Bulgaria's National Assembly enacted the State Budget Act for 2026 on 31 July 2026, establishing family tax deductions up to EUR 9,203.25 annually, phasing tobacco excise increases through January 2028, creating a 6,000 EUR annual licensing fee for gambling affiliate operators plus 10% on result-linked commissions, exempting municipal water infrastructure from VAT, and lowering public contract reporting thresholds to EUR 5,000.

RF Report

Bulgaria’s National Assembly has enacted the State Budget Act for 2026, setting the country’s strategic financial direction.

It was passed by the National Assembly on 24 July 2026, approved by the President on 29 July 2026, and officially published in the State Gazette on 31 July 2026.

Corporate taxes and transfer pricing updates

The 2026 budget maintains the general corporate income tax rates, focusing instead on specific deductions and compliance checks. Furthermore, the Act contains no amendments or updates to transfer pricing regulations, meaning existing transfer pricing rules remain unchanged for 2026.

Personal income tax and child relief

The Act provides generous tax reliefs for families, which apply to the tax year of 2026, with the general Act entering into force on 1 January 2026.

Annual deductions for families 

  • Parents of one minor child can deduct EUR 3,067.75 EUR from their annual tax base.
  • For two minor children, the deduction is set at EUR 6,135.50 EUR.
  • Families with three or more minor children can deduct up to EUR 9,203.25 EUR.
  • A deduction of EUR 6,135.50 is allowed for a child with a disability of 50% or more.

Advance monthly reductions through employers

The Act allows parents to claim these reliefs monthly through their employers, reducing their monthly tax base:

  • EUR 255.65 monthly for one minor child.
  • EUR 511.29 monthly for two minor children.
  • EUR 766.94 monthly for three or more minor children.
  • EUR 511.29 monthly for a disabled child.

Quarterly adjustments for self-employed persons

For quarterly advance tax payments (for Q1-Q3), self-employed individuals can reduce their quarterly tax bases by:

  • EUR 76.69 for one minor child.
  • EUR 153.39 for two minor children.
  • EUR 230.08 for three or more minor children.
  • EUR 153.39 for a disabled child.

Value Added Tax (VAT) structural realignments

The Act modifies the VAT regime with effect from 1 August 2026, specifically targeting municipal water infrastructure.

Water infrastructure exemption

Under Article 10b (4), water utility (ViK) operators providing construction, reconstruction, or extension services of public water and sewerage systems to municipalities or state organs are not considered to be making a “delivery” (non-delivery status), provided the projects are financed under the “Environment” 2021-2027 Program. This applies to services funded by the program or from state budget resources.

Excise duties and step-by-step tobacco rate increases

The Act outlines a multi-year schedule of tax increases starting on 1 August 2026, with further hikes on 1 March 2027 and 1 January 2028.

  • Starting 1 August 2026, conventional cigarettes will face a specific excise of EUR 77 per 1,000 cigarettes alongside a 21% proportional duty on retail price, with a minimum floor of EUR 120 per 1,000 cigarettes. These figures will climb to EUR 82 and 20.5% (minimum EUR 126) on 1 March 2027, then EUR 87 and 20% (minimum EUR 132) on 1 January 2028.
  • Heated tobacco products carry steeper rates: EUR 225 per kilogram from 1 August 2026, rising to EUR 235 on 1 March 2027 and EUR 251 on 1 January 2028.
  • Smoking tobacco starts at EUR 130 per kilogram and reaches EUR 146 by January 2028.
  • Cigars and cigarillos move from EUR 223 per 1,000 pieces to EUR 246. E-cigarette liquid increases from EUR 0.28 per millilitre to EUR 0.34, while nicotine substitutes under 20 mg/unit go from EUR 20 to EUR 28 per kilogram, and those over 20 mg/unit rise from EUR 64 to EUR 73 per kilogram.

Local fees, property taxes, and customs duties

Property tax 

  • No general property tax rate changes are introduced. Instead, municipal mayors are ordered to take urgent action to collect outstanding debts for property tax, vehicle tax, and household waste fees.
  • Mayors must issue tax assessments or debt determination acts for debts exceeding EUR 375 per type of tax for past years. Reports on these collection activities must be sent quarterly to the Ministry of Finance.

New Taxes and licensing for gambling affiliate operators

The Act introduces a groundbreaking regulatory and tax regime for gambling “affiliate operators” under the Gambling Act, effective 1 August 2026.

Under amendments to the Gambling Act, affiliate operators—entities that promote gambling games for result-linked commission fees—must obtain a license requiring a two-part state fee. The fixed component is 6,000 EUR annually.  The variable component is 10% of commissions tied to measurable outcomes like player acquisitions, deposits, or bets. This definition excludes standard advertising agencies where payment isn’t performance-based.

The regime includes an anti-avoidance provision: if operators use simulated transactions to conceal result-linked commissions, the variable fee doubles to 20% of the hidden amount.

Special income tax exemption

Income earned by affiliate operators from commissions on which the variable fee has been paid is not recognised for tax purposes under the Corporate Income Tax Act, and represents non-taxable income under the Personal Income Tax Act. Corresponding expenses are likewise unrecognised for corporate tax purposes. This tax-exempt status is denied if the transaction is determined to be sham or simulated. Existing operators as of 1 August 2026 must apply for a license by 15 August 2026.

Reporting thresholds and public contract notifications

To prevent tax evasion and improve transparency, the Act revises reporting rules under the Tax and Social Insurance Procedure Code (DOIPC), entering into force on 1 September 2026.

Lower reporting thresholds

  • Public enterprises, state bodies, and municipalities must notify the National Revenue Agency (NRA) of any contract or upcoming payment of EUR 5,000 or more (previously 10,000 BGN).
  • This notification rule also applies to multiple contracts signed with the same person if their combined value is equal to or exceeds EUR 5,000.

Judgments and sanctions for non-compliance

Courts and execution officials must notify the National Revenue Agency of judgment payments or execution writs totalling EUR 500 or more. Notifications are also required for amounts as low as EUR 50 if they’re part of a larger debt that reaches or exceeds EUR 500.

Failure to notify the NRA triggers a fine of EUR 500 to 1,000, doubling to EUR 1,500 to 2,500 for repeat violations. Making payments without following these rules carries a EUR 1,000 to 2,000 fine, escalating to EUR 2,000 to 4,000 on subsequent offences.