Bulgaria has become an increasingly attractive destination for foreign entrepreneurs due to its low corporate tax rate, simple incorporation process, and access to the EU market. However, while starting a company in Bulgaria is relatively straightforward, accounting and tax compliance require a clear understanding of local regulations.

Bulgaria applies a flat corporate tax rate of 10%, one of the lowest in the European Union. This rate applies to the company’s taxable profit, regardless of size or industry.

Dividend distributions are subject to a 5% withholding tax, making Bulgaria attractive for profit repatriation compared to many other EU jurisdictions.

The standard VAT rate in Bulgaria is 20%. VAT registration becomes mandatory when a company exceeds a turnover threshold of approximately €51129 over 12 months.

Foreign companies may also be required to register for VAT even below this threshold, depending on the nature of their activities (especially cross-border services or goods).

All companies registered in Bulgaria must comply with ongoing accounting requirements, including:

• Monthly bookkeeping of transactions
• VAT declarations (if VAT registered)
• Payroll reporting for employees
• Annual financial statements
• Corporate tax return submission

Even inactive companies are required to file annual reports.

Employers in Bulgaria must withhold and pay social security contributions and personal income tax on behalf of employees. Total employment-related costs typically range between 32% and 35% on top of gross salary, depending on specific conditions.

Proper payroll accounting is essential to avoid penalties and ensure compliance.

Companies in Bulgaria follow National Accounting Standards (NAS) or may apply IFRS (International Financial Reporting Standards) where required or preferred.

Foreign-owned companies often choose IFRS for group reporting consistency.

Many foreign business owners underestimate the complexity of Bulgarian accounting. The most common mistakes include:

• Missing VAT registration deadlines
• Incorrect expense documentation
• Improper cross-border invoicing
• Ignoring monthly reporting obligations
• Mixing personal and business finances

These issues can lead to fines and administrative complications.

Although Bulgaria offers a business-friendly tax environment, compliance rules are strict. Professional accounting services ensure:

• Full compliance with tax authorities
• Optimized tax planning
• Accurate financial reporting
• Reduced risk of penalties
• Time savings for business owners

For foreign entrepreneurs, having a reliable local accountant is essential, not optional.

We at Exquisite Ltd – Varna provide accounting, human resources, and payroll services exclusively for the foreign owners of small businesses in Bulgaria, helping them fully comply with Bulgarian tax and accounting legislation.

www.exquisite.bg; office@exquisite.bg