The Bulgarian Industrial Capital Association reviewed the package of legislative amendments presented by the Ministry of Finance in the areas of taxation, financial reporting and public finances.
BICA has consistently maintained that a competitive tax environment is one of the key comparative advantages of the Bulgarian economy. The tax system should be simple, predictable and sustainable, with low tax rates and a broad tax base, ensuring equal treatment of taxpayers and avoiding unjustified administrative costs for businesses. Increasing budget revenues should be pursued primarily through economic growth, broadening the tax base, reducing undeclared economic activity and improving tax collection, rather than by increasing the tax burden on compliant taxpayers.
In this context, we welcome the fact that a significant part of the proposals is aimed at easing the burden on businesses, updating value thresholds that have remained unchanged for years, encouraging investment and reducing the regulatory burden. At the same time, however, certain measures are also being proposed that pose significant risks to tax neutrality, the predictability of the business environment, equal treatment of enterprises and investment activity.
BICA expresses the following position on the individual draft laws and proposals:
1. PERSONAL INCOME TAX ACT
1.1. Increase in tax relief for children and children with disabilities
BICA supports the proposal and views this change not merely as a tax preference, but as an element of the country’s necessary long-term demographic policy. Bulgaria is facing serious demographic challenges, which are already having a direct impact on the labour market. Therefore, policies supporting families should increasingly encourage labour market participation.
The tax relief will increase the disposable income of working parents, which is a more sustainable approach than relying solely on an expansion of the social transfer system, since support through tax relief is directly linked to employment, GDP generation and the payment of taxes and social security contributions.
1.2. New tax relief for child development
BICA supports the proposal because the measure has two positive effects at the same time.
On the one hand, it encourages families to invest in their children’s development by financing STEM education, foreign language training, additional educational activities, sports, arts and other extracurricular activities. This represents an investment in human capital and has a long-term social and economic impact.
On the other hand, the requirement for expenditure to be supported by documentary evidence creates an additional incentive for formalising sectors in which a significant volume of payments is still made without accounting documents. In order to benefit from the tax relief, the parent will require a document certifying the expenditure, which will result in the respective turnover being declared and the income being taxed. In this way, part of the initial negative budgetary impact of the tax relief may be offset by broadening the declared tax base of persons providing educational services.
2. VALUE ADDED TAX ACT
2.1. Increase in the threshold for mandatory VAT registration
BICA supports increasing the threshold from EUR 51,130 to EUR 75,000. This measure supports micro and small enterprises and provides both tax and administrative relief. Directive (EU) 2020/285 allows for a threshold of up to EUR 85,000, and the proposed EUR 75,000 is close to the maximum permitted level. For enterprises with low turnover, the costs of registration, ongoing accounting administration and compliance with all VAT obligations may be disproportionately high relative to the scale of their business activities.
At the same time, the possibility of voluntary registration is retained, allowing enterprises for which the general regime is economically more advantageous to continue using it.
2.2. Mandatory registration for supplies of land and new buildings
The measure is justified insofar as it seeks to put an end to practices whereby actual business activities involving construction and the subsequent sale of newly constructed properties are structured in a manner that allows VAT taxation to be avoided.
At the same time, the new provision should not create obstacles to the normal functioning of the real estate market and the construction sector. It is particularly important that a one-off disposal of personal property by an individual should not automatically bring that person within the scope of the VAT regime. This also applies in cases where an individual who owns land establishes a right to build on their property in exchange for receiving individual units in the future building.
We propose the introduction of clear statutory criteria distinguishing independent economic activity from the one-off management and disposal of personal property.
2.3. Mandatory electronic invoicing for domestic supplies from 2028
BICA supports, in principle, the introduction of mandatory electronic invoicing from 2028. The measure could simultaneously automate business processes, reduce document processing costs and limit opportunities for tax fraud.
As this measure will constitute a significant reform in the administration and payment of VAT, we recommend that, prior to the mandatory introduction of electronic invoicing, the platform be fully developed, made publicly available for testing and subjected to comprehensive load testing. To this end, the technical specifications should be published sufficiently early to allow accounting and ERP software providers to adapt their products.
It is particularly important that electronic invoicing replace, rather than duplicate, existing administrative obligations. It is unacceptable for the same information to be submitted to the National Revenue Agency (NRA) through a structured electronic invoice, VAT ledgers, SAF-T and other parallel information channels. Once the revenue administration has access to structured real-time data, maximum use should be made of pre-filled returns, automated checks and the gradual elimination of redundant reporting registers. A free solution should also be provided for micro-enterprises that do not have their own specialised software and ICT capacity.
