How do R&D tax breaks work for companies in Bulgaria?

Bulgaria offers tax incentives for companies conducting research and development activities, including deductions for R&D personnel costs, materials, equipment, and contracted research services. Combined with Bulgaria's already low 10% corporate tax rate, these R&D deductions make Bulgaria one of the most tax-efficient locations for technology development in the EU. Companies must maintain proper documentation of qualifying R&D activities and expenditures.

What documentation is required to claim R&D tax breaks in Bulgaria?

Companies must maintain detailed records of R&D projects including project descriptions demonstrating technological uncertainty and advancement, time sheets for R&D personnel, invoices for materials and contracted services, and evidence of systematic investigation. The documentation should clearly distinguish R&D activities from routine product development. Annual reporting to the Bulgarian tax authorities with supporting documentation is required when claiming the deduction.

Bulgaria R&D Tax Breaks 2026

Program Overview

Bulgaria is launching comprehensive R&D tax breaks in 2026, marking a strategic shift in the country's economic model toward innovation-driven growth. Announced by Deputy Prime Minister and Minister of Innovation and Growth Tomislav Donchev at a leading innovation summit in Sofia, these incentives — specifically an additional 25% deduction of R&D expenses from taxable income, adopted by the National Assembly — represent Bulgaria's commitment to reinforcing national competitiveness through research and development support.

Strategic Context

Closing the EU Gap

According to OECD data from 2023, Bulgaria stands out as one of the few EU countries that currently provides no fiscal incentives for research and development. The 2026 R&D tax breaks directly address this gap, bringing Bulgaria in line with European peers and creating a more competitive environment for innovation-driven companies.

Reinforcing Competitiveness

The Deputy Prime Minister characterized these incentives as a strategic step to reinforce Bulgaria's competitiveness in the global innovation economy. Combined with Bulgaria's existing 10% corporate tax rate—one of the lowest in the European Union—the new R&D incentives create a compelling value proposition for technology companies and research-intensive businesses.

Tax Incentive Structure

R&D Tax Deductions

The program will provide tax deductions on qualifying R&D expenditure. While specific deduction rates and structures are being finalized for the 2026 launch, the incentives are designed to reduce the after-tax cost of conducting research and development in Bulgaria, making it more financially viable for companies to invest in innovation.

Stacking with Low Corporate Tax

Companies will benefit from stacking R&D tax deductions on top of Bulgaria's already favorable 10% corporate income tax rate. This combination creates one of Europe's most attractive fiscal environments for research-intensive businesses, particularly in high-tech industries.

Infrastructure Support Initiatives

Access to Research Equipment

Beyond tax incentives, Minister Donchev announced reforms to increase corporate access to laboratory resources. Millions of euros worth of digital research equipment, previously housed largely in Centers of Competence and Centers of Excellence for academic use, will be made available to business entities. This dramatically lowers the capital investment barrier for R&D-intensive startups and SMEs.

Public-Private Research Collaboration

Opening access to state-of-the-art research facilities creates opportunities for public-private collaboration, enabling companies to leverage academic research infrastructure without major capital outlays. This is particularly valuable for early-stage technology companies and those conducting cutting-edge research requiring specialized equipment.

Complementary Government Support

Investment Promotion Act Benefits

The Investment Promotion Act provides additional incentives for companies investing in priority sectors, including high-tech industries. Eligible companies can access tax breaks, grants, and simplified administrative procedures beyond the new R&D tax incentives, creating a comprehensive support ecosystem.

Startup Visa Program

Bulgaria offers a startup visa program allowing foreign entrepreneurs to obtain residency permits in the country. This facilitates international talent attraction and enables global founders to establish R&D operations in Bulgaria while benefiting from the new tax incentives.

Eligibility Requirements

Qualifying R&D Activities

Companies conducting research and development activities in Bulgaria will be eligible for the tax incentives. Final regulations defining qualifying R&D activities, documentation requirements, and claim procedures will be published before the 2026 launch.

Priority Sectors

While the incentives are expected to be broadly available across industries, priority sectors under the Investment Promotion Act include high-tech industries, software development, biotechnology, advanced manufacturing, and other innovation-intensive fields.

2026 Timeline and Implementation

The R&D tax breaks are scheduled to launch in 2026. Detailed regulations, including specific deduction rates, eligible expenditure categories, and claim procedures, are currently being finalized by the Ministry of Innovation and Growth. Companies planning to benefit from these incentives should monitor official government announcements for implementation details.

Application Strategy

Step 1: Begin documenting R&D activities and expenditures now to establish a baