BULGARIA Law and Practice Contributed by: Todor Banchev Todorov and Victoriya Grishina, Banchev and Grishina Law Firm
3.6 Other Income In addition to the main income categories, Bulgar - ian tax law provides specific taxation rules for certain types of income that are not expressly addressed in the OECD Model Convention. This includes, in par - ticular: • income from prizes and awards; • income from games of chance; and • certain one-off or ancillary income streams, which may be subject to taxation. Bulgarian law also applies special regimes for income from agriculture and forestry, as well as simplified taxation mechanisms for sole traders and small-scale activities, which deviate from the standard profit- based taxation approach. These rules are primarily driven by domestic policy considerations and operate independently of treaty-based income classification. 4. OECD/G20 Global Tax Reform 4.1 Pillar One – Amount B Bulgaria has not adopted specific legislation imple - menting Amount B of Pillar One and has not formally introduced a domestic simplified transfer pricing safe harbour for baseline marketing and distribution activi - ties, although some provisions have a similar practi - cal effect. At this stage, the Bulgarian tax authorities continue to apply the general arm’s length principle under domestic transfer pricing rules and applicable tax treaties. Any future implementation of Amount B is expected to closely follow the OECD framework, with - out material local deviations, but no formal legislative or administrative steps have been announced to date. 4.2 Pillar One – Amount A Bulgaria supports Pillar One Amount A as part of the broader OECD/G20 Inclusive Framework, which aims to reallocate taxing rights in the digitalised economy. However, Amount A has not been implemented into Bulgarian domestic law, as its application depends on the entry into force of a multilateral convention at the international level. In line with the position of most EU Member States, Bulgaria’s approach remains con - ditional and coordinated, pending sufficient interna - tional consensus and legal certainty regarding scope,
administration and dispute resolution. Until such time, the taxation of highly digitalised and consumer-facing businesses continues to be governed by existing trea - ties and domestic tax rules. 4.3 Pillar Two Bulgaria has implemented the global minimum tax under Pillar Two through the transposition of Directive (EU) 2022/2523, with effect from 1st January 2024. The rules apply to multinational and large domestic groups with consolidated annual revenue of at least EUR 750 million. The Bulgarian regime operates pri - marily through a qualified domestic minimum top- up tax, ensuring that profits attributable to Bulgaria are taxed at an effective minimum rate of 15%, not - withstanding the country’s standard 10% corporate income tax rate. 4.4 Specific Features or Deviations of Pillar Two Bulgarian implementation of the global minimum tax closely follows the OECD Pillar Two framework, as transposed through Directive (EU) 2022/2523, and does not introduce material domestic deviations. The rules align with the OECD Model Rules in terms of scope, effective tax rate calculation, and top-up tax mechanisms. Any differences are limited to technical and administrative aspects required by EU harmonisa - tion, rather than substantive policy departures. As a result, in-scope groups can generally rely on OECD- compliant Pillar Two analyses when assessing their Bulgarian tax position. 4.5 Digital Services Tax Bulgaria has not introduced a specific tax on digital products or digital services, such as a digital services tax or a streaming services tax. The taxation of digital activities is therefore governed by general corporate income tax and VAT rules, as well as withholding tax requirements, applicable directives (most notably the Interest and Royalty Directive), and double tax trea - ties. In line with the common EU approach, Bulgaria has refrained from adopting unilateral digital taxes, pending multilateral solutions at the OECD and EU levels, including the ongoing discussions around Pil - lar One.
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