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5.1. Tax Base for Resident Entities

Resident companies are taxed on their worldwide income, unless specifically exempt. The tax base is the accounting profit as adjusted for tax. Expenses incurred in the production of income are deductible. There is, however, a specific 10% tax on (deductible) entertainment and representation costs as well as company car expenses.

Dividends

Inter-corporate dividends received from an associated company resident either in Bulgaria or in an EU/EEA Member State are excluded from the taxable base. There is no minimum holding percentage or holding duration for the exemption to apply. However, the exemption does not apply with respect to dividends from special-purpose investment companies (which are exempt from corporate tax in Bulgaria), and, from 2016, is available with respect to EU/EEA dividends only on the condition that the distribution is not deductible to the payer or in any way reduces the taxable income of the payer.

Capital Gains

Capital gains on the disposal of government bonds and listed shares are exempt to the extent realized on a regulated market, whether in Bulgaria or an EU/EEA Member State. Effective 1 January 2021, capital gains on the disposal of listed shares on markets equivalent to regulated markets outside the EU/EEA are also exempt.