Quick Answer
The Corporate Income Tax Act (CITA) in Bulgaria regulates corporate taxation, including the 10% corporate income tax rate, tax base calculation, tax adjustments, advance payments, and annual filing obligations. It applies to Bulgarian companies and foreign entities with permanent establishments in Bulgaria. Compliance requires accurate accounting records, timely advance tax payments, and annual tax return submission by 30 June.
What Is the Corporate Income Tax Act (CITA) in Bulgaria?
The Corporate Income Tax Act (CITA) (Закон за корпоративното подоходно облагане – ЗКПО) is the primary legislation governing corporate taxation in Bulgaria.
It regulates:
- Taxable persons
- Determination of the corporate tax base
- Tax adjustments
- Corporate tax rate
- Advance corporate tax payments
- Annual corporate tax return obligations
- Withholding taxes
- Special tax regimes
The official legal text is available via the Bulgarian legislation portal and through the National Revenue Agency (NRA).
CITA is one of the core pillars of Bulgaria’s tax framework, alongside the VAT Act and the Personal Income Tax Act.
Who Is Subject to CITA?
The Corporate Income Tax Act applies to:
1. Bulgarian Legal Entities
All companies registered in Bulgaria (EOOD, OOD, AD, branches, etc.) are subject to corporate income tax on their worldwide income.
2. Foreign Legal Entities
Foreign companies are subject to CITA when they:
- Operate through a permanent establishment in Bulgaria
- Derive Bulgarian-source income subject to withholding tax
Cross-border structures should also be reviewed in light of double tax treaties and EU directives.
For broader context, see our guide on Doing Business in Bulgaria.
The Corporate Income Tax Rate in Bulgaria
The Corporate Income Tax Rate in Bulgaria
Bulgaria applies a flat 10% corporate income tax rate.
This is one of the lowest corporate tax rates in the European Union and remains a key element of Bulgaria’s tax competitiveness.
However, the low rate does not reduce compliance requirements. Proper accounting, tax adjustments, documentation, and reporting remain mandatory under the Corporate Income Tax Act (CITA).
Minimum Tax for Large Groups (Pillar Two)
From 2024 onward, Bulgaria has implemented the EU/OECD Pillar Two global minimum tax framework, introducing a 15% minimum effective tax rate for multinational and large domestic groups with consolidated annual revenues exceeding €750 million. Where the effective tax rate in a jurisdiction falls below 15%, a “top-up tax” (additional tax) applies to bring taxation up to the minimum level.
These rules apply only to large groups and do not affect the standard 10% corporate tax regime applicable to SMEs and typical Bulgarian companies.
How Is the Taxable Profit Calculated?
Under CITA, corporate tax is not calculated directly on accounting profit. Instead, it is based on:
Accounting profit
± Tax adjustments
= Taxable profit
× 10%
= Corporate tax due
Common Tax Adjustments Include:
- Non-recognised expenses
- Thin capitalisation adjustments
- Depreciation differences
- Provisions not tax-recognised
- Hidden profit distributions
- Transfer pricing adjustments
This is where accounting and tax diverge. Accurate tax computation requires reconciliation between financial statements and tax law requirements.
For a deeper look at accounting, see Bookkeeping and Accounting in Bulgaria: Essential Guide
Advance Corporate Tax Payments
The Corporate Income Tax Act requires companies to make advance tax payments during the year.
The obligation depends on the prior year’s turnover:
- Smaller companies may not owe monthly advance payments.
- Companies above certain revenue thresholds must pay monthly or quarterly advance corporate tax.
Advance payments are typically due:
- Monthly payments: by the 15th of the current month
- Quarterly payments: by the 15th of the month following the quarter
Final settlement is made with the annual tax return.
Advance tax planning is essential to avoid interest charges.
Annual Corporate Tax Return
The annual corporate income tax return must be submitted by 30 June of the following year.
The return includes:
- Financial result reconciliation
- Tax adjustments
- Calculation of corporate tax
- Disclosure of related-party transactions (if applicable)
Corporate tax must also be paid by 30 June.
Failure to file or pay on time may result in:
- Interest
- Administrative penalties
- NRA inspections
Withholding Taxes Under CITA
CITA also regulates withholding tax on certain payments to foreign entities, including:
- Dividends
- Interest
- Royalties
- Technical services
- Management fees (in certain cases)
The standard withholding tax rate is typically 10%, unless reduced under:
- Double Tax Treaties
- EU Parent-Subsidiary Directive
- EU Interest & Royalties Directive
This makes proper structuring important in cross-border group setups.
Transfer Pricing & Related-Party Transactions
Companies engaging in related-party transactions must comply with transfer pricing rules under CITA.
This includes:
- Arm’s length principle application
- Documentation requirements
- Potential adjustments by the NRA
CITA incorporates OECD-based principles, and documentation may be required even for domestic related parties.
Hidden Profit Distribution
CITA addresses “hidden profit distribution,” which includes:
- Undocumented shareholder benefits
- Personal expenses paid by the company
- Non-arm’s length transactions benefiting owners
Such amounts may be:
- Reclassified
- Taxed additionally
- Subject to penalties
This is a common compliance risk for small and owner-managed businesses.
Loss Carry-Forward
Tax losses may be carried forward for five consecutive years.
However:
- Losses must be declared properly
- Certain reorganisations may restrict usage
- Documentation must support loss origin
Strategic tax planning may include timing of profit realisation.
Common Misconceptions About CITA
1. “Corporate tax is only 10%, so compliance is simple.”
The rate is low, but tax adjustments and reporting requirements are detailed.
2. “If I don’t distribute dividends, there is no further tax risk.”
Hidden profit distribution rules may apply even without formal dividends.
3. “Small companies are not audited.”
The NRA may inspect any entity regardless of size.
How CITA Connects to Broader Compliance
The Corporate Income Tax Act interacts with:
- VAT Act
- Accounting Act
- Social Security Code
- Double Tax Treaties
- EU Directives
Corporate tax is not isolated. It must align with accounting records, payroll, VAT reporting, and cross-border structuring.
Businesses with international elements should ensure consistent treatment across jurisdictions.
Conclusion
The Corporate Income Tax Act (CITA) in Bulgaria establishes a clear and competitive 10% corporate tax framework. However, the simplicity of the rate should not be confused with simplicity of compliance.
Accurate tax adjustments, proper documentation, and timely filings are essential. For companies with cross-border transactions, related parties, or holding structures, structured review under CITA is advisable.
A tailored assessment ensures compliance and avoids unnecessary risks.
Contact us for further consultation.
Frequently Asked Questions (FAQ)
1. What is the corporate tax rate in Bulgaria?
The corporate income tax rate is 10% on taxable profit.
2. When is the annual corporate tax return due?
The deadline is 30 June of the following year.
3. Are advance corporate tax payments required?
Yes, depending on prior-year turnover, companies may owe monthly or quarterly advance payments.
4. Can tax losses be carried forward?
Yes, for up to five years under specific conditions.
5. Does CITA apply to foreign companies?
Yes, if they operate through a permanent establishment or derive Bulgarian-source income.
Disclaimer
This article is for informational purposes only and does not constitute tax, legal, or accounting advice. Each case requires individual assessment under Bulgarian and applicable international law.
Last reviewed: February 2026
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