Employer-provided share units or options are taxed as employment income at the time of the transfer of the shares.
Private use of company assets is also considered employment income and can be reported either at the individual or company level, at the option of the employer. The employer must apply the chosen reporting with respect to all employees and cannot apply different reporting regimes for different employees.
Self-employment and business income. Self-employment and business income is income derived from professional services and business activities, such as the following:
• Income from activity as a sole entrepreneur
• Copyright royalties
• Agricultural income
• Forestry income
• Earnings from other self-employment and non-employment activities
A fixed deduction of 25%, 40% or 60% of gross revenue applies, depending on the type of activity, with the exception of sole entrepreneurs, who may deduct the actual expenses of the business.
Interest income. Interest income is taxable at a rate of 10%.
Directors’ fees. Management income, including directors’ fees, paid to residents is taxed as employment income. Any deductions that may be applied to residents may be claimed by nonresidents who are residents of EU countries and countries of the European Economic Area (EEA) through the filing of an annual tax return (see Section D).
Other income. A fixed deduction equal to 10% of revenue applies when determining the taxable rental income of residents. Nonresidents who are residents of other EU countries and countries of the EEA may apply the same deduction through the filing of an annual tax return (see Section D).
Payments for rights, damages and indemnities to residents in low-tax jurisdictions are subject to withholding tax at a rate of 10%.
Dividends and liquidation proceeds from participations in the profits of Bulgarian entities are considered Bulgarian-source taxable income. Foreign-source dividend income derived by Bulgarian tax residents is also taxable in Bulgaria at a rate of 5%.
Capital gains
Shares. Income derived from the sale of shares and other financial assets is taxable if a gain has been realized. Gains on disposals of securities traded through the Bulgarian or an EU/EEA stock exchange are exempt from tax.
The taxable gain is the positive difference between the total amount of profits realized during the year less the total amount of losses during the year, both determined for each transaction. A fixed deduction of 10% of the taxable gain applies.
Non-monetary contributions to the capital of a company. For non-monetary contributions to the capital of a company, no tax is levied at the moment the contribution is made. However, if the
contribution is subsequently sold, followed by a reduction in capital and payment to the shareholder, the realized gain is taxable at the individual level.
Real estate. Bulgarian and EU/EEA tax residents are not subject to tax on a gain derived from the disposal of one principal private residence in a year if the residence has been owned for at least three years. Such residents are also exempt from tax on gains derived from up to two other real estate properties if the properties have been owned for at least five years.
A fixed deduction of 10% of the taxable gain (sales price minus purchase price) on the disposal of real estate applies.
Exempt income. Income from scholarships, pensions derived from compulsory social security schemes in Bulgaria and abroad, alimony and certain insurance payments are not taxable.
Deductions. Individuals may claim deductions only if they have no outstanding public liabilities subject to public enforcement at the time of claiming the deduction.
Donations. Gifts and donations to Bulgarian and similar EU/EEA charitable institutions and other welfare institutions are deductible up to 5% of the annual tax base. A deduction of up to 50% applies to gifts and donations to special funds for children’s medical treatment and assisted reproduction.
Child benefits. Bulgarian and EU/EEA tax residents may now deduct BGN200 per child from their annual tax base for up to three minor children. A deduction of BGN2,000 from the annual tax base is also available for taking care of a child with disabilities. Only one of the parents or legal guardians can benefit from these deductions. For 2024, the amount of the benefit that may be deducted from the annual tax base is increased to BGN6,000 per child for up to three minor children and the amount of the deduction for taking care of a child with disabilities is increased to BGN12,000. The benefit may be deducted by the employer on a monthly basis.
Mortgage interest Interest paid on the first BGN100,000 of a mortgage loan is tax deductible for married couples if all of the following conditions are satisfied:
• The taxpayer or his or her spouse was below the age of 35 when the mortgage agreement was concluded.
