Bulgaria: the 10% flat tax boosted by the euro

Bulgarian income tax is flat. Article 48 of the applicable law sets the tax rate on the general annual tax base at 10%¹. There is neither a progressive scale nor a general tax-free band.

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

This difference in nature is fundamental. An incentive regime can be closed to new entrants overnight, as Portugal has shown. An ordinary-law rate can only change through a reform affecting the whole population, which makes changing it politically costly.

Dividends are subject to a separate final withholding tax, provided for in Article 38, at a rate of 5%².

Article 13 also exempts certain income, notably income from the disposal of financial instruments as defined by the law, taxed at a rate of 0%³. The exemption is governed by a precise definition and does not extend by analogy.

Bulgaria's currency is the lev, pegged to the euro through a currency board since the nineties. In practice, this mechanism removes exchange-rate risk for a euro-denominated budget.

This is a major difference from Romania, whose leu floats, and it is rarely highlighted in comparisons between the two countries, which are nonetheless very similar in tax terms.

We do not publish a date for Bulgaria's adoption of the euro or an official conversion rate: we were unable to verify them in an up-to-date official source. The timetable must be confirmed with the institutions concerned.

What can be said is that the currency board makes the transition technically simple, since the rate has been fixed for a long time. The economic effect of switching to the euro would therefore concern exchange rates less than interest rates and prices.

For an employee, the 10%¹ rate is the main burden. For an entrepreneur, it says almost nothing: they do not receive a salary but distributed profits.

The real cost then combines corporate income tax, followed by the 5%² withholding tax on distribution. It is this combined cost that must be compared with a French situation, not the personal rate on its own.

We do not publish the Bulgarian corporate income tax rate or social contribution rates: they do not appear in the extracts available to us, even though they are essential to this calculation. They must be checked with the National Revenue Agency.

Bulgarian tax residency is acquired through a permanent address, through a stay of more than 183 days⁴ over twelve months, or by having the centre of vital interests located in Bulgaria.

This last criterion is expressly provided for by law, and it deprives purely formal moves of any effect: a permanent address is not enough if the centre of vital interests remains elsewhere.

1. Settle without any visa formality, since freedom of movement applies, then apply for the residence certificate beyond three months.
2. Obtain a personal identification number, a prerequisite for registration and for opening an account.
3. Have the full cost of a distribution calculated, not just the personal rate.
4. Genuinely move the centre of vital interests: this is what both Bulgarian law and the tax treaty require.
5. Handle the departure from France according to its own criteria and under the France–Bulgaria tax treaty.

Bulgaria suits a mobile self-employed person with modest needs in terms of public services well, and a family looking for a school and healthcare system comparable to the one it is leaving much less so. It is this trade-off, not the rate, that decides.