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When Do Bulgarian Companies Withhold Tax for Foreign Suppliers? | 2025 Guide
Welcome to ASB Accounting Services Bulgaria – your trusted partner for accounting, tax, and business solutions. In this article, we explain clearly when a Bulgarian company must withhold tax on payments made to foreign suppliers. The rules may seem complex at first, but with the right information, you can manage compliance with confidence.
The General Rule
Under Bulgarian tax law, a company registered in Bulgaria must withhold tax at source when paying certain types of income to a foreign entity. This rule applies even if the foreign supplier has no legal presence or registration in Bulgaria.
Types of Income Subject to Withholding Tax
The most common cases include:
- Royalties (licensing fees, use of intellectual property).
- Interest payments.
- Management and consulting services performed abroad.
- Franchise and technical service fees.
- Dividends paid to foreign shareholders.
Applicable Tax Rates
The standard withholding tax rate in Bulgaria is 10%. However, this can be reduced or fully eliminated if a double tax treaty exists between Bulgaria and the supplier’s country. To apply the reduced rate, the Bulgarian payer must obtain a valid tax residency certificate from the foreign supplier.
| Type of Income | Standard Rate | Rate with Double Tax Treaty |
|---|---|---|
| Royalties | 10% | 0–5% (depending on treaty) |
| Interest | 10% | 0–5% (depending on treaty) |
| Dividends | 5% | 0–5% (depending on treaty) |
| Management & Consulting Fees | 10% | Often exempt with treaty |
| Franchise & Technical Services | 10% | Reduced or exempt with treaty |
Example in Practice
Imagine a Bulgarian company pays EUR 20,000 in licensing fees to a German supplier. Without a tax residency certificate, the Bulgarian company must withhold 10% tax (EUR 2,000) and remit it to the National Revenue Agency. If a valid German residency certificate is presented, the tax may be reduced to 0% under the Bulgaria–Germany double tax treaty, and the full EUR 20,000 can be paid to the supplier.
Your Responsibility as a Bulgarian Company
- You are responsible for withholding and remitting the tax.
- If you fail to withhold, the Bulgarian tax authorities may charge your company instead of the foreign supplier.
- Payments must be declared and the tax submitted to the National Revenue Agency (NRA) by the 15th of the month following the payment.
Always check if withholding tax applies before paying a foreign supplier. With the right treaty documents in place, you may not need to withhold at all. Without them, your company becomes fully liable. Proper documentation is not just a formality – it directly protects your business from unnecessary tax exposure.
Contact ASB Accounting Services today to ensure your company stays compliant with Bulgarian withholding tax rules and avoids unnecessary penalties.