Bulgaria's Tax System: Simplicity and Stability in the EU
Bulgaria has intentionally cultivated a business-friendly environment, and its tax system is the cornerstone of this strategy. Unlike the complex, progressive tax regimes found in most of Western Europe, Bulgaria's system is built on one simple number: 10%. This predictability makes financial planning for yourself and your business incredibly straightforward.
Personal Income Tax (PIT): A Flat 10% on Your Earnings
For individuals, the rule is refreshingly simple. A 10% flat tax rate applies to almost all types of personal income, including salaries and self-employment income. This is one of the lowest personal income tax rates in the entire European Union.
Becoming a Bulgarian Tax Resident
To benefit from this system, you generally need to become a Bulgarian tax resident. The criteria are standard and clear:
You have a permanent address in Bulgaria; OR
You reside in Bulgaria for more than 183 days in any 12-month period.
Once you are a tax resident, you are taxed on your worldwide income. This is a crucial point: unlike territorial tax countries, Bulgaria taxes income you earn from sources both inside and outside the country. However, with the rate at a mere 10% and an extensive network of double tax treaties, the overall burden remains exceptionally low.
Non-residents are only taxed on income from Bulgarian sources, also at the 10% flat rate.
Note: Dividends and liquidation quotas are subject to an even lower 5% tax. Income for sole traders, however, is taxed at a slightly higher rate of 15%.
Corporate Tax: Just 10% for Your Business
For digital nomads running their own company, Bulgaria is a game-changer. The corporate income tax is also a 10% flat rate on all taxable profits. This applies to:
Companies incorporated under Bulgarian law (e.g., a Bulgarian EOOD or OOD).
Foreign companies generating income through a permanent establishment in Bulgaria.
Just like with personal residency, Bulgarian-registered companies are taxed on their worldwide profits. This means profits generated from clients in the US, Germany, or anywhere else are subject to the 10% tax. This might seem like a disadvantage compared to a zero-tax offshore company, but in today's world of increased financial scrutiny (CRS, FATCA), having a legitimate EU company that pays a low, respectable amount of tax is far more sustainable. It ensures access to reputable banking (like Stripe and Wise) and avoids the compliance issues that plague many zero-tax structures.
Key corporate tax features include:
Loss Carry Forward: Losses can be carried forward to offset profits for up to five consecutive years.
Advance Payments: Not required for newly established companies in their first year of operation.
Filing Deadline: Corporate tax returns are due by March 31st of the following year.
Value Added Tax (VAT) for Online Businesses
If you're providing services, you need to be aware of VAT. The system in Bulgaria is aligned with EU standards.
Standard Rate: 20% on most goods and services.
Reduced Rate: 9% on specific services like hotel accommodation.
Zero Rate (0%): Applies to exports and services provided to businesses outside the EU. This is highly relevant for digital service providers with an international client base.
VAT registration becomes mandatory once your taxable turnover exceeds BGN 50,000 (approximately €25,500) over a 12-month period. VAT returns are filed monthly.
Double Taxation Treaties: Your Global Safety Net
Bulgaria has signed over 65 double taxation treaties with countries worldwide, including the US, UK, Germany, Canada, and Singapore. These agreements are crucial for international entrepreneurs, as they prevent you from being taxed twice on the same income. This extensive network solidifies Bulgaria's position as a legitimate and reliable hub for global business operations.
How Bulgaria Compares to Other EU Countries
The difference is stark. While many digital nomads look at options like Portugal or Spain, Bulgaria's tax advantages are hard to ignore.
Corporate Tax: Bulgaria's 10% vs. EU averages of 20-30%.
Personal Tax: Bulgaria's 10% flat rate vs. progressive rates that can exceed 50% in countries like Germany or France.
Simplicity: A flat-rate system avoids the complex tax brackets and deductions common elsewhere, saving you time and accounting fees.
