New VAT Rules in Bulgaria: Lowered Threshold for Mandatory Registration

As of April 1, 2025, Bulgaria’s tax system has undergone a significant change that is set to impact businesses and self-employed professionals alike. The Bulgarian National Revenue Agency (NRA) has officially announced the lowering of the turnover threshold that mandates VAT registration in Bulgaria: the limit has been reduced from BGN 166,000 to BGN 100,000 on an annual basis.

This change, approved as part of the 2025 national budget law, is part of a broader strategy to align Bulgaria’s tax system with European standards. For many economic operators, especially those who have chosen or are considering start a business in Bulgaria, this new threshold is a crucial factor to consider in their tax and administrative planning.

The legislative amendment has sparked heated debate in the local political landscape. The reformist coalition “We Continue the Change – Democratic Bulgaria” (WCC-DB), currently in opposition, has voiced its dissent, claiming that the measure penalizes small businesses, which are the most affected by the lowered VAT threshold. Nonetheless, the reform has been confirmed and became fully effective on the first day of April 2025.

The NRA clarified that the new threshold will serve as the benchmark for determining both mandatory registration and possible deregistration for VAT purposes. However, companies that are already VAT-registered with a turnover below BGN 100,000 are not required to deregister: they may continue as VAT payers on a voluntary basis, thus maintaining the right to deduct input tax on business purchases.

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

New VAT Rules and the Government’s Fight Against Tax Evasion

In parallel with the implementation of the new VAT threshold, Bulgarian tax authorities have announced increased inspections of micro-enterprises and sole proprietorships, particularly in sectors where the risk of tax evasion is traditionally high.

The NRA has launched a targeted inspection campaign involving thousands of workers in the home repair sector, such as bricklayers, electricians, plumbers, painters, and installers. The goal is to ensure that all income is properly declared and that official tax documentation is issued for services rendered.

According to an analysis by the agency, over 60% of maintenance and renovation services are not accompanied by receipts or invoices, a clear indicator of the presence of an underground economy.

But inspections do not stop there. The NRA has extended controls to other high-risk sectors, including beauticians, hairdressers, tattoo artists, massage therapists, wellness professionals, and various freelancers. According to the data collected, around 10,000 professionals in Bulgaria operate partially or entirely irregularly, evading taxes or failing to submit their annual income tax returns.

A significant portion of these violations, according to the agency, is due not so much to deliberate fraud but rather to a lack of knowledge of current regulations. For this reason, the NRA has published an informational brochure aimed at the most at-risk categories, providing guidelines on how to properly fulfill tax and social security obligations.

This initiative is part of a broader effort to strengthen oversight and transparency mechanisms, aiming to reduce tax evasion and foster a more responsible and informed tax culture.

Read also: Deductible Expenses in Bulgaria: What Are They?

Adapting to the New Tax Landscape: A Key Step for Businesses

The Bulgarian tax landscape is evolving. After years of being a popular destination for launching low-cost businesses thanks to its light tax regime and simplified rules, Bulgaria is now steadily moving toward harmonization with European standards. The reduction in the VAT threshold is a clear sign of this shift.

Simultaneously, the country is preparing for the official adoption of the euro, scheduled for January 1, 2026. This change will also directly affect the administrative and accounting management of businesses. Many companies are already considering converting their operations and invoicing systems to euros in anticipation of the changes the new monetary framework will bring.

For foreign businesses operating in Bulgaria or looking to enter the Bulgarian market, now is the time to act strategically and with awareness. Adjusting tax and accounting structures, ensuring proper VAT registration, and optimizing financial flows ahead of the euro transition are essential steps for ensuring operational continuity and stability.

It is equally important to have access to competent and up-to-date professional support, such as that offered by Accountancy Bulgaria, specialized company in accounting in Bulgaria capable of providing personalized advice and guiding businesses through local compliance requirements. While Bulgarian taxation remains advantageous compared to other European countries, it is becoming more rigorous and requires greater attention.