• The mortgage loan contract entered into force after the date of the marriage.
• The real estate subject to the mortgage is the only residential property owned by the family.
This deduction is also available to nonresidents from other EU/EEA countries.
Mandatory social security and health insurance contributions
Social security and health insurance contributions made by individuals to mandatory Bulgarian and EU/EEA systems, or mandatory systems of countries with which a totalization agreement is available, are deductible for tax purposes. Official documentation from the social security institution must be presented as proof for the paid contributions. The deduction can be applied on a monthly or on an annual basis.
Voluntary social security contributions. Deductions equaling up to 10% of the tax base may be claimed for voluntary pension contributions by individuals. In addition, deductions equaling up to 10% of the tax base may be claimed for voluntary health and life insurance contributions made by individuals to Bulgarian or EU/EEA authorized funds.
Deduction for cashless payments. A deduction of 1% of the tax due (but no more than BGN500) may be claimed by individuals who have received 100% of their income into their bank accounts and have spent at least 80% of it by making cashless payments.
Deduction for repairing or improvement of residential property. A deduction amounting up to BGN2,000 from the annual tax base for property repairing or improvement applies if the residential property is in Bulgaria, if the beneficiary is the owner of the property and if the improvement or repair has been done by Bulgarian or EU/EEA residents. Only expenditures for labor are deductible, not equipment or construction materials.
Tax rates. The rate of income tax is a flat 10%, except for dividend income, which is taxed at a rate of 5%, and the income of sole entrepreneurs, which is taxed at a rate of 15%.
B. Inheritance and gift taxes
Inheritance tax is levied on all property located in Bulgaria and is paid by the recipient. Property located outside Bulgaria that is owned by Bulgarian citizens is also subject to inheritance tax. Spouses, parents and more remote ancestors and direct descendants are not subject to inheritance tax. The following flat rates apply for determining the inheritance tax for other heirs:
• For brothers, sisters and their children, the tax rate ranges from 0.4% to 0.8% (determined by the local Municipal Council of the last permanent residence of the deceased) for an inheritance share over BGN250,000
• For other heirs subject to inheritance tax, the tax rate ranges from 3.3% to 6.6% (determined by the local Municipal Council of the last permanent residence of the deceased) for an inheritance share over BGN250,000
Property acquired as a gift is taxable unless the gift is given by a spouse or the gift is made between descendants. The tax base is the value of the property at the moment of transfer determined by the tax authorities or the Municipal Council. The applicable rates vary by location and type of property.
C. Social security
Contributions. Different social security regimes apply to employees and self-employed individuals. Social security contributions payable by self-employed individuals vary depending on the individual’s activity.
Individuals performing working activities in Bulgaria are subject to Bulgarian mandatory social security contributions unless an exemption is provided. Labor is divided into three categories, depending on the characteristics of the work performed. Professions involving harmful or risky conditions are included in the
first or second category. The following table provides the rates effective from 1 January 2021 for contributions payable by employers and employees with respect to employees in the third labor category (normal work conditions) who were born after 1 January 1960 and work under employment contracts governed by the Labor Code.
* The percentage depends on the category of basic economic activities into which the company falls.
The monthly social security base is capped at BGN3,750.
Coverage. Employees working in Bulgaria under an employment contract are covered under all of the social security funds, as well as the Pension Fund. Third-country nationals with long-term residence permits (non-Bulgarian and non-EU/EEA/Swiss) are not subject to the health insurance system.
The following exceptions apply:
• EU Blue card holders are subject to the Bulgarian health insurance system.
• Citizens of Albania, Montenegro, North Macedonia and Serbia are subject to the Bulgarian health insurance system.
Sole entrepreneurs and freelancers insure themselves by paying contributions on a level of monthly income selected by them of at least BGN933. For these individuals, the annual amount of social security and health insurance contributions is recalculated at the end of the year based on actual annual income received, up to a maximum of BGN45,000. The rate of the contribution is 27.8% or 31.3%, depending on the scope of coverage desired.
