Corporate tax and dividend tax in Bulgaria

Corporate Tax, also known as a tax on business profit, must be paid by various types of companies, clubs, cooperatives, and unincorporated associations on the profit from their business activities. The tax base is the accounting profit of the tax entities, adjusted by decreases and/or increases according to the respective legislation.

The corporate tax regime is regulated by the Corporate Income Tax Act (CITA).

Corporate tax applies to:

• Profits of local legal entities;
• Profits of local legal entities that are not traders, including religious organizations, from transactions under Article 1 of the Commercial Act, as well as from renting movable and immovable property;
• Profits of foreign legal entities from business activities in the Republic of Bulgaria;
• Profits from the activities of certain gambling organizers.

How is corporate tax in Bulgaria determined?

The tax base for determining the corporate tax is the taxable profit. The tax rate for corporate tax is 10 percent, and the tax period for determining corporate tax is the calendar year. For newly established tax-liable entities, the tax period covers the time from their establishment to the end of the year.

Example: If your company has generated revenues of 68,000 EUR and the expenses incurred during the reporting period (calendar year) amount to 65,000 EUR, the company realizes a profit of 3,000 EUR, which will be taxed at a 10% corporate tax rate. As a result, the due corporate tax to be deposited in the treasury will be 300 EUR.

How is dividend tax in Bulgaria determined?

Dividend tax is a tax company owners pay if they want to distribute the profit to themselves. Dividend tax in Bulgaria is 5 % on the amount of profit after the corporate tax is already paid.

Example: If your company has generated profit of 3,000 EUR on which you have to pay 300 EUR corporate tax, the profit after corporate tax is 2,700 EUR. Dividend tax will be 5 % on 2,700 EUR or 135 EUR. The rest of the amount the company owner can have as a personal net income or 2,565 EUR.