoid double taxation.

If you need a consultation with a good corporate lawyer in Bulgaria, contact us now. We will provide you with the latest detailed information regarding the corporate tax such as tax reforms, corporate tax rate, corporate tax compliance in Bulgaria, and more.

Now that you know what corporate tax is, you might also like to read our article on VAT.


far fa-map


g.k. Gotse Delchev, ul. "Slavovitsa" , block 24Е, office 2, 1404 Sofia, Bulgaria

Western Industrial Zone, 2 Neptun Str.,
9000 Varna, Bulgaria

fas fa-mail-bulk
fas fa-phone-volume