Exemption. Exemption from paying social security contributions in Bulgaria may apply under the provisions of EU Regulation 883/2004 or a bilateral social security agreement, including the EU/UK social security protocol. Bulgaria has entered into bilateral social security agreements with the following jurisdictions.
Albania Korea (South) Russian Azerbaijan (a) Libya Federation Bosnia and Moldova Serbia
Herzegovina Montenegro Tunisia
Brazil (b) Morocco (b) Türkiye (a)
Canada North Macedonia Ukraine
Israel Quebec
(a) This agreement has a limited scope of applicability.
(b) This agreement has been ratified and is pending entry into force.
D. Tax filing and payment procedures
Payment of tax
Employment income. An advance tax payment on employment income is due on a monthly basis. The employer withholds advance tax from the salary payment and must remit and report it to the tax authorities by the 25th day of the month following the month of payment of the income. A tax rate of 10% is applied to the tax base.
Self-employment and business income Self-employed individuals must pay advance tax of 10% by the end of the month following the quarter of the earning of the income.
Advance tax of 15% applies to income derived from activities of sole entrepreneurs under the provisions of the Corporate Tax Act.
Directors’ fees. Management income is treated as employment income if derived by residents. If nonresidents derive management income with a Bulgarian source that is earned without a fixed base in Bulgaria, it is subject to 10% withholding tax. Management income earned from a fixed place of business outside Bulgaria is specifically distinguished from employment income.
Rental income Rental income is subject to a 10% tax. This tax must be withheld and reported on a quarterly basis by the tenant if the tenant is an enterprise or a freelancer. For foreign entities or freelancers who do not have Bulgarian reporting obligations, the reporting must be done by the recipients of the income.
Interest income. Interest income is taxable at 10% on an annual basis. Withholding tax at a rate of 10% applies to nonresidents.
Dividend income. A 5% withholding tax applies to income from dividends and liquidation distributions received from resident entities.
Capital gains A tax rate of 10% applies to capital gains, which are reported in annual tax returns for residents and quarterly tax returns for nonresidents. A fixed deduction of 10% of the taxable gain applies.
Harmonization. Nonresidents who are residents of EU countries or countries of the EEA may apply the same deductions applicable for residents and claim the refund of the excess tax withheld or paid in advance through the filing of an annual tax return.
Tax returns
Quarterly tax returns Certain types of income are subject to quarterly tax payment and reporting by both residents and nonresidents.
Annual tax returns. Annual tax returns must be filed and the balance of tax due must be paid by 30 April of the year following the tax year. Extensions are not possible. Registered self-employed individuals must file annual tax returns electronically. The submission must be completed on the National Revenue Agency website via a Personal Identification Code. Tax return filing requirements do not apply to individuals who receive only employment income during the year if they have no outstanding
F. Entry and visa requirements
EU nationals, citizens of EEA Member States and citizens of Switzerland. EU nationals, citizens of EEA Member States and citizens of Switzerland may benefit fully from the right of free movement. They may enter Bulgaria based on a valid identification card or international passport and reside freely in the country. Individuals who intend to spend more than three months in Bulgaria should register with the Bulgarian Immigration Office. A long-term residence certificate is obtained through this registration.
Other nationals enjoying a visa-free regime. Nationals of countries under Annex II of Council Regulation 539/2001, as well as holders of Schengen visas and residence permits issued by Schengen countries, Liechtenstein and Switzerland, are not required to obtain visas. They may stay in Bulgaria for up to 90 days within each six-month period, counting from the date of the first entry into Bulgaria. These individuals are required to possess valid international passports to enter the country. If they intend to work or engage in self-employment activities in Bulgaria, they are subject to the same regime as citizens of non-preferred countries.
Holders of valid residence cards issued by other EU Member States are not subject to visa requirements for Bulgaria.