3. CORPORATE INCOME TAX ACT
3.1. Increase in the value threshold for tax depreciable assets
BICA supports increasing the threshold from BGN 700 to EUR 1,000. The BGN 700 threshold has been in force since the beginning of 2008 and has effectively not been updated for nearly two decades, despite the significant increase in the general price level over that period. The existing low threshold results in an increasing number of low-value assets being included in tax depreciation schedules, where the administrative cost of tracking and depreciating them is unjustified relative to their value. The proposed threshold of EUR 1,000 will reduce the administrative burden and ensure more appropriate tax treatment of low-value assets.
3.2. Tax loss carryforward
BICA considers the extension of the tax loss carryforward period from 5 to 10 years to be appropriate and necessary. For enterprises with substantial initial investments, long investment cycles, restructuring processes or significant losses during periods of economic crisis, the five-year period is often insufficient to fully deduct accumulated tax losses.
However, the proposed restriction limiting the deduction of accumulated tax losses to 70% of the positive tax financial result raises a different issue. For example, an enterprise that still has unutilised tax losses would be required to pay corporate income tax on at least 30% of its positive result before those losses have been fully deducted. This would create a situation in which, over a medium-term investment cycle, tax may become payable before the enterprise has effectively recovered its previous tax losses.
In this regard, we do not find sufficient justification for the choice of a 70% threshold specifically.
BICA proposes retaining the current regime for the first five years, during which accumulated tax losses may be deducted against up to 100% of the positive tax financial result. During the subsequent five years of the extended ten-year period, the Ministry of Finance’s proposed restriction limiting deductions to 70% of the positive tax financial result could apply. In this way, extending the period from 5 to 10 years would provide genuine relief for businesses without simultaneously worsening the existing regime for tax loss deductions during the first five years.
3.3. Accelerated tax depreciation for AI and high-performance technologies
BICA considers the proposed measure to be a step in the right direction.
Improving the productivity of Bulgarian enterprises requires significant investment in digitalisation, automation, artificial intelligence and high-performance infrastructure. However, we see no economic justification for limiting this investment incentive to a three-year period. We propose that the regime be made permanent or, at a minimum, that the law provide for an evaluation of its results in 2029 and the possibility of its automatic extension where a positive impact has been demonstrated.
3.4. Food vouchers
BICA welcomes the almost twofold increase in the maximum monthly value of food vouchers to EUR 200 and the increase in the overall annual quota from EUR 818 million to EUR 1.5 billion.
Food vouchers are a social benefit widely used by employers as a tool for motivating and retaining employees. As a rule, employees do not perceive vouchers as replacing part of their remuneration, nor do they constitute part of the agreed salary.
In addition to their social function, vouchers also play an important role in bringing turnover into the formal economy, particularly in the food retail sector. Payments made through vouchers are fully traceable and limit opportunities for undeclared sales. Therefore, the fiscal impact of vouchers should not be assessed solely in terms of the value of the tax preference.
The proposed taxation regime for food vouchers taxes not only the increase from approximately EUR 102 to EUR 200, but also the portion that has until now been completely exempt from taxation. This could reduce employers’ incentives to use this instrument.
BICA proposes that the 7% tax apply only to the additional amount above the currently applicable tax-exempt threshold. Alternatively, if the Ministry of Finance insists that taxation cover the entire value of the voucher, we consider a significantly lower rate of 3.5% to be a more balanced option.
This could generate additional budget revenue without putting the widespread use of the instrument at risk.
3.5. Tax on so-called “excess profits”
BICA does not support the proposal in its current form and considers that the provisions should be substantially revised following a full economic and sectoral impact assessment. We do not dispute the fact that unusually high returns have been generated in certain sectors and enterprises in recent years. Nor do we dispute the right of the State, under extraordinary circumstances, to consider the temporary taxation of such extraordinary returns. However, precisely because of the exceptional nature of such an instrument, it must be based on exceptionally clear economic logic, an objective methodology and unquestionably equal treatment. The proposed mechanism does not sufficiently meet these requirements.
BICA notes that some of the affected sectors are highly concentrated. If high profitability is the result of insufficient competition, high barriers to market entry or abuse of market position, this is primarily a matter of competition and sectoral regulation. Taxing profits does not address the underlying cause of insufficient competition. At the same time, the administrative setting of prices, interest rates, fees or permissible margins is likewise not an acceptable long-term alternative in a market economy. The appropriate response is effective competition and well-functioning regulators.
The concept of “excess profit” cannot be reduced solely to an increase in nominal accounting profit, since a higher absolute profit does not in itself prove the existence of extraordinary income. An enterprise may increase its profit as a result of higher turnover, inflation, the acquisition of another enterprise, an expansion of production capacity, new investments, an increase in capital or improved productivity. For example, if an enterprise’s revenue doubles and its profit also doubles, this does not necessarily mean that its profitability has increased. The analysis should therefore take into account not only absolute profit, but also indicators such as profit margin, return on capital, asset size, investments made and risks assumed.
