The main international tax law sources in Bulgaria are the Double Tax Treaties (DTTs) and other international treaties, EU law, OECD rules and domestic tax legislation. Under the Constitution, ratified international treaties prevail over conflicting domestic law. EU law plays a significant role, particularly through anti-avoidance, transparency and minimum tax directives, as well as through the directives in the field of VAT and other directives such as The EU Interest and Royalties Directive (Council Directive 2003/49/EC) of 3 June 2003 on a common system of taxation applicable to interest and royalty payments made between associated companies of different Member States and Parent-Subsidiary Directive (Council Directive 2011/96/EU) of 30 November 2011 on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States, which have been transposed into Bulgarian legislation. Domestic tax rules are primarily set out in the Corporate Income Tax Act, the Personal Income Tax Act and the Value Added Tax Act, with procedural matters governed by the Tax and Social Security Procedure Code.

Administrative practice of the National Revenue Agency in the form of Rulings provides interpretative guidance that, while not legally binding, is influential in practice.

Bulgaria has an extensive DTT network of over 70 double tax treaties, based on the OECD Model Tax Convention, covering all EU Member States and key global trading partners. Bulgaria is a party to the OECD Multilateral Instrument (MLI), which has modified part of its treaty network to incorporate BEPS minimum standards.

Bulgaria also follows the OECD Guidelines in the field of transfer pricing, reflected in Special Ordinances – acts formally placed below the laws in the hierarchy of State acts but with significant practical effect.

Under the Bulgarian Constitution, ratified and promulgated international treaties take precedence over conflicting domestic legislation, which ensures the direct applicability of double tax treaties in the domestic legal order. Anyway, in practice, the double tax treaties are usually applied when there is a conflict between the legislations of the contracting parties – for example, both countries are taxing the same income or both countries are treating the same person as resident.

The EU Regulations have supremacy over national law within their scope of application with direct effect. The Bulgarian tax legislation is also influenced by the transposed directives.

In practice, Bulgarian tax authorities and courts are interpreting domestic legislation in conformity with Bulgaria’s international and EU commitments.

The Bulgarian Constitution has supremacy over all other acts, including those at the international and EU levels, but its provisions are quite general and it is unlikely to conflict with any international tax rules.

Bulgarian double tax treaties are based on the OECD Model Tax Convention. The OECD Model is generally followed in respect of the allocation of taxing rights, permanent establishment rules and the treatment of business profits. The OECD Model, although not a formal legislative act, is widely used for the interpretation of disputable aspects, based on the practice of the Supreme Administrative Court treating it as a source used in the course of negotiation of an international agreement. More recent treaties and treaty updates have incorporated BEPS-related provisions, including principal purpose test clauses, either through bilateral renegotiation or via the OECD Multilateral Instrument (MLI).

Bulgaria is a signatory to the OECD Multilateral Instrument (MLI) and has ratified it, with the MLI in force for Bulgaria since 1st July 2023. The MLI modifies a significant portion of Bulgaria’s double tax treaty network by introducing BEPS minimum standards, including treaty anti-abuse rules and improved dispute resolution mechanisms.

Bulgaria applies a mixed territorial and residence-based principle of taxation. Resident individuals and legal entities are subject to tax on their worldwide income, while non-residents are taxed only on Bulgarian-source income, as defined by domestic law (including the transposed EU directives) and applicable tax treaties. Bulgarian tax legislation does not provide for special tax regimes or territorial particularities within the country, as the tax system applies uniformly across the entire territory. Some incentives and tax reliefs are provided for investments in regions with high unemployment. In cross-border situations, the territorial scope of taxation is further limited by double tax treaties and EU law, which may restrict source taxation rights or allocate taxing powers to another jurisdiction.

An individual is considered a tax resident in Bulgaria when they:

• have a permanent address in Bulgaria;
• stay in the country for more than 183 days in any 12-month period; or
• have a centre of vital interests located in Bulgaria.

Where an individual qualifies as a tax resident in more than one jurisdiction, double tax treaties provide tie-breaker rules, typically based on permanent home, centre of vital interests, habitual abode and nationality, in line with the OECD Model Tax Convention.

Individuals who are tax residents in Bulgaria are taxed on their worldwide income, irrespective of the source. Bulgarian personal income tax is generally levied at a flat rate of 10%, with certain categories of income subject to final withholding taxes. The income from dividends is taxed at 5% personal income tax. Specific statutory exemptions and reliefs exist for certain types of income, such as some social benefits and limited categories of capital income, but these are narrowly defined and strictly applied. For income derived from certain specifically listed professions or occupations, the taxable base may be reduced by a legislatively fixed percentage.

