Bulgaria sticks to 20% VAT rate and limited reduced rates

Fri 14th Feb 2014

The Bulgarian government has confirmed that it will retain its 20% VAT rate for the foreseeable future as part of its flat tax policy.

Bulgarian flat rate tax policy

Bulgaria has one of the lowest VAT rate in the Central & Eastern European region.  Hungary raised its VAT rate from 20% to 27% by 2012 during the financial crisis.  Romania has been forced to put its rate up to 24% in 2011.  The average EU VAT rate is over 21%.

The Bulgarian VAT rate is a universal VAT rate, meaning there are very few exemptions or use of the reduced VAT rates.  Economists believe this gives a more stable and less distorting tax regime.  The only use of a reduced VAT rate is for hotel accommodation at 9%.

The low Bulgarian VAT rate matches Bulgaria’s corporate tax rate of 10%.  This is the lowest in the EU – Ireland is next with 12.5%.