According to BICA, no convincing economic justification has been provided as to why an increase of precisely 20% above the average profit of previous years should constitute the dividing line between normal and “excess” profit. Accumulated inflation over the period under consideration is significant, and a nominal 20% increase in profit may represent no real increase at all once the price level and scale of business activity are taken into account.
Another weakness of the proposed methodology for determining “excess profit” is that the formula does not sufficiently account for changes in the economic scale of an enterprise. A company that has acquired a competitor, built new production capacity, expanded its network or made significant investments may naturally generate higher absolute profit. This is necessary to recover the investment and ensure a normal return on invested capital. Under the current formula, it is precisely enterprises that have invested and expanded their operations that may be subject to additional taxation on the results generated by those investments.
Such an extraordinary taxation mechanism creates the wrong economic incentive and, instead of encouraging investment, the tax system may penalise a successfully implemented investment.
The draft provides for a special control mechanism under which the ratio between taxable profit and the financial result before interest is compared with a historical average, with a significant deviation potentially resulting in an adjustment of taxable profit. This creates several problems.
First, for financial institutions and banks in particular, interest-related activities are at the core of the business model, and conventional EBIT does not have the same economic relevance as it does for a non-financial enterprise.
Second, introducing an exception based on “objective economic reasons” will inevitably lead to complex evidentiary proceedings between enterprises and the National Revenue Agency and create a risk of prolonged administrative and court disputes.
Under the draft, the tax is defined as a one-off measure applicable only for 2027. The introduction of an extraordinary sector-specific tax sends a strongly negative signal to investors. Once a practice has been established whereby a temporary budget shortfall is offset through new sector-specific taxation, there is a risk that this approach may be repeated or extended to other sectors in response to a future fiscal problem.
A similar approach was already applied to the mining industry in 2025. It did not resolve any structural problem in the sector, improve competition or change the market environment; its only result was additional budget revenue. If the State claims that a given sector is generating “excess profits”, extraordinary taxation should be accompanied by measures that address the causes of those profits and create a genuinely competitive environment. Otherwise, this does not constitute economic policy, but purely fiscal extraction of resources.
BICA considers the stability of the tax system to be an important investment asset for Bulgaria, and this asset should not be put at risk for the sake of a one-off fiscal effect.
4. EXCISE DUTIES AND TAX WAREHOUSES ACT
4.1. Excise duty on vehicles with a power output of 250 kW or more
BICA understands the fiscal and economic rationale for differentiated taxation of vehicles with a clearly pronounced luxury character, but considers that the proposal should be further refined.
By their economic nature, excise duties may be used both for goods with negative externalities and for clearly identifiable luxury consumption. However, the published draft does not appear to contain an explicit exemption for electric vehicles. This creates a genuine risk that fully electric vehicles and hybrids could fall within the regime solely because of the high power output of their electric drivetrains. Such an outcome would run counter to other policies aimed at the decarbonisation of transport.
BICA proposes that fully electric vehicles be explicitly exempted from the tax, while for hybrid vehicles a criterion should be developed that takes into account emissions and drivetrain characteristics rather than solely total power output.
5. GAMBLING ACT
BICA supports strict restrictions on gambling advertising. The restrictions should also be consistently applied to indirect forms of advertising, including in the online environment.
BICA supports increasing the tax and fee burden on gambling activities and considers that the possibility of a more substantial increase should also be analysed, provided that a preliminary assessment demonstrates that this would not encourage consumers to shift towards unlicensed operators.
BICA does not support allowing gambling operators to withhold part of the variable fee where the corresponding amount is used for sponsorship, advertising or donations to certain sports organisations. Such an arrangement is inconsistent with the overall objective of limiting the advertising presence of gambling operators. If the State considers that part of gambling revenues should be used to finance sport, this should take place through the public budget and transparent programmes, rather than through a tax preference that simultaneously allows the operator to advertise.
BICA supports the remote connection of gaming equipment to the information systems of the National Revenue Agency and the requirement for foreign online operators to maintain an actual place of business in Bulgaria. Automated reporting of bets, winnings paid out and revenues increases transparency, reduces opportunities for concealing turnover and improves equal treatment among operators.
6. LOCAL TAXES AND FEES ACT
BICA supports the proposal to update the tax valuations of real estate. Tax valuations in Bulgaria have not been updated since 2008 and, as a result, the gap between tax valuations and actual market values has become excessive in large parts of the country. We welcome the gradual implementation of the update rather than a one-off sharp increase.