Non-resident individuals are taxed in Bulgaria only on income sourced within the country, as defined by domestic tax law and limited by applicable double tax treaties. Bulgarian-source income typically includes employment income from labour performed in Bulgaria, income from real estate located in Bulgaria and certain categories of passive income. Passive income paid to non-resident individuals (such as dividends, interest and royalties) is generally subject to withholding tax, unless reduced or exempt under an applicable tax treaty or EU law. In practice, the taxation of non-residents is largely effected through final withholding mechanisms, with limited filing obligations where tax is withheld at source. Relief from double taxation is available through the application of double tax treaties.

A legal entity is considered a tax resident in Bulgaria if it is incorporated under the Bulgarian law. In cases of dual residence, double tax treaties provide tie-breaker rules in line with the OECD Model Tax Convention.

Bulgarian domestic tax law defines a permanent establishment (PE) broadly as a fixed place of business through which a non-resident carries out all or part of its business activities in Bulgaria. This includes places such as branches, offices, factories, workshops, or construction sites that exceed a statutory duration threshold, as well as certain forms of dependent-agent activity or continuous activity of signing agreements in Bulgaria. Where a double tax treaty applies, the treaty definition of PE prevails over domestic law. Bulgaria’s tax treaties are generally aligned with the OECD Model Tax Convention, including in respect of construction sites and agency PE concepts.

Income from immovable property located in Bulgaria is taxable in Bulgaria, irrespective of whether the recipient is a resident or non-resident. This includes income from rental, leasing or other forms of exploitation of real estate. For resident individuals and entities, such income is included in their worldwide taxable income and is taxed under the applicable income tax rules. Non-residents are taxed on Bulgarian-source real estate income, typically through withholding tax or filing obligations, depending on the nature of the income and the applicable tax regime. Double tax treaties generally preserve source-state taxing rights over income from immovable property.

Business profits realised by Bulgarian tax resident entities are subject to corporate income tax at a flat rate of 10% on worldwide income. Profits are determined based on accounting results, adjusted for tax purposes in accordance with the Corporate Income Tax Act.

Non-resident entities are taxable in Bulgaria only on Bulgarian-source business profits, typically where such profits are attributable to a permanent establishment in Bulgaria. In line with the double tax treaties, business profits are taxable exclusively in the state of residence unless a permanent establishment exists in Bulgaria, in which case profits attributable to that PE are subject to Bulgarian corporate income tax.

According to the practice of the Bulgarian tax authorities, the income at source of foreign residents that does not fall explicitly within the scope of certain special treaty provisions is generally treated as business profit.

Passive income (such as dividends, interest and royalties) is generally subject to withholding tax under Bulgarian domestic law when paid by a Bulgarian source to non-residents. The standard withholding tax rate is 5% for dividends and 10% for interest and royalties, subject to specific statutory exemptions. EU law exemptions apply in certain cases, including under the EU Parent–Subsidiary Directive and the Interest and Royalties Directive, provided the requirements are met. Withholding tax, if not eliminated at the EU level, may be reduced or eliminated under applicable double tax treaties, typically subject to conditions on beneficial ownership and other treaty requirements. In addition, the above provisions regarding tax reliefs are not applicable in cases of hidden distribution of profit.

Capital gains of Bulgarian tax resident individuals and entities are generally taxable in Bulgaria as part of their worldwide income. For corporate taxpayers, capital gains are included in taxable profit and are subject to a 10% corporate income tax. Non-residents are taxed on capital gains from the disposal of Bulgarian-source assets, including immovable property located in Bulgaria and shares in Bulgarian companies, subject to limitations under applicable double tax treaties. In practice, treaties often allocate taxing rights over gains on immovable property to the source state, while gains on shares may be exempt in Bulgaria unless the value is derived principally from Bulgarian real estate.

Under Bulgarian legislation, employment income is taxable in Bulgaria if the work is performed within the country, irrespective of the employer’s place of residence. For Bulgarian tax residents, such income is included in their worldwide taxable income and is generally taxed at a flat personal income tax rate of 10%, in addition to mandatory social security contributions.

For non-resident employees, Bulgarian-source employment income is taxable where the work is physically performed in Bulgaria, subject to short-term assignment exemptions under applicable double tax treaties, typically based on the 183-day rule and conditions relating to the employer and cost-bearing entity.

Bulgarian tax legislation does not contain specific rules on remote working. In practice, remote work performed from Bulgaria may create tax residence risks for individuals, especially in light of the current OECD interpretation and, in certain cases, permanent establishment or payroll obligations for foreign employers, depending on the factual circumstances and duration of the activity.

