Tax10 min read
How Bulgaria's flat 10% corporate tax actually works, what counts as taxable profit, the 5% dividend rate, and the real effective rate compared to Estonia, Cyprus, Ireland, and Germany.
Bulgaria has the lowest flat corporate income tax in the European Union: 10%. It has held that rate since 2007 and there is no political appetite to change it. For non-resident founders comparing EU jurisdictions, this is usually the headline number that brings them to Bulgaria — but the real picture is a bit more nuanced than the headline.
This guide explains exactly how the 10% works, what gets taxed, what the effective rate looks like once you actually take money out, and how it stacks up against the EU jurisdictions founders most often consider.
Bulgaria's corporate income tax (korporativen danak) is:
The base is accounting profit adjusted by a defined list of tax additions and deductions — close to IFRS / Bulgarian National Accounting Standards, with predictable adjustments for depreciation, provisions, and non-deductible expenses.
Start with the company's accounting profit, then apply the standard adjustments:
For a typical SaaS, consulting, or e-commerce business with clean bookkeeping, the gap between accounting and taxable profit is small — often within a few percent. The 10% rate applied to that adjusted figure is the corporate tax due.
Once the company pays tax and wants to distribute profit to shareholders, Bulgaria withholds 5% on dividends paid to individuals or to non-EU corporate shareholders. Dividends paid to EU-resident corporate shareholders that meet the parent-subsidiary directive are 0%.
So the full picture for a non-resident individual founder taking everything out as dividends:
| Step | Rate | On |
|---|---|---|
| Corporate tax | 10% | Taxable profit |
| Dividend withholding | 5% | Net profit distributed |
| Combined effective | ~14.5% | Of pre-tax profit |
A €100,000 profit becomes €90,000 after corporate tax, then €85,500 in the founder's pocket after the 5% dividend WHT. That's roughly half of what you'd net from a comparable German GmbH and around two-thirds of what you'd net from an Irish Ltd after the 12.5% + dividend layer.
This is the comparison that actually matters for founders who pay themselves:
| Jurisdiction | Corporate | Dividend (non-resident individual) | Combined effective |
|---|---|---|---|
| 🇧🇬 Bulgaria | 10% | 5% | ~14.5% |
| 🇪🇪 Estonia | 0% retained / 22% on distribution | included | ~22% (when you actually distribute) |
| 🇮🇪 Ireland | 12.5% | 25% WHT (treaty-reducible) | ~20–34% |
| 🇨🇾 Cyprus | 12.5% | 0% (non-residents) | 12.5% |
| 🇲🇹 Malta | 35% headline → ~5% refund | varies | ~5% (if you operate the refund correctly) |
| 🇩🇪 Germany | ~30% (KSt + Gewerbe) | 26.375% | ~48% |
Cyprus and Malta can look cheaper on paper, but each carries real complexity: Cyprus needs proper substance and the IP Box requires audits since 2019; Malta's 5% effective rate depends on a refund mechanism that requires a holding structure most solo founders won't set up. Bulgaria's 14.5% is the lowest no-tricks effective rate in the EU for a straightforward operating company.
Estonia's 0% on retained earnings is famous, but the moment you distribute, it becomes 22%. For a founder who actually wants to pay themselves, Bulgaria wins on cash in hand. See the full Bulgaria vs Estonia comparison for the long version.
The 10% is corporate income tax only. A complete picture of your tax burden in Bulgaria should also include:
For non-resident founders who pay themselves predominantly as dividends rather than salary, the social-contribution layer is largely avoided — which is one of the main reasons the Bulgarian setup is so attractive for solo operators.
The 10% rate delivers the cleanest value when:
If your strategy is to retain 100% of profits inside the company for a decade and never distribute, Estonia's 0% on retained earnings is genuinely competitive. For everyone else, Bulgaria wins on cash actually delivered to the founder.
Is the 10% changing? There's no active legislative proposal to raise it. Bulgaria's 10% rate has survived multiple governments since 2007 and is treated as a competitive cornerstone, not a political variable.
Does the 10% apply to dividend income my Bulgarian company receives? Dividends received from EU subsidiaries are generally exempt under the parent-subsidiary directive. Dividends from non-EU subsidiaries can be taxed at 10% or relieved under a treaty, depending on the source country.
Do I have to live in Bulgaria to use the 10% rate? No. The 10% is the rate on the company's profit, regardless of where the shareholders live. Where you are tax-resident affects only how the distributed dividends are then taxed in your hand — and the 5% Bulgarian WHT is often the lowest layer in the chain.
What if I never distribute and just keep profit in the company? You pay the 10% on profit each year. When you eventually distribute, the 5% dividend WHT applies on top. There is no "tax-deferred reinvestment" feature like Estonia's — but at 10%, the headline is low enough that most founders don't bother optimising further.
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