Bulgaria has established itself as one of the most attractive tax jurisdictions within the European Union due to its simple, transparent, and exceptionally low tax system. From an accounting and professional perspective, the Bulgarian taxation framework provides predictability, administrative efficiency, and strong incentives for investment and entrepreneurship.

It must be clearly emphasized that taxation in Bulgaria is among the lowest in Europe, both for corporations and individuals.

The corporate income tax in Bulgaria is set at a flat rate of 10% on taxable profits.

The tax applies to Bulgarian legal entities as well as foreign companies operating through a permanent establishment in Bulgaria.

The taxable profit is determined on the basis of accounting profit adjusted for tax purposes under the Corporate Income Tax Act. Bulgaria does not apply progressive corporate tax brackets, which ensures clarity, predictability, and simplified tax planning.

Compared to most European Union countries, where corporate tax rates typically range between 19% and 30%, Bulgaria’s corporate taxation remains one of the most competitive in Europe.

Dividends distributed to individuals and non-resident shareholders are subject to a final withholding tax of 5%.

The dividend tax is applied after corporate income tax has already been paid and represents final taxation for individuals without additional tax obligations.

Dividend distributions to partners and shareholders that are legal entities are taxed at 0%, meaning no withholding tax is due between companies under the applicable tax rules.

This structure significantly reduces the overall effective taxation of business profits and encourages reinvestment within corporate groups.

Bulgaria applies a flat personal income tax rate of 10%.

The tax covers income from employment, freelance activity, rental income, civil contracts, and other taxable earnings of individuals. The flat tax system eliminates progressive taxation and simplifies payroll accounting and long-term financial planning.

In comparison with many European countries where personal income tax rates exceed 40%–50%, Bulgaria remains one of the lowest-tax jurisdictions for individuals.

The standard VAT rate in Bulgaria is 20% and applies to the majority of goods and services supplied within the country.

A reduced VAT rate of 9% applies mainly to hotel accommodation services and selected tourism-related activities.

The Bulgarian VAT regime follows European Union VAT legislation while maintaining administrative simplicity and predictability for businesses.

Social security contributions form a fundamental component of the Bulgarian taxation system and are essential from an accounting perspective.

The system consists of three main pillars:

DОО (State Social Security)
ZO (Health Insurance)
DZPO (Supplementary Mandatory Pension Insurance — Second Pillar)

The contribution percentages below apply to employees working under standard third labour category conditions.

The total social security burden is approximately 32.7%–33.4% of gross salary depending on labour risk category.

DОО (State Social Security) — approximately 8.38%
DZPO (Second Pillar Pension) — 2.2%
ZO (Health Insurance) — 3.2%

Total employee contribution — approximately 13.78%

DОО (State Social Security) — approximately 11.92%
DZPO (Second Pillar Pension) — 2.8%
ZO (Health Insurance) — 4.8%
Accident and Occupational Disease Fund — 0.4%–1.1%
Unemployment Fund — 0.6%

Total employer contribution — approximately 18.92%–19.62%

Self-employed individuals pay their social contributions entirely at their own expense.

DОО (Pension and Social Security) — 14.8%
DZPO (Second Pillar Pension) — 5%
ZO (Health Insurance) — 8%

Total social contribution — approximately 27.8%

Unemployment insurance is generally not mandatory for self-employed persons. Contributions are calculated on chosen insured income within legally defined minimum and maximum thresholds.

From a professional accounting perspective, Bulgaria offers an exceptionally competitive tax environment:

10% corporate income tax
5% dividend tax for individuals
0% dividend tax between legal entities
10% personal income tax

Moderate social security burden compared to Western Europe
Flat tax model ensuring stability and predictability
Low effective taxation of distributed profits

Taxation in Bulgaria is clearly among the lowest in Europe, making the country highly attractive for entrepreneurs, investors, and international companies.

The Bulgarian taxation system combines low tax rates, administrative simplicity, and financial efficiency, positioning Bulgaria as one of the most competitive business jurisdictions in Europe.