In addition to the main income categories, Bulgarian tax law provides specific taxation rules for certain types of income that are not expressly addressed in the OECD Model Convention. This includes, in particular:

• income from prizes and awards;
• income from games of chance; and
• certain one-off or ancillary income streams, which may be subject to taxation.

Bulgarian law also applies special regimes for income from agriculture and forestry, as well as simplified taxation mechanisms for sole traders and small-scale activities, which deviate from the standard profit-based taxation approach. These rules are primarily driven by domestic policy considerations and operate independently of treaty-based income classification.

Bulgaria has not adopted specific legislation implementing Amount B of Pillar One and has not formally introduced a domestic simplified transfer pricing safe harbour for baseline marketing and distribution activities, although some provisions have a similar practical effect. At this stage, the Bulgarian tax authorities continue to apply the general arm’s length principle under domestic transfer pricing rules and applicable tax treaties. Any future implementation of Amount B is expected to closely follow the OECD framework, without material local deviations, but no formal legislative or administrative steps have been announced to date.

Bulgaria supports Pillar One Amount A as part of the broader OECD/G20 Inclusive Framework, which aims to reallocate taxing rights in the digitalised economy. However, Amount A has not been implemented into Bulgarian domestic law, as its application depends on the entry into force of a multilateral convention at the international level. In line with the position of most EU Member States, Bulgaria’s approach remains conditional and coordinated, pending sufficient international consensus and legal certainty regarding scope, administration and dispute resolution. Until such time, the taxation of highly digitalised and consumer-facing businesses continues to be governed by existing treaties and domestic tax rules.

Bulgaria has implemented the global minimum tax under Pillar Two through the transposition of Directive (EU) 2022/2523, with effect from 1st January 2024. The rules apply to multinational and large domestic groups with consolidated annual revenue of at least EUR 750 million. The Bulgarian regime operates primarily through a qualified domestic minimum top-up tax, ensuring that profits attributable to Bulgaria are taxed at an effective minimum rate of 15%, notwithstanding the country’s standard 10% corporate income tax rate.

Bulgarian implementation of the global minimum tax closely follows the OECD Pillar Two framework, as transposed through Directive (EU) 2022/2523, and does not introduce material domestic deviations. The rules align with the OECD Model Rules in terms of scope, effective tax rate calculation, and top-up tax mechanisms. Any differences are limited to technical and administrative aspects required by EU harmonisation, rather than substantive policy departures. As a result, in-scope groups can generally rely on OECD-compliant Pillar Two analyses when assessing their Bulgarian tax position.

Bulgaria has not introduced a specific tax on digital products or digital services, such as a digital services tax or a streaming services tax. The taxation of digital activities is therefore governed by general corporate income tax and VAT rules, as well as withholding tax requirements, applicable directives (most notably the Interest and Royalty Directive), and double tax treaties. In line with the common EU approach, Bulgaria has refrained from adopting unilateral digital taxes, pending multilateral solutions at the OECD and EU levels, including the ongoing discussions around Pillar One.

Bulgarian law clearly distinguishes between tax fraud, tax evasion and tax avoidance, each subject to different legal consequences. Tax fraud and tax evasion involve intentional acts or omissions aimed at unlawfully reducing or eliminating tax liabilities, such as:

• the use of false documentation;
• concealment of income; or
• participation in fraudulent VAT schemes.

Those are subject to administrative penalties and criminal liability.

Tax avoidance, by contrast, refers to arrangements that formally comply with the law but are designed to obtain an undue tax advantage. Bulgarian tax law incorporates a general anti-avoidance rule (GAAR), allowing the tax authorities to disregard artificial or non-genuine arrangements lacking valid commercial substance, particularly in cross-border contexts. Indicators of abusive arrangements include the absence of economic rationale, circular transactions, disproportionate tax benefits and structures that do not reflect economic reality, in line with EU and OECD principles.

Bulgaria has implemented a multi-layered framework to combat tax fraud, tax evasion and tax avoidance, combining substantive tax rules, procedural powers and enhanced reporting obligations. Key mechanisms include a general anti-avoidance rule (GAAR), specific anti-avoidance provisions under the Corporate Income Tax Act, and extensive transfer pricing documentation requirements aligned with OECD standards. Apart from that, the Criminal Code provides criminal liability for significant breaches of the tax and financial systems, including submitting false declarations, inaccurate financial results and others. Criminal sanctions also apply in cases of serious tax fraud, particularly in relation to VAT carousel and organised fraud schemes, while administrative penalties and interest apply in cases of non-compliance, hidden distribution of profit or abusive tax planning.

