Corporation Tax

The corporation tax regime is regulated in the Corporate Income Tax Act.

Scope of taxation

Corporation tax is levied on:

• the profit accruing to resident legal persons;   
• the profit accruing to resident legal persons who are not merchants, including the organizations of the religious denominations, from any transactions covered under Article 1 of the Commerce Act, as well as from letting movable and immovable property;
• the profit accruing to non-resident legal persons from a permanent establishment in the Republic of Bulgaria.
• the profit from the activity of organizers of games of chance.

Taxable Persons

The following persons shall be taxable for corporation tax:

• any resident legal person - commercial corporation;
• resident legal persons who are not merchants - for their profit from any transactions covered under Article 1 of the Commerce Act, as well as from letting movable and immovable property;
• any resident unincorporated association and any social insurance fund established in pursuance of Article 8 of the Social Insurance Code;
• any non-resident legal person, where carrying out economic activity within Bulgaria through a permanent establishment;
• any non-resident unincorporated association, where carrying out economic activity within Bulgaria through a permanent establishment;

Taxable Amount

The taxable amount for assessment of the corporation tax shall be the tax profit.

Tax Rate

The corporation tax rate shall be 10 per cent.

Tax Period

The tax period for the assessment of the corporation tax shall be the calendar year. In respect of any newly incorporated taxable persons, the tax period shall cover the period from the date of incorporation thereof until the end of the year.

Declaring the tax

The taxable persons shall submit an annual tax return in a standard form regarding the tax financial result and the annual corporation tax due.

The annual tax return shall be submitted between 01 March and 30 June of the following year at the National Revenue Agency territorial directorate exercising competence over the place of registration of the taxable person.

An annual activity report shall be submitted together with the annual tax return. An annual activity report shall not be submitted by the taxable persons who did not carry out activity within the meaning given by the Accountancy Act, except when for the tax period during which no activity within the meaning of the Accountancy Act is carried out, a liability for corporation or expense tax arises, and when the taxable person wishes to declare other data and circumstances provided for in the standard tax return form.

Tax Remittance

• Tax prepayments 

Any taxable person shall make monthly or quarterly prepayments of corporation tax based on the projected tax profit for the current year. In determining the projected tax profit and the annual corporate tax due, the following shall not be taken into account:

• the tax profit derived from a controlled foreign company;
• the portion of the excess of the credits over the debits of the accounting financial result as a result of the adjustments under Article 155a(1) and Article 155b(1) of CITA, corresponding to the transferred assets/business, whereto a deferral under Article 155d CITA will be applied.

Under the provision of Article 83(2) of CITA prepayments shall not be made by:

1. any taxable persons whose net turnover for the year before the previous year does not exceed BGN 300,000;
2. any newly incorporated taxable persons, for the year of the incorporation thereof and for the following year, with the exception of any such persons newly incorporated as a result of a transformation under the Commerce Act. They may make quarterly prepayments in accordance with Part One, Chapter Fourteen of CITA and in this case Article 89 shall not apply

Monthly Tax Prepayments - shall be made by any taxable person whose net sales revenue for the year before the previous year exceeds BGN 3,000,000. The monthly tax prepayments shall be determined using the formula set out in Article 86 of CITA.

Monthly tax prepayments shall be remitted as follows:

• for January, February and March: by 15 April of the current calendar year;
• for the months from April until November: by the 15th day of the month to which the said prepayments apply; 
• for December – by 01 December of the current calendar year.

Quarterly tax prepayments - shall be made by any taxable person who is under no obligation to make monthly tax prepayments. Quarterly tax prepayments shall be determined using the formula set out in Article 87 of CITA.

Quarterly tax prepayments shall be remitted on or before the 15th day of the month following the quarter to which the said prepayments apply and for the third quarter: not later than 01 December. No quarterly tax prepayment shall be made for the fourth quarter.

Under the provision of Article 88 of CITA the taxable persons may submit, by 15 November of the respective calendar year, a declaration in a standard form on reduction or increase of tax prepayments when the said persons assume that the said prepayments will differ from the annual corporation tax due. The reduction or increase of tax prepayments shall be enjoyable after submission of the declaration.

The tax prepayments for the current calendar year determined in accordance with Article 86 and Article 87 shall be declared in the annual tax return for the previous calendar year.

