Guide

Taxes in Bulgaria

By Svetlana Junge · updated August 29, 2026

Ten per cent on income, ten per cent on corporate profit, five per cent on dividends. Those rates are correct. They do not, however, start to apply merely because a company has been registered in Bulgaria. This page sets out the conditions German tax law attaches, with the statutory reference for each.

When Germany continues to tax

Section 1(1) sentence 1 of the German Income Tax Act reads: individuals who have a residence or their habitual abode in Germany are subject to unlimited income tax liability. Both terms are defined by statute. Under section 8 of the Fiscal Code a person has a residence where they occupy a dwelling in circumstances indicating that they will keep and use it. Under section 9 of the Fiscal Code a person has their habitual abode where they stay other than temporarily; a continuous stay of more than six months always counts as such, and from the outset, with short interruptions disregarded. What decides the matter is the actual situation, not deregistration at the residents' registration office.

The German dwelling is the most common stumbling block

A retained dwelling that remains available at any time establishes residence even if it is rarely used. Anyone who keeps German property ready for occupation risks continuing unlimited tax liability. Long-term letting to third parties changes the assessment; occasional use by friends generally does not. This is where relocation plans most often fail in practice.

When both states want to tax

Where both states have jurisdiction under their domestic law, the double taxation treaty between Germany and Bulgaria determines which state may tax. The test proceeds in stages: first the permanent home, then the centre of vital interests, then habitual abode, then nationality. Where that too yields no answer, the competent authorities of both states reach agreement between themselves. The centre of vital interests is measured by verifiable circumstances: where the family lives, where the children go to school, where the accounts are held, where the family doctor is, where the car is registered.

Exit taxation on shareholdings

Anyone holding at least 1 per cent of the capital of a corporation falls under section 17(1) sentence 1 of the Income Tax Act. When unlimited tax liability ends, section 6 of the Foreign Tax Act treats those shares as if they had been sold at fair market value. A gain that was never received is therefore taxed. The rule catches anyone who was subject to unlimited tax liability for at least seven of the past twelve years. The statute provides two forms of relief. On application, the assessed tax may be paid in seven equal annual instalments under section 6(4). And where the departure rests on a merely temporary absence and the person becomes subject to unlimited tax liability again within seven years, the claim lapses under section 6(3) on the conditions set out there. For shareholders in a German GmbH it nevertheless remains the largest single item of a departure, and it belongs before the decision rather than after it.

Where a company sits for tax purposes

Section 10 of the Fiscal Code provides that management is the centre of senior business direction. It is not the commercial register that decides, but the place where the day-to-day decisions of some weight are actually taken. If a Bulgarian company is run from a German desk, management lies in Germany, with unlimited corporate tax liability there as the consequence. Anyone who wants the Bulgarian rates needs the management, the premises and the people in Bulgaria.

Controlled foreign company rules

Sections 7 to 14 of the Foreign Tax Act attribute certain passive income of a controlled foreign company directly to the German shareholder, even without a distribution. What is meant above all are arrangements in which the foreign company carries on no economic activity of its own. A company with a real business in Bulgaria, with an office, staff and its own value creation, is something fundamentally different from a mailing address.