Accounting in Bulgaria: A Practical Guide to Tax Management for Businesses

Properly managing accounting obligations is essential for anyone looking to open a company in Bulgaria or conduct economic activities in the country. Bulgarian tax legislation requires transparency, punctuality, and accuracy in recording economic transactions, regardless of the legal form of the company.

This guide provides a detailed overview of the accounting requirements in Bulgaria, divided by thematic areas, highlighting key obligations and offering practical advice to avoid common mistakes.

Key Elements of Business Accounting in Bulgaria

Accounting in Bulgaria covers several operational areas, each with specific obligations and deadlines. An overview of the main aspects includes:

1. Issuing and Storing Invoices

Every economic transaction must be documented with an invoice that complies with legal requirements. The essential elements an invoice must contain include:

• Supplier details (name, address, VAT registration number)
  
• Customer information
  
• Sequential invoice number and date
  
• Detailed description of goods or services
  
• Taxable amount and VAT amount, where applicable
  

The law requires invoices to be stored for at least 10 years. In case of tax audits, incomplete documentation may result in fines or retroactive assessments.

2. VAT Obligations and Reporting

VAT registration in Bulgaria becomes mandatory when certain thresholds are exceeded or specific types of transactions are carried out:

• Annual turnover exceeding BGN 166,000
  
• Provision of services to EU entities
  
• Imports from non-EU countries
  

Registered companies must:

• Submit the monthly VAT return by the 14th of the following month
  
• File the VIES declaration for intra-EU transactions
  
• Maintain separate VAT purchase and sales registers
  

Voluntary VAT registration, while not mandatory below the threshold, can be advantageous for businesses seeking to recover VAT on certain purchases.

3. Payroll Management and Social Security Contributions

When employing staff, the employer must comply with labor laws and properly handle:

• Calculation of net salaries
  
• Withholding of the 10% personal income tax
  
• Payment of mandatory social security contributions
  

Mandatory filings include:

• Declaration 1: individual employee data
  
• Declaration 6: aggregate tax and contribution payments
  

Both must be submitted by the 25th of each month to avoid administrative penalties.

4. Periodic and Annual Tax Obligations

All companies and self-employed individuals must adhere to a calendar of tax deadlines throughout the year, including:

• Corporate Income Tax Return (ZKPO): by June 30
  
• Personal Income Tax Return (ZDDFL): by April 30
  
• Annual Financial Statements: to be filed by September 30
  
• Declaration under Article 73: for companies paying income to individuals, by February 28
  

Strict compliance with these deadlines is crucial to avoid fines and ensure the company’s tax transparency.

Read also: Residence Permit in Bulgaria for EU and Non-EU Citizens: How to Apply

Accounting Obligations and Applicable Entities

Bulgarian law mandates proper accounting for various categories of economic operators. The main groups subject to accounting and tax obligations include:

• Registered Companies (EOOD, OOD, AD): all entities with legal personality must keep updated accounting records and file annual financial statements.
  
• Freelancers and Sole Traders: individuals conducting economic activity must report income and expenses and fulfill personal tax obligations.
  
• Non-Governmental Organizations (NGOs): if involved in economic activity, NGOs must also keep proper accounts and file annual reports.
  
• VAT-Registered Operators: VAT registration increases obligations, including monthly reporting, proper invoice issuance, and maintaining VAT records.
  

In all cases, accurate accounting not only ensures legal compliance but also serves as a vital tool for planning and monitoring the financial health of the business.

Tax Optimization: Expense Management and Deductions

One of the most important aspects of accounting is the correct handling of deductible expenses, which allows businesses in Bulgaria to optimize their tax burden by reducing their taxable base.

Common types of deductible expenses include:

• Rent for business premises
  
• Wages and paid social contributions
  
• Business travel and transportation costs
  
• Advertising and marketing expenses
  
• Depreciation of business assets
  
• Professional services and consultancy fees
  

Read also: New VAT Rules in Bulgaria: Lowered Threshold for Mandatory Registration

Specifics of Representation Expenses

Expenses incurred for promotional activities such as business meals, events, or corporate gifts are subject to a 10% withholding tax and are not deductible when calculating taxable profit.

VAT Recovery on Purchases

If VAT registered, a business may recover VAT on many business-related expenses, with exceptions for representation costs and other expenses not directly related to the company’s activity.

Required Documentation

For each deductible expense, it is essential to keep:

• A tax invoice issued in the company’s name
  
• Receipts and proof of payment
  
• Travel records or expense reports, if applicable
  

Proper documentation is critical in case of audits by the Bulgarian tax authorities.

Accounting in Bulgaria requires attention to detail, professional knowledge, and ongoing updates on regulatory changes. Mistakes in tax filings, missing documents, or late payments can have serious financial consequences for the company.

For this reason, it is highly recommended to work with local professionals who can ensure efficient, compliant, and tax-optimized accounting services.

Accountancy Bulgaria, experts in Bulgarian accounting, offers comprehensive support for entrepreneurs, freelancers, and foreign businesses wishing to operate legally in the country. For help with day-to-day accounting, VAT compliance, payroll management, or tax returns, you can request a tailored consultation.