Bulgaria: 10% flat tax and the switch to the euro in 2026

Article 48 of the Bulgarian income tax law sets the rate applicable to the general annual tax base at 10%¹. The tax is proportional: no progressive scale, no general tax-free band.

It is the lowest rate in the European Union, on a par with Romania's. And it is part of the ordinary rules: it is not a special regime reserved for newcomers.

This distinction is what makes Bulgaria attractive over the long term. An incentive regime can be closed overnight; a rate applicable to the whole population can only be changed through a politically costly reform.

Dividends are subject to a final withholding tax of 5%², and article 13 exempts income from the disposal of financial instruments as defined by the law, at a rate of 0%³.

The lev has been pegged to the euro through a currency board since the nineties. This mechanism fixes the parity and in practice eliminates currency risk for a budget denominated in euros.

A formal switch to the euro would therefore not change a foreign resident's situation on this point: it is already that of a euro economy, apart from the conversion.

What would change lies elsewhere: in monetary policy, interest rates, access to European mechanisms and, for households, in the price conversion effects observed during previous changeovers.

We do not publish the date Bulgaria adopts the euro or the official conversion rate: we have not been able to verify them in an up-to-date official source. The timetable must be confirmed with the institutions concerned.

This difference from Romania deserves to be highlighted, as the two countries are so often compared on their taxation alone. The Romanian leu floats; the Bulgarian lev does not. For income in euros, this is no small detail.

For an employee, the 10%¹ rate is the main charge. For an entrepreneur, it describes only part of the situation: they receive distributed profits, and the cost combines the company's tax and then the withholding tax on distribution.

We do not publish the Bulgarian corporate tax rate or social security contribution rates: they do not appear in the extracts available to us, even though they are essential to this calculation.

Bulgarian law also treats as resident a person who has their permanent address in Bulgaria, who stays there for more than 183 days⁴ in any twelve months, or whose centre of vital interests is there.

This last criterion is expressly provided for in the law, and it deprives purely formal moves of any effect. A permanent address is not enough if your life remains elsewhere — Bulgarian law says so itself.

• The 10%¹ rate is part of the ordinary rules, not a temporary regime.
• The currency board already eliminates currency risk: the euro would change little for a resident.
• An entrepreneur's real cost combines corporate tax and the withholding tax on dividends.
• The centre of vital interests criterion deprives a purely formal address of any effect.
• The exemption for disposals of financial instruments is strictly defined and does not extend by analogy.

In return for these advantages, one must spell out what Bulgaria does not offer: an underfunded public healthcare system, a slow administration, and international schooling concentrated in Sofia. The country suits a mobile self-employed person with modest needs for public services well, and a family looking for the equivalent of what it is leaving much less. It is this trade-off, not the rate, that decides.