Corporate - Deductions

Last reviewed - 05 March 2024

Depreciation and depletion

For accounting purposes, depreciation is calculated in accordance with the straight-line, progressive, or declining-balance methods. Accounting regulations permit Bulgarian companies to establish a depreciation schedule for each tangible and intangible fixed asset on the basis of the method chosen by the company.

For tax purposes, only the straight-line method is permitted. For machines and equipment that are part of the initial investment, accelerated depreciation may also apply, subject to certain conditions.

For tax purposes, fixed assets are divided into the following seven categories:

Category Assets Maximum rates (%)
I Massive buildings, industrial constructions/equipment, transmission facilities/lines (including electricity) 4
II Machinery, production facilities, apparatuses 30/50
III Vehicles (except cars), coverage of roads and runways 10
IV Computers, peripherals to computers, software and rights to use software, mobile phones 50
V Cars 25
VI Long-term intangibles with legal or contractual limitations on the period of use 33⅓
VII Other assets 15

Under certain conditions, assets classified in Category II that are new may be depreciated at a maximum rate of 50% for tax purposes.

The depreciation rate for Category VI is determined by the period of limitations, but not more than 33⅓%.

Depletion is not specifically regulated for tax purposes.


Goodwill is not amortisable under Bulgarian tax law.

Start-up expenses

Start-up expenses may be recognised as deductible in the year of establishment of the company.

Interest expenses/borrowing costs

Interest expenses are recognised as deductible expenses, subject to the thin capitalisation rules (see the Group taxation section) and the interest limitation rules applicable in Bulgaria.

Interest limitation regime

As of 1 January 2019, in addition to the existing thin capitalisation regime, new interest limitation rules are introduced to the CIT Act, transposing the EU Anti-Tax Avoidance Directive (ATAD).

Under the interest limitation regime, net borrowing costs are deductible for tax purposes in the year when incurred, up to 30% of the company’s tax-adjusted earnings before interest, taxes, depreciation, and amortisation (EBITDA).

If the net borrowing costs for the year are up to EUR 3 million, no restrictions apply under the interest limitation regime (the thin capitalisation rules may still apply).

Any resulting non-deductible borrowing costs can be carried forward and deducted in future years without a time limitation based on a special formula.

Credit institutions are out of the scope of the interest limitation regime.

Bad debt

Bad debt impairment costs can be deducted upon expiration of the statute of limitation period. Also, the impairment costs can be recognised for tax purposes upon transferring the receivables. Such impairment costs are tax deductible for financial institutions in the year of recognition.

Charitable contributions

Generally, charitable contributions to certain organisations or persons, specified by law, can be deductible at up to 10% of a company’s accounting profit.

Fines and penalties

Expenses for fines and penalties for violation of the legislation are not deductible.


CIT is not deductible for tax purposes. However, other taxes, such as one-off taxes on certain expenses (e.g. representative expenses, certain types of fringe benefits) or local taxes and fees may be recognised as deductible for CIT purposes.

Net operating losses

The taxpayer has the right to carry forward tax losses incurred in a given year over the following five years. The loss subject to carryforward is the negative amount of the financial result adjusted for tax purposes, with certain add-backs and deductions specified in the tax legislation.

Tax losses may be reversed up to the amount of the positive financial result after tax adjustments (without the effect of the loss subject to be carried forward itself).

Carryforwards of foreign-source losses may only offset income from the same source. However, EU/EEA-source losses may offset income from other sources, including Bulgarian sources.

Payments to foreign affiliates

Payments to foreign affiliates may be subject to recalculation by the tax authorities if such payments are not made at arm’s length (as part of the general transfer pricing requirements).