The proposed tax amendments aim to support industrial production by allowing businesses to accelerate tax depreciation on qualifying machinery, equipment, computers and software.
Bulgaria’s National Assembly (parliament) is considering a Draft Law on Amendments and Supplements to the Corporate Income Taxation Act, which is meant to stimulate economic growth and industrial production by encouraging businesses to reinvest their profits into machinery and production equipment.
The draft law, Ref. No. 52-654-01-132, was submitted on 10 September 2026 by Members of Parliament including Martin Dimitrov, Bozhidar Bozhanov, Ivaylo Mirchev, Atanas Slavov and Elisaveta Belobradova, among others.
Under the proposal, the maximum annual tax depreciation rate for Category II assets, covering machinery, production equipment and apparatus, would increase from 30% to 100%.
The maximum rate for Category IV assets, covering computers, peripheral equipment and software, would also increase from 50% to 100%.
New category for mobile devices
The draft would remove mobile phones from Category IV and establish a new Category VIII, “Mobile Devices”.
Assets classified under the new category would have a maximum annual tax depreciation rate of 50%, meaning mobile phones would not qualify for the proposed 100% accelerated depreciation rate applicable to computers and software.
Automobiles and passenger cars would also remain outside the scope of the accelerated depreciation mechanism.
Gradual implementation
The proposed amendments would introduce a transitional phase between 2027 and 2029 before the full regime took effect.
For Category II assets, the maximum annual depreciation rates would rise to 40% in 2027, 60% in 2028 and 80% in 2029.
For Category IV assets, the corresponding rates would be 60% in 2027, 70% in 2028 and 80% in 2029.
The full 100% maximum depreciation rate would apply from 1 January 2030.
The proposal would distinguish between tax and financial accounting treatment. Accelerated depreciation would apply for tax purposes, while the assets would continue to be depreciated under normal financial accounting rules, including IFRS or national accounting standards.
Proposal modelled on Estonia
The explanatory materials had referred to the Estonian corporate tax model, including Estonia’s 2000 tax reform. Under that approach, profits retained and reinvested in a business are exempt from corporate tax, with taxation arising when profits are distributed, including as dividends.
The Bulgarian proposal sought to provide a similar investment incentive by allowing companies to reduce their taxable profit through accelerated tax depreciation when profits were reinvested in qualifying machinery and production equipment.
The bill’s policy rationale had also cited the need to address declines in Bulgarian industrial production and support the country’s convergence towards average EU income levels.
Fiscal and economic effects
The regulatory impact assessment had identified Bulgarian businesses and private investors undertaking expansion or greenfield projects as the principal affected stakeholders.
The proposal was expected to reduce corporate tax revenues temporarily during the first year as companies made greater use of accelerated depreciation. The assessment indicated that part of this effect could be offset by higher VAT revenues resulting from increased purchases of machinery and other capital equipment.
From the third year onwards, the assessment projected a net-positive effect on total state tax revenues, based on expected economic growth and expansion of the tax base.
The proposed measures would not require administrative reorganisation or the creation of new state agencies.
The assessment also projected that stronger economic growth could contribute to real wage growth, which it linked to improved conditions for domestic demographic stability.
