Is there a “simplified tax regime” in Bulgaria?

Bulgaria has what is known as the patent tax, provided for by the Закон за местните данъци и такси (Art. 61z–61p). This is a special regime under which the entrepreneur pays a fixed amount per year instead of profit tax. However, it is not available to everyone and applies only to strictly defined types of activity.

The patent regime is aimed at small, local businesses and household services. The list includes hairdressing and cosmetic services, clothing repair, small-scale retail, photography services, and grooming — the care of pets. The general logic is simple: this is activity where the entrepreneur works independently, without a complex structure and with end customers, rather than with large companies or contracts.

The main feature of the patent is that the tax does not depend on income. Its amount is set by the municipality and varies depending on the city and the type of activity. For example, for grooming services the annual patent tax in most cases is roughly in the range of 100–300 euros. Per month that is only about 10–25 euros. But it is important to understand that payments are not limited to this. Regardless of the regime, an entrepreneur is obliged to pay social and health contributions, which amount to approximately 150–180 euros per month on the minimum base.

If you look at the real burden, it becomes clear why the patent is popular. Suppose a groomer earns about 3000 euros per month. Working under the patent, their total mandatory payment will be approximately 160–200 euros per month, including social contributions. This gives an effective tax burden of around 5–7%. And it makes no difference whether the income is 1500 euros or 4000 euros — the patent itself remains fixed.

By comparison, if the same business is run through a company, for example an EOOD (single-member LLC), the situation changes. With minimal expenses almost all income turns into profit, on which 10% corporate tax is paid first, and then 5% dividend tax. As a result, the combined burden can reach 18–20% and higher. This makes the patent especially advantageous precisely in areas with high margins and low expenses.

However, this regime also has limitations. It is not suitable for a scalable business, for working with legal entities, or for activity involving manufacturing and large orders. In addition, the list of permitted activities is closed: if a service is not specified in the law, the patent cannot be applied. It is also important to bear in mind that the tax is paid even in the absence of income — it is a fixed obligation.

Ultimately, the patent tax in Bulgaria can be regarded as an equivalent of a simplified system, but only for a narrow circle of entrepreneurs. It is ideal for service professionals and small businesses at the start, allowing them to pay minimal taxes and keep accounting simple. But as income grows and the activity develops, the entrepreneur almost always has to move to other forms, where there are more opportunities, but the tax burden also becomes more flexible and dependent on actual financial results.