BICA supports the decision not to automatically transfer the increased tax valuations into the amount of the municipal waste fee. We insist that the “polluter pays” principle enter into force as of 1 January 2027 and that its implementation should not be postponed any further, including with regard to enterprises. The amount of the municipal waste fee should be linked to the actual quantity of waste generated rather than to the value of the real estate. Only in this way will the fee fulfil its intended purpose and create genuine incentives for waste reduction.
7. ACCOUNTANCY ACT AND INDEPENDENT FINANCIAL AUDIT AND SUSTAINABILITY ASSURANCE ACT
BICA supports the proposed amendments related to sustainability reporting. The draft provides that mandatory reporting will apply to enterprises that simultaneously exceed EUR 450 million in net sales revenue and an average workforce of 1,000 employees. This will remove a significant number of enterprises from the scope of mandatory reporting and constitutes an appropriate step towards restoring the principle of proportionality.
Of particular importance to BICA is the protection of small and medium-sized enterprises that supply large companies subject to sustainability reporting requirements. The draft introduces a category of “protected undertaking” and explicitly allows such an undertaking to refuse to provide information exceeding the voluntary standards, while contractual clauses requiring it to provide additional information for sustainability reporting purposes are non-binding. Formally exempting SMEs from reporting obligations would be meaningless if large enterprises could simply transfer their own information requirements to suppliers in their value chains.
BICA insists that no national requirements exceeding the minimum necessary under European law be introduced and that the protection of SMEs should not be circumvented through secondary legislation or contractual practices.
BICA considers it appropriate in principle to replace the requirement for reasonable assurance with a limited assurance regime for the verification of sustainability information, as Directive (EU) 2026/470 itself aims to establish a more proportionate framework and reduce excessive administrative and financial costs associated with sustainability reporting.
Alongside our support in principle for the amendments, we consider that an additional transitional period should be provided for undertakings in the so-called “first wave” that remain within the scope of mandatory reporting. Substantial changes to the European framework and standards were made during 2026 itself, at a time when undertakings were already expected to organise data collection, internal controls, value-chain processes and preparations for independent assurance. The choice between the old and revised standards does not resolve this practical problem, since in either case there is no full reporting period governed by rules that were known in advance and finalised.
It should also be taken into account that the sustainability assurance engagement requires the explicit appointment of a registered auditor by the undertaking’s competent governing body, while auditors themselves also require time to prepare and plan the engagement. BICA therefore proposes that the first mandatory sustainability report under the amended framework for “first-wave” undertakings that remain within its scope should cover the 2027 financial year. This would reduce the one-off administrative burden and allow the first report to be prepared on the basis of data collected consistently throughout the entire reporting period.
8. PUBLIC FINANCE ACT
BICA supports aligning the national fiscal framework with the new European rules and strengthening the link between budget planning and a medium-term trajectory for net primary expenditure. We particularly welcome the principle that permanent reductions in revenue should be offset by permanent reductions in expenditure, as well as the restriction on automatically converting revenue overperformance during the year into new expenditure. We regard this as an important change in the philosophy of public finance management, and higher revenues resulting from inflation, higher nominal GDP or improved collection should not automatically generate permanent new expenditure commitments.
We also support the introduction of ex-ante assessment and prioritisation of nationally financed public investments. The capital programme should be determined on the basis of economic returns, connectivity, productivity and the impact on potential economic growth, rather than as an aggregation of political and departmental investment demands.
9. FISCAL COUNCIL ACT
BICA supports strengthening the institutional independence and analytical functions of the Fiscal Council. Independent assessment of macroeconomic forecasts and budget assumptions is particularly necessary in an environment of highly dynamic revenues and expenditures and during the transition to the new European fiscal framework.
We support higher professional standards for members of the Fiscal Council, greater transparency in its activities and institutionalised access to information. An independent fiscal institution should have the genuine capacity to assess not only formal compliance with fiscal rules, but also the quality of macroeconomic assumptions, the sustainability of revenue projections and the permanent nature of expenditure commitments.
BICA assesses the presented package as predominantly positive with regard to a number of structural and administrative changes, while at the same time identifying several proposals that create significant economic and regulatory risks and should be reconsidered.
For BICA, a stable, predictable and competitive tax system is an asset for the Bulgarian economy and should not be put at risk through short-term measures aimed at covering current budget deficits. Sustainable public finances are achieved through economic growth, high employment, efficient public expenditure, reducing the undeclared economy and improving tax collection, rather than through the continuous expansion of the tax burden on compliant taxpayers.
BICA remains available for expert dialogue with the Ministry of Finance and for participation in discussions on the specific provisions, with a view to finding solutions that simultaneously ensure fiscal sustainability, the competitiveness of the Bulgarian economy and the predictability of the business environment.
