Quick Answer
In Bulgaria, certain business expenses classified as representative expenses—such as client meals, gifts, and business hospitality—are subject to a 10% representative tax. These expenses remain deductible for corporate income tax purposes, but the 10% tax itself is not deductible. VAT on representative expenses is not recoverable. From 2026 onward, thresholds and examples are typically shown in EUR.
Introduction
Representative expenses—such as client dinners, gifts, and corporate events—are a common part of doing business. In Bulgaria, however, these expenses come with specific tax implications that companies must understand to remain compliant and avoid unpleasant surprises.
This guide explains how representative expenses are treated under Bulgarian tax law, including the 10% representative tax, VAT treatment, and why recognising these expenses is still usually the correct approach in practice.
For a broader overview of deductible and non-deductible costs, see our guide:
Tax Deductible Expenses in Bulgaria: A Complete Guide.
What Are Representative Expenses?
Representative expenses are costs incurred for business-related entertainment or relationship-building activities. Common examples include:
- Client dinners or lunches
- Corporate gifts (e.g. branded merchandise, holiday gifts)
- Event hosting (conferences, seminars, networking events)
- Food and drinks during business meetings
These expenses are treated separately from standard operating costs and are subject to specific tax rules.
Tax Rules for Representative Expenses
10% Representative Tax
A 10% representative tax is levied on the gross amount of representative expenses.
- The expense itself remains deductible from taxable profit
- The 10% tax paid is not deductible
- The tax must be declared and paid by the 15th day of the following month
Example
If you spend EUR 500 (BGN 977.92) on a client dinner:
- Representative tax (10%): EUR 50 (BGN 97.79)
- Deductible expense: EUR 500 (BGN 977.92)
- Non-deductible cost: EUR 50 (BGN 97.79) (the representative tax itself)
VAT Treatment
Under Bulgarian VAT law, VAT on representative expenses cannot be reclaimed.
This means VAT becomes part of the total cost of the expense and should be treated accordingly in accounting records.
Is It Worth Recognising Representative Expenses?
Many businesses hesitate to recognise representative expenses due to the additional 10% tax and non-recoverable VAT. In practice, however, proper recognition is usually the safer and more transparent approach.
Avoid Higher Corporate Tax
If representative expenses are not recognised, they may be treated as non-deductible costs, increasing taxable profit and corporate income tax exposure.
Maintain Clear Financial Records
Correct classification ensures clean bookkeeping, clearer cash-flow tracking, and fewer issues during tax inspections.
Practical Tax Management
While there is no direct tax saving, proper categorisation reduces the risk of reassessments, penalties, or disputes with the National Revenue Agency.
A common mistake is treating all business meals as ordinary deductible expenses, while in practice many fall under the representative expense regime and require separate 10% taxation.
How to Recognise Representative Expenses
To comply with Bulgarian tax regulations:
- Keep receipts (look for “фискален бон / fiskalen bon”)
- Document the business purpose (client meeting, event, negotiation, etc.)
- Provide documentation to your accountant for correct classification and reporting
Conclusion
While the 10% tax on representative expenses may appear as an additional cost, recognising these expenses correctly remains the safer and more transparent approach. It helps companies avoid higher corporate income tax exposure, maintain clean accounting records, and stay compliant with Bulgarian tax rules.
If you need assistance with identifying, documenting, or reporting representative expenses in Bulgaria, our team can help.
👉 Contact us for a Free Discovery Meeting to discuss your situation in practice.
Frequently Asked Questions
1. What expenses qualify as representative?
Expenses must be directly related to business relationships, such as client meals, gifts, or hosted events. Personal or purely private expenses do not qualify.
2. Can VAT be reclaimed on representative expenses?
No. VAT on representative expenses is non-recoverable under Bulgarian VAT law.
3. What happens if representative expenses are not recognised?
They may be treated as non-deductible, increasing taxable profit and potentially leading to higher corporate income tax and compliance risks.
Useful Resources
Disclaimer
This article is for informational purposes only and does not constitute financial, tax, or legal advice. Professional consultation is required for case-specific situations.
Last reviewed and updated: February 2026
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