Germany
Bulgaria
Bulgaria taxes company profit at 10%, Germany at about 30% with trade tax. For a German resident owner, that gap triggers the first German question: the controlled foreign company rules of the Aussensteuergesetz (AStG). Unlike most low-tax countries, Bulgaria is in the EU, and that changes the answer.
This guide covers the 2010 treaty, the AStG test, dividends to a GmbH and to an individual, and when the structure works.
What Bulgaria asks of a German founder
- No visa, no permit: a German citizen can own, manage and live in Bulgaria.
- One owner and one manager, EUR 1 of capital; a German GmbH can be the owner.
- Apostilled documents with certified Bulgarian translations, including the GmbH's register extract.
- A capital account at a Bulgarian bank before registration.
The steps are in how to register a company in Bulgaria.
The 2010 treaty
| Income from Bulgaria to Germany | Treaty ceiling | Bulgarian domestic rate | What applies |
|---|---|---|---|
| Dividends to a company holding 10% or more | 5% | 0% to EU companies | 0% |
| Dividends to an individual | 15% | 5% | 5% |
| Interest | 5% | 10% | 5% |
| Royalties | 5% | 10% | 5% |
Relief in Germany: dividends paid to a German company holding at least 10% directly are exempt under Article 22; other income is relieved by credit.
Tax estimate
How much tax could you save?Three questions, then the yearly difference between your current rate and three jurisdictions.
The AStG test: low taxed, but in the EU
- 11. ControlMore than half of votes, capital or profit rights
- 22. Tax below 15%?Yes: Bulgaria taxes at 10%
- 33. Passive income?Outside the active list: licensing, financing, services routed through German related parties
- 44. Substance defenceOpen to EU companies with a real economic activity in Bulgaria
- 55. OtherwisePassive income attributed and taxed in Germany
- The rate test fails: 10% is below the 15% line, so Bulgaria is low taxed.
- Active income is never attributed: production, genuine trading and services the Bulgarian company performs with its own people.
- The substance defence applies to EU and EEA companies: if the EOOD carries on a substantive economic activity in Bulgaria, with staff, premises and equipment, its income is not attributed even where it is passive.
- The de minimis: passive income up to one third of total income and no more than EUR 100,000 is disregarded.
| Bulgarian company profile | Rate test | Income or substance | Outcome |
|---|---|---|---|
| Software house with Sofia staff | Low taxed | Active, and substance | Not attributed |
| Invoicing company for the German founder's work | Low taxed | Passive, no substance | Attributed |
| IP holding with no staff | Low taxed | Passive, no substance | Attributed |
Dividends to a German GmbH
| On 100 of Bulgarian profit | Amount |
|---|---|
| Bulgarian corporate tax, 10% | 10.00 |
| Dividend paid | 90.00 |
| Bulgarian withholding to an EU company | 0.00 |
| German corporation tax, 15% on 5% of 90 | 0.68 |
| Total, before trade tax and solidarity surcharge | 10.68 |
- A 10% holding at the start of the calendar year is required for section 8b, 15% to keep the dividend out of trade tax.
- German corporation tax is 15% up to 2027, then falls one point a year to 10% from 2032.
Dividends to a founder personally
A German resident individual pays the 25% flat tax and the solidarity surcharge on the dividend, with a credit for the Bulgarian 5%: on 100 of profit, about 33.5 in total before church tax. That is close to what a German GmbH owner pays when taking dividends at home.
Running it from Germany
A Bulgarian company whose management is in Germany is a German resident company for tax. And a German founder working for it from home can create a German permanent establishment. Keep decisions, the manager and the books in Bulgaria; see tax for non-residents.
If you move to Bulgaria
A founder who gives up German residence leaves the AStG behind for new income, but German exit taxation of shareholdings and the extended limited tax liability can follow. Plan it with a German adviser; living in Bulgaria is covered in non-resident founders.
The bottom line
For a German owner, Bulgaria's 10% is low taxed under the AStG, but an EU company with real staff and premises in Bulgaria can rely on the substance defence. Held through a GmbH, the total tax on distributed profit stays near 10.7 on 100; held personally, the flat tax brings it to about 33.5. A Bulgarian invoicing shell for work done in Germany is attributed back.
corpsec registers the EOOD, including for a German GmbH owner, and provides the registered address. See the Bulgaria formation service, or read how Bulgarian corporate tax works.
Frequently asked questions
Is there a tax treaty between Germany and Bulgaria?
Yes, signed in Berlin on 25 January 2010 and amended by a protocol of 21 July 2022. It caps dividends at 5% or 15%, and interest and royalties at 5%.
Is a Bulgarian company low taxed under the AStG?
Yes. Its 10% rate is below the 15% line. As an EU company, it can still avoid attribution if it carries on a substantive economic activity in Bulgaria.
How are Bulgarian dividends taxed for a German GmbH?
Bulgaria withholds nothing for an EU company, and section 8b leaves 95% of the dividend out of German corporation tax. The total on 100 of profit is about 10.7 before trade tax.
How are Bulgarian dividends taxed for a German individual?
At the 25% flat tax plus solidarity surcharge, with a credit for the Bulgarian 5%. On 100 of profit, about 33.5 in total.
Can I run a Bulgarian company from Germany?
You can, but if it is managed from Germany it becomes German resident for tax. Keep management in Bulgaria.
Sources
- Bundesrat, Drucksache 325/10: Germany and Bulgaria tax treaty signed in Berlin on 25 January 2010; dividends 5% or 15% (Article 10), interest 5% (Article 11), royalties 5% (Article 12), exemption of dividends to a German company holding 10% (Article 22)
- DATEV Magazin, 17 May 2023: protocol of 21 July 2022 amending the Germany and Bulgaria treaty to implement the BEPS project
- Aussensteuergesetz, section 8: active income, the substance defence for EU and EEA companies, and low taxation below 15%
- Koerperschaftsteuergesetz, section 8b: dividends left out of a company's income, 5% treated as non-deductible expenses, 10% minimum holding
- Deloitte, Bulgaria Highlights 2026: 10% corporate income tax, 5% dividend withholding for individuals, 0% for EU and EEA companies
Official, read on 26 October 2026: the Germany and Bulgaria treaty of 25 January 2010 in the Bundesrat bill (Drucksache 325/10). Read on 5 October 2026 for this series: the Aussensteuergesetz, Koerperschaftsteuergesetz and Einkommensteuergesetz on gesetze-im-internet.de. Secondary: the 2022 protocol as reported by DATEV Magazin, whose changes were not read. Our calculations exclude trade tax, church tax and, for the GmbH, the solidarity surcharge; the 25% flat tax and its credit for foreign tax follow the Income Tax Act. Whether a given Bulgarian company meets the substance defence is a question of fact for your German adviser. This is not legal or tax advice.