Any taxable person who is allowed to retain corporation tax for the current year shall furthermore be allowed to retain the relevant portion of the tax prepayments determined in proportion to the amount of the retention. In cases concerning state aid for regional development in the form of retention of tax prepayment for the year in which an order under Article 189, item 1, letter (b) was received, the relevant portion of the tax prepayments determined shall be retained as from the month/quarter succeeding the month of the issuing of the order.

• Tax Remittance

Any taxable person shall remit the corporation tax for the relevant year in the period between 01 March and 30 June of the following year after deduction of the tax prepayments remitted for the relevant year.

Where the annual corporation tax due exceeds the sum of the monthly tax prepayments determined for the relevant year by more than 25 per cent, or where 75 per cent of the annual corporation tax due exceeds the sum of the quarterly tax prepayments determined for the relevant year by more than 25 per cent, interest shall be due on the excess over 25 per cent determined under the procedure provided for in Article 89(5).

Reduction, retention and exemption from levy of corporation tax

The reduction, retention and exemption from levy of corporation tax are regulated in Chapter Twenty Two of CITA.

Taxable persons may enjoy tax relief for levy of corporation tax where the requirements of Article 167 of CITA are met.

CITA regulates the following tax relief for and exemptions from levy of corporation tax:

1. Any collective investment scheme, any national investment funds, special purpose investment companies, the Bulgarian Red Cross and organizers of games of chance for which stamp duty is due under Article 30 (3) of the Gambling Act for this activity, shall be exempt from the levy of corporation tax. (Articles 174-176a of CITA).
2. Exemptions from levy of corporation tax of higher schools, the Bulgarian Academy of Science, the Agricultural Academy and others (Article 96а of the Higher Education Act).
3. Tax incentives upon hiring of unemployed persons, upon grant of scholarships and upon hiring people with disabilities. (Articles 177-178 of CITA).
4. Retention of 50% corporation tax by social and health insurance funds (Article 181 of CITA).
5. Retention of up to 100% corporation tax by taxable persons carrying out manufacturing activities solely in municipalities where the rate of unemployment for the year preceding the current year was by 25 per cent or more higher than the national average for the same period in the form of de minimis aid (Articles 184-188 of CITA).
6. Retention of up to 60% corporation tax by taxable persons, registered as agricultural producers (Article 189b of CITA).

Sanctions

Under the provisions of Article 9 of CITA interest according to the Interest on Taxes, Fees and Other State Receivables Act shall be due on any taxes which are not remitted when due, including any tax prepayments.

In accordance with the provisions of Article 261 of the Corporate Income Tax Act, any taxable person, who fails to submit a tax return under this Act, who fails to submit any such return when due, or who fails to state or misstates any particulars or circumstances leading to underassessment of the tax due or to undue reduction, retention of or exemption from tax, shall be liable to a pecuniary penalty varying between BGN 500 and BGN 3,000. Any repeated violation is punishable by a pecuniary penalty varying between BGN 1,000 and BGN 6,000.

Under the provisions of Article 262 of CITA any taxable person, who fails to submit any supplement to the annual tax return or who states any untrue particulars or circumstances in any such supplement, shall be liable to a pecuniary penalty varying between BGN 100 and BGN 1,000. Any repeated violation shall be punishable by a pecuniary penalty varying between BGN 200 and BGN 2,000.

According to Article 262b of CITA any taxable person, who fails to fulfil the obligation under Article 155d (9), (requiring notification after the occurrence of a circumstance for immediate recovery of a deferred amount related to transfer of assets to a Member State of the EU or another State, party to the Agreement on the European Economic Area) fails to fulfil the said obligation in due time, fails to state or misstates any particulars or circumstances related to the immediate recovery of deferred tax, shall be liable to a pecuniary penalty varying between BGN 3,000 and BGN 5,000. Any repeated violation shall be punishable by a pecuniary penalty varying between BGN 6,000 and BGN 10,000.

Under the provisions of Article 267 of CITA any taxable person, who effects a hidden profit distribution, shall be liable to a pecuniary penalty to the amount of 20 per cent of the expense charged constituting a hidden profit distribution. In the cases where a taxable person states this circumstance in the tax return thereof, the sanction shall not be imposed.

Under the provisions of Article 276 of CITA any taxable person, who fails to fulfil the obligations thereof under Article 92 (3) of CITA (submission of annual activity report) shall be liable to a pecuniary penalty varying between BGN 500 and BGN 2,000 and, upon a repeated violation, to a pecuniary penalty varying between BGN 1,500 and BGN 5,000.

