Tax Incentives in Bulgaria: A Comprehensive Overview of Allowances and Deductions

Choosing to start a company in Bulgaria is an increasingly popular decision among entrepreneurs and international investors. One of the main reasons is the country’s favorable tax environment, featuring one of the most competitive corporate tax rates in the European Union and a system of incentives designed to support economic growth, innovation, and employment.
Bulgaria’s tax policies aim to stimulate strategic sectors such as high-tech industries, research and development, agriculture, and small and medium-sized enterprises, while also offering a wide range of benefits to residents and individuals.

The combination of tax reliefs and deductions makes Bulgaria an attractive environment not only for those planning to launch a business but also for existing companies looking to optimize their tax position.

This article provides a detailed overview of the main incentives available for companies and individuals, the applicable deductions, benefits for those using cashless payments, allowances for property renovations, and foreign tax credits.

Business Incentives: Reductions and Refunds on Corporate Income Tax

Under certain conditions, Bulgarian tax law allows companies to significantly reduce their corporate income tax liability.
A notable example applies to agricultural activities, which can benefit from dedicated reductions.
Additional deductions are available for companies hiring individuals from protected categories, such as long-term unemployed persons, people with disabilities, or older workers.

Another strong incentive is targeted at companies investing in areas of the country with high unemployment rates: in such cases, a refund of up to 100% of the corporate income tax due can be obtained.
These measures combine competitiveness with active employment policies, strengthening the link between economic growth and social responsibility.

Read also: EEIG in Bulgaria: Legal Nature, Taxation and Registration

Tax Incentives in Bulgaria: Business Deductions and Flat-Rate Allowances for Professional Categories

In addition to direct corporate tax incentives, Bulgaria offers flat-rate deductions for various categories of taxpayers earning income from professional or entrepreneurial activities.

• Self-employed professionals such as notaries, doctors, and dentists can deduct up to 25% of their gross income.
  
• Royalties benefit from a 40% deduction.
  
• Rental income receives a 10% deduction.
  
• Agricultural activities, including tobacco production, are entitled to a 60% deduction.
  

These fixed-rate deductions simplify the calculation of the taxable base and reduce the tax burden for professionals and entrepreneurs.

Individual Tax Incentives: Opportunities for Residents and Citizens in Bulgaria 

The Bulgarian system includes a broad range of allowances for individuals, adaptable to different financial and personal circumstances.

Donations and Mandatory Social Security Contributions

Donations to approved charitable organizations are deductible up to 65% of annual taxable income.
Mandatory social security contributions paid in Bulgaria or in other EU/EEA countries are also fully deductible, provided they are properly documented.

Voluntary Contributions and Insurance Premiums

Tax reliefs are available for voluntary contributions to pension and unemployment funds, as well as for health or life insurance premiums, subject to specific legal limits.

Incentives for Young Married Couples

Young married couples, including those residing in other EU/EEA states, can deduct mortgage interest payments on loans up to 100,000 BGN.

Child and Family Allowances

A key component of Bulgaria’s tax framework is the deduction for dependent children.
This significantly reduces the annual tax liability, with amounts increasing based on the number of children.
For children with disabilities, additional and higher benefits are available.

In some cases, the deduction can be applied in advance during specific months of the year, immediately reducing the monthly taxable base.
However, regulations are in place to prevent multiple claims for the same child by different individuals and to recover any improperly obtained benefits.

Tax Reduction for Cashless Payments

To encourage the use of electronic payment methods, Bulgaria grants a tax benefit to taxpayers meeting certain conditions:

• earning their entire taxable income through bank transfers in the tax year;
  
• spending at least 80% of their income using non-cash payment methods;
  
• having no outstanding public debts at the time of filing the annual tax return.
  

Taxpayers meeting these requirements can receive a discount equal to 1% of the annual tax due, up to a maximum of 500 BGN.
This measure aims to promote transaction traceability and combat the shadow economy.

Read also: Taxation of Trading in Bulgaria: 2025 Fiscal Guide for Private Investors and Companies

Incentives for Property Renovation and Upgrades

Residents of Bulgaria and other EU/EEA countries may benefit from a tax deduction of up to 2,000 BGN for renovation or modernization expenses on real estate.
To qualify, specific legal requirements must be met and proper documentation must be provided.

This incentive not only helps improve the quality of the housing stock but also supports the construction sector and energy efficiency upgrades.

Foreign Tax Credits

To prevent double taxation on income earned outside Bulgaria, the country has signed numerous Double Taxation Treaties.
These agreements allow taxpayers to offset foreign taxes paid against those owed in Bulgaria.

Even in the absence of such a treaty, a unilateral tax credit may still be granted for taxes paid in another country, calculated separately for each country of origin according to a “per country limitation” rule.

Bulgaria’s tax incentives are practical tools for boosting competitiveness, attracting investment, and promoting innovation.
The combination of low rates, targeted reliefs, and simplified compliance processes makes the country a favorable environment for both businesses and individuals.

Maximizing the tax benefits available in Bulgaria requires in-depth knowledge of the legal framework and careful planning.
Whether it’s an agricultural enterprise seeking a corporate tax refund, a professional taking advantage of flat-rate deductions, or a private individual benefiting from home renovation allowances, working with qualified advisors is essential.

Accountancy Bulgaria, tax advisor in Bulgaria, offers specialized assistance to identify and apply the most suitable incentives, ensuring compliance with regulations and maximizing tax advantages.