Citizens of non-preferred countries. Citizens of non-preferred countries (countries whose nationals are not subject to a visa-free regime) need a valid international passport and a Bulgarian visa to enter the country. Citizens of some non-preferred countries may require a Type C visa to travel through the country or an air transit visa to stay in the international transit zone of a Bulgarian airport.
Visas. Visas are issued by the Bulgarian diplomatic and consular offices abroad. The following are the types of visas:
• Type A: air transit visa.
• Type C: short-term visa for a total stay of up to 90 days during a six-month period beginning from the date of first entry. A Type C visa may be issued for tourist or business purposes. The Type C visa can be a single- or multiple-entry visa.
• Type D: long-term visa for a total stay of up to 180 days. The Type D visa is also a prerequisite for a long-term residence permit. In exceptional cases, a Type D visa may be issued for a period of 360 days, such as for seconded personnel of an employer certified in accordance with the International Investments Act. The Type D visa also allows multiple entries into Bulgaria.
G. Work permits, EU Blue Cards and self-employment
EU nationals, citizens of EEA Member States and citizens of Switzerland. EU nationals, citizens of EEA Member States and citizens of Switzerland enjoy the right of free movement within the EU. They do not need to obtain a work permit or register with the Employment Agency to work or engage in self-employment activities in Bulgaria.
Individuals enjoying preferential treatment. The following individuals do not need a work permit to work in Bulgaria:
• Permanent or long-term residence permit holders
• Family members of EU, EEA and Swiss nationals
• Individuals granted asylum or humanitarian status
• Individuals to whom the provisions of an international agreement apply
Other nationals. Individuals not enjoying preferential treatment who intend to work in the country under a local employment contract or under the terms of a secondment or intercorporate transfer must obtain a work permit from the Employment Agency by submitting an application form for initiating the respective immigration procedure to the immigration office. The immigration office distributes the documents received internally to various institutions, including, among others, the Employment Agency and Ministry of Foreign Affairs.
Foreign companies posting employees to Bulgaria have an obligation to notify in advance the Labor Inspectorate of each posting and to appoint a representative in Bulgaria.
Applications for work permits are submitted by the Bulgarian entity that would employ or host the third-country nationals. For certain procedures, applications can be submitted personally by foreign nationals if they already have valid long-term residence permits in the country. Individuals who obtain work permits are authorized to work only for that employer.
Work permits are issued to foreign nationals who possess proper education, special skills or professional experience, suitable to the position they intend to take. In some cases, the Bulgarian employer must perform a labor market test to establish the lack of Bulgarians and individuals enjoying preferential treatment who are suitable for the position. The market test requirement can be avoided under specific circumstances.
The number of non-EU nationals employed by a company may not exceed 20% (for large enterprises) or 35% (for small and medium-sized enterprises) of the average number of Bulgarian nationals and individuals enjoying preferential treatment that were employed by the company in the preceding year. The ratio of foreign to local employees does not apply in cases of applications for EU Blue Cards, work permits based on secondments or intercorporate transfers.
The term of validity of the standard work permit is up to one year and may be renewed each year (for up to three years). In general, non-EU nationals may not reside in Bulgaria while their work permit application is being processed.
Highly qualified foreign employees can be granted EU Blue Cards subject to prior approval by the Employment Agency. A Bulgarian employer is not required to conduct a labor market test to establish the lack of Bulgarians who are suitable for the position. An EU Blue Card allows its holder to work and reside in Bulgaria for up to five years.
Foreign nationals intending to perform self-employment activities in Bulgaria should apply for a permit before entering the country.
Driver’s permits. Foreign nationals, who reside in Bulgaria and have a valid driver’s license issued by EU or EEA Member States or Switzerland, may drive legally in Bulgaria. Holders of licenses issued by other states that signed the Vienna Convention for Traffic Rules may drive legally in Bulgaria for up to one year.