In accordance with the provisions of Article 278 of the Corporate Income Tax Act, the written statements ascertaining the violations shall be drawn up by the authorities of the National Revenue Agency, and the penalty decrees shall be issued by the Executive Director of the National Revenue Agency or by an official authorized thereby. The ascertainment of violations, the issuing, appeal against and enforcement of the penalty decrees follows the procedure established by the Administrative Violations and Sanctions Act.

Taxation of multinational enterprise groups and large-scale domestic groups with top-up tax and domestic top-up tax

The Corporate Income Tax Act provides for the minimum level of taxation of multinational enterprise groups and large-scale domestic groups with top-up tax and domestic top-up tax.

Scope of taxation

Constituent entities located in Bulgaria that are members of a multinational enterprise group or of a large-scale domestic group which has an annual revenue of EUR 750 000 000 or more in its ultimate parent entity’s consolidated financial statements in at least two of the four fiscal years immediately preceding the tested fiscal year.

Tax rate

The positive percentage point difference between 15 per cent and the effective tax rate of the group for a jurisdiction for the fiscal year.

Types of taxes

The minimum level of taxation is ensured by an IIR top-up tax, an UTPR top-up tax and a domestic top-up tax.

Taxpayers (IIR top-up tax)

- ultimate parent entities that are constituent entities located in Bulgaria of a multinational enterprise group or of a large-scale domestic group – liable with respect to its low-taxed constituent entities located in another jurisdiction or that are stateless as well as with respect to itself (if low taxed) and its low-taxed constituent entities located in Bulgaria;

- intermediate parent entities located in Bulgaria and held by an ultimate parent entity that is located in a third-country jurisdiction – liable with respect to its low-taxed constituent entities located in another jurisdiction or that are stateless as well as with respect to itself (if low taxed) and its low-taxed constituent entities located in Bulgaria;

- intermediate parent entities located in Bulgaria and held by an ultimate parent entity that is an excluded entity – liable with respect to its low-taxed constituent entities located in another jurisdiction or that are stateless as well as with respect to itself (if low taxed) and its low-taxed constituent entities located in Bulgaria;

- partially-owned parent entities located in Bulgaria – liable with respect to its low-taxed constituent entities located in another jurisdiction or that are stateless as well as with respect to itself (if low taxed) and its low-taxed constituent entities located in Bulgaria.

Taxpayers (UTPR top-up tax)

- constituent entities located in Bulgaria that are members of a multinational enterprise group where the ultimate parent entity is located in a third-country jurisdiction that does not apply a qualified IIR, or where the ultimate parent entity is an excluded entity;

- constituent entities located in Bulgaria that are members of a multinational enterprise group where the ultimate parent entity is located in a low-tax third country jurisdiction;

- constituent entities located in Bulgaria that are members of a multinational enterprise group where the ultimate parent entity is located in a Member State of the EU which has made an election not to apply the IIR and the UTPR for six consecutive fiscal years beginning from 31 December 2023.

Taxpayers (domestic top-up tax)

- constituent entities located in Bulgaria that are members of a multinational enterprise group or of a large-scale domestic group;

- ultimate parent entities that are constituent entities located in Bulgaria of a multinational enterprise group or of a large-scale domestic group – liable with respect to itself (if low taxed);

- intermediate parent entities located in Bulgaria and held by an ultimate parent entity that is located in a third-country jurisdiction – liable with respect to itself (if low taxed);

- intermediate parent entities located in Bulgaria and held by an ultimate parent entity that is an excluded entity – liable with respect to itself (if low taxed);

- partially-owned parent entities located in Bulgaria – liable with respect to itself (if low taxed);

- Joint Ventures, Joint Venture affiliates and permanent establishments of Joint Ventures located in Bulgaria.

Fiscal year

The accounting period with respect to which the ultimate parent entity of a multinational enterprise group or of a large-scale domestic group prepares its consolidated financial statements or, if the ultimate parent entity does not prepare consolidated financial statements, the calendar year

Tax base for the IIR top-up tax

The excess profit of the multinational enterprise group or of the large-scale domestic group for the jurisdiction.

Amount of the UTPR top-up tax

The amount of the UTPR top-up tax payable in Bulgaria is computed by multiplying the total UTPR top-up tax by the UTPR percentage of the country. The total UTPR top-up tax is equal to the sum of the top-up tax computed for each low-taxed constituent entity of the MNE group for that fiscal year.

Amount of the domestic top-up tax

The amount of the domestic top-up tax is equal to the amount of the IIR top-up tax payable in respect of constituent entities located in the country taking account of the specific provisions applicable to the domestic top-up tax.