Bulgaria Adjusts Corporate Tax

Bulgaria’s parliament is considering amendments to the Corporate Income Tax Act that leave the headline rate unchanged but reshape selected incentives after euro adoption: businesses are being offered accelerated depreciation for electric vehicles, an additional research and development deduction, technical currency clarifications and targeted relief for religious organizations.

Tax policy shifts from rates to incentives

Bulgaria’s 2026 tax reform is not moving through an increase in the standard corporate income tax rate, but through targeted adjustments. Bloomberg Tax reported that Bulgaria’s National Assembly is considering a bill to amend the Corporate Income Tax Act. The full article is subscription-based, but the substance of the measures under discussion is confirmed by open legal and business sources.

The main context is Bulgaria’s adoption of the euro on January 1, 2026. The European Central Bank said Bulgaria became the 21st member of the euro area, with the exchange rate fixed at 1.95583 Bulgarian lev per euro. For the tax system, that means not only a change in reporting currency but also the need to align laws, returns, payments, thresholds and calculation rules with the new monetary base.

The headline rate remains the competitive anchor

Bulgaria continues to have one of Europe’s lowest nominal corporate tax rates. According to the Tax Foundation, Bulgaria’s corporate income tax rate in 2026 is 10%, below the European average and second only to Hungary among the lowest-rate European jurisdictions.

That is why the amendments matter less as a signal of radical tax-policy change and more as a recalibration of the existing regime. For investors, the difference is important: Sofia is not abandoning its low-tax identity, but is trying to make the system compatible with the euro, European climate goals and international minimum-tax rules for large groups.

Electric vehicles receive accelerated depreciation

One of the central measures is accelerated tax depreciation for electric vehicles. The Bulgarian News Agency reported that parliament approved at first reading a bill allowing an annual depreciation rate of 50% for electric vehicles acquired on or after January 1, 2026. The explanatory notes link the measure to the National Recovery and Resilience Plan and to reducing the risk of European Commission financial sanctions.

For companies, this means faster recognition of the cost of electric vehicles for tax purposes. In effect, the state is reducing the cost of corporate fleet renewal through the tax base rather than through a direct subsidy. The measure is especially relevant for logistics companies, couriers, service businesses with large fleets and firms preparing environmental reporting.

Research and development gets an extra deduction

The second measure concerns research and development, meaning systematic work to create new knowledge, technologies, products or processes. Deloitte reported that amendments published in Bulgaria’s State Gazette on March 27, 2026 provide an additional 25% deduction for operating research and development costs on top of immediate deductibility.

Velchev & Co says the expenses must be directly related to research and development activities, incurred on market terms and not financed by state aid or European Union funds. If an intangible asset is created as a result of such activities, related costs may also be increased by an additional 25% for tax-base purposes.

For Bulgaria’s economy, this is an attempt to strengthen innovation without raising the general tax burden. But the practical effect will depend on how clearly the tax administration interprets qualifying research costs, documentation, the link between expenses and projects, and market-based treatment of related-party transactions.

The euro requires technical reporting changes

Euro adoption has created a separate layer of tax amendments. PwC notes that from January 1, 2026 all tax and other public liabilities must be paid in euro, while tax returns for periods ending on or before December 31, 2025 are filed in lev and returns for periods after January 1, 2026 are filed in euro. The general conversion rule uses the full official exchange rate of 1.95583, without shortening or rounding the rate itself.

This is not a minor technical issue. For companies, conversion affects tax returns, accounting systems, contracts, advance payments, asset registers, depreciation schedules and intra-group settlements. An error in the rate or rounding can create tax discrepancies, especially for companies with large numbers of transactions, assets or branches.

Minimum tax rules for large groups are clarified

Another part of the package concerns Pillar Two, the international rules developed through the Organisation for Economic Co-operation and Development and the European Union to impose a global minimum effective tax rate on large multinational and domestic groups. KPMG reported that draft amendments clarify certain provisions of the Pillar Two regime and are proposed to apply retroactively from January 1, 2026, while also including technical corrections linked to euro adoption.

For most small and medium-sized companies, these rules will not be a daily concern. But for large groups above the international revenue threshold, Bulgaria is no longer only a 10% tax-rate jurisdiction. The low rate remains, but global minimum-tax rules limit the ability of large structures to use it without considering the group’s effective tax rate.

Religious organizations get a targeted exemption

One bill provides for exemption from taxation of income earned by religious organizations from renting out or otherwise granting use of immovable property located in Bulgaria. The measure is narrow but politically sensitive: it concerns organizations that may own historic, cultural and urban assets, and rental income that can be used to maintain buildings and support community activity.

For business, this is not a systemic shift in corporate taxation. But it shows that the legislative package combines several different objectives: currency adaptation, environmental incentives, innovation support, religious relief and international tax clarifications.

Business gets incentives, but also more requirements

The new rules may benefit companies investing in electric vehicles, research projects and process modernization. Yet the tax benefit will not be automatic. Businesses will need documents proving the acquisition date of electric vehicles, the nature of research expenses, the absence of double financing through state aid or EU funds, and the correctness of euro conversion.

For tax advisers and chief financial officers, 2026 is a higher-risk transition year. Even if the tax rate has not changed, recognition rules, reporting currency, technical formulas and the link between Bulgaria’s regime and the global minimum tax are changing. In practice, that may mean a heavier compliance burden.

The amendments fit into a wider budget dispute

The tax changes come against a broader debate over Bulgaria’s fiscal policy after eurozone entry. Associated Press reported that in late 2025 the government withdrew its 2026 draft budget after mass protests against tax increases, including higher social-security contributions and a doubling of the dividend tax.

Against that background, the current amendments look politically cautious. They do not raise the standard corporate rate, but instead offer targeted incentives and technical clarifications. That reduces the risk of public resistance, but it does not remove the central question: whether Bulgaria can preserve tax competitiveness, finance eurozone-related obligations and meet investment goals linked to green transition and innovation.

Investors will watch implementation, not just legislation

For foreign companies, Bulgaria’s tax regime remains attractive because of its low rate, European Union membership, euro adoption and relatively moderate operating costs. But after 2026, investment decisions will depend more heavily on the quality of tax administration.

If the research and development rules are applied predictably, they may support technology centres, engineering companies, manufacturing investment projects and startups. If the criteria are unclear, businesses will fear disputes with tax authorities. The same applies to electric vehicles: accelerated depreciation will matter only if companies are confident that the tax treatment will not be challenged retrospectively.

As International Investment experts report, the critical conclusion for Bulgaria is that the country is trying to preserve its low-tax image but can no longer rely on the 10% rate alone. After euro adoption, competition for capital will depend on predictability, administrative quality, transparent conversion rules and the real usability of incentives. If the amendments remain clear and workable, they will strengthen Bulgaria’s position as a regional business platform. If they produce disputes and excessive documentation, the country’s tax appeal will look stronger on paper than in investors’ financial models.