The National Revenue Agency and the courts are also practising denial of VAT credit on the basis of a statement for participation in a tax avoidance scheme, following the case law of the Court of Justice of the European Union.

On the enforcement side, the National Revenue Agency has broad audit and investigation powers at its disposal, including:

• real-time access to accounting data;
• fiscal control measures for high-risk goods; and
• enhanced information-gathering tools.

Bulgaria has also implemented EU and OECD transparency regimes, including:

• the DAC framework;
• automatic exchange of information; and
• mandatory disclosure rules for cross-border arrangements.

Bulgaria maintains a domestic list of non-cooperative jurisdictions for tax purposes, which largely mirrors the EU list and is updated periodically. The list is used as a reference point for applying enhanced anti-avoidance and anti-evasion measures. Transactions involving entities located in listed jurisdictions are subject to stricter tax treatment, including:

• limitations on tax deductibility of expenses;
• heightened transfer pricing scrutiny; and
• increased withholding tax exposure.

In addition, such transactions may trigger enhanced reporting and documentation requirements, as well as a higher likelihood of tax audits by the Bulgarian tax authorities.

Bulgaria has implemented a range of reporting and transparency obligations to detect and prevent tax fraud, tax evasion and tax avoidance. These include country-by-country reporting (CbCR) for large multinational groups, transfer pricing documentation requirements, and mandatory disclosure rules (DAC 6) for certain cross-border arrangements.

Additional obligations include:

• SAF-T electronic reporting, phased in from 2026;
• enhanced VAT reporting;
• real-time control measures; and
• extensive information exchange mechanisms under the EU and OECD frameworks.

Together, these measures significantly increase the tax authorities’ data availability and audit capabilities, particularly for cross-border and high-risk transactions.

A special measure under the internal legislation concerns the hidden distribution of profit, according to which the voluntary disclosure of hidden distribution of profit in the corporate tax declaration eliminates the sanction provided for such omissions. This is a deviation from the general approach of the national legislation, as, in principle, voluntary tax disclosure is not a judicially regulated measure.

The Bulgarian tax authorities, primarily the National Revenue Agency, are vested with extensive investigatory powers to detect and investigate tax fraud. These include the authority to access accounting records and electronic data, request information from taxpayers and third parties, and conduct tax audits and inspections. The NRA may conduct on-site inspections, including unannounced visits, and impose interim measures, such as the seizure of documents, goods or electronic devices, where there is a risk that evidence will be destroyed or concealed. In cases involving serious tax fraud, particularly VAT fraud, the authorities may initiate tax searches and co-ordinate with law enforcement bodies, subject to procedural safeguards and, where required, judicial oversight.

The tax authorities have a broad range of powers connected with the control of the transport of goods of high fiscal risk, including forfeiture in favour of the State, the right to request financial securities, the sealing of truck loads, and others.

The tax raids are also a familiar practice of the tax authorities, conducted in some cases together with authorities from other regulatory institutions. Depending on the search, these could be representatives of Customs, Police, Food Safety Agency, Commission for Consumer Protection, Commission on Protection of Competition and others.

Penalties for cross-border transactions in Bulgaria are primarily governed by the Tax and Social Security Procedure Code, the Corporate Income Tax Act, the Value Added Tax Act, and related secondary legislation. The framework provides for administrative sanctions in cases of non-compliance, late reporting, incorrect tax treatment or failure to meet transfer pricing and disclosure obligations. The National Revenue Agency is the principal authority responsible for imposing and enforcing tax penalties, including fines, sanctions and interest. In cases involving serious tax fraud or criminal offences, enforcement may involve the prosecution authorities and criminal courts, while judicial review of administrative sanctions is carried out by the regional courts as the first court of instance and the administrative courts as the cassation instance.

Tax fraud and tax evasion in Bulgaria may give rise to criminal liability under the Criminal Code, where the offence involves intentional acts aimed at avoiding or reducing tax liabilities above statutory thresholds. Criminal offences typically include the use of false documentation, concealment of taxable income or participation in organised VAT fraud schemes. Sanctions may include imprisonment, criminal fines and the confiscation of assets, with penalties increasing where the offence involves particularly large amounts, repeated conduct or organised criminal activity. Criminal proceedings are conducted by the prosecution authorities, with cases adjudicated by the criminal courts, alongside parallel administrative tax enforcement where applicable.

Coordination between the National Revenue Agency and the prosecution authorities is ensured through formal notification procedures, information sharing and, in complex cases, joint or parallel investigative actions. While administrative and criminal tax proceedings are legally distinct, they may run in parallel, subject to procedural safeguards and judicial oversight.

Bulgarian law provides for suspending the tax proceedings and referring the materials to the relevant prosecutor when, during the proceedings, information on a crime of significance to the outcome is established. Disclosure of tax and social security information can be granted by the courts upon a request of the prosecutor, the investigating police officer or the investigator in connection with criminal proceedings.

On the other hand, if in the course of criminal proceedings evidence is collected that is relevant for establishing tax obligations, the police authorities, the prosecutor or the investigators are obliged to provide the revenue authorities with access to this evidence and certified copies thereof.

In the litigation process of appealing tax audit acts, although not criminal proceedings, the prosecutor is entitled to participate.

Administrative co-operation in tax matters in Bulgaria is primarily based on EU law, multilateral conventions and bilateral treaties. At the EU level, Bulgaria applies the Directive on Administrative Cooperation (DAC) framework, which provides for automatic, spontaneous and on-request exchange of information, joint audits and other forms of cooperation between Member States. At the international level, Bulgaria is a party to the OECD Multilateral Convention on Mutual Administrative Assistance in Tax Matters, enabling broad information exchange and assistance in tax collection with both EU and non-EU jurisdictions. These instruments are complemented by bilateral tax treaties, which typically include exchange of information provisions aligned with OECD standards.

Bulgaria participates in automatic, spontaneous and on-request exchange of information for tax purposes. Automatic exchange is carried out primarily under the EU DAC framework and the OECD Common Reporting Standard, covering financial account information, tax rulings and other prescribed categories. Spontaneous and on-request exchanges are conducted under EU law, the OECD Multilateral Convention on Mutual Administrative Assistance in Tax Matters and bilateral tax treaties, enabling the Bulgarian tax authorities to obtain and provide information relevant to cross-border tax enforcement and compliance.

Bulgaria participates in multilateral administrative co-operation mechanisms beyond traditional mutual agreement procedures. In particular, the Bulgarian tax authorities may engage in joint and simultaneous tax audits with other EU Member States under the Directive on Administrative Cooperation (DAC) framework. While Bulgaria has not formally announced participation as a lead authority in the OECD International Compliance Assurance Programme, it may be involved indirectly or on a case-by-case basis through information exchange and coordinated audit actions with other participating jurisdictions.

Bulgaria has an established mutual agreement procedure (MAP) framework available to taxpayers. The legal bases for MAP include bilateral tax treaties, the EU Arbitration Convention (for transfer pricing and permanent establishment disputes within the EU) and the EU Tax Dispute Resolution Directive, which provides binding dispute resolution mechanisms.

In Bulgaria, a request for a mutual agreement procedure (MAP) must generally be submitted within three years from the first notification of the action resulting in taxation not in accordance with the applicable tax treaty, in line with the OECD Model Tax Convention and the provisions of most Bulgarian double tax treaties. For disputes falling within the scope of the EU Tax Dispute Resolution Directive, the same three-year deadline applies, calculated from the receipt of the first formal notice of the disputed tax measure.

Mandatory binding arbitration is available in Bulgaria primarily within the EU context. It applies under the EU Arbitration Convention (for transfer pricing and permanent establishment disputes) and the EU Tax Dispute Resolution Directive, where arbitration may be initiated if the mutual agreement procedure does not resolve the dispute within the prescribed timeframe.

Outside the EU framework, mandatory binding arbitration is not generally available. Bulgaria has not adopted a broad arbitration mechanism under its bilateral tax treaties and has not opted into mandatory arbitration under the OECD Multilateral Instrument (MLI). As a result, arbitration in non-EU cases depends on the specific provisions of the relevant tax treaty and remains relatively limited in practice.

Bulgaria does not have a formal advance pricing agreement (APA) programme established under domestic law. As a result, taxpayers cannot obtain binding unilateral, bilateral or multilateral APAs from the Bulgarian tax authorities.

Some tax certainty may instead be sought through informal pre-filing discussions, general interpretative guidance of the National Revenue Agency, or through mutual agreement procedures (MAP) under applicable tax treaties, particularly in cross-border transfer pricing disputes.

Bulgaria does not operate a formal co-operative compliance or enhanced engagement programme for international tax matters. However, taxpayers may seek individual written tax rulings or interpretative opinions from the National Revenue Agency, which, while not generally binding on third parties, provide practical guidance and a degree of comfort if the facts are fully and accurately disclosed. In cross-border contexts, additional certainty may be achieved through mutual agreement procedures (MAP) under applicable tax treaties and EU dispute resolution mechanisms. In practice, tax certainty in Bulgaria remains largely ex post, achieved through audits and litigation rather than advance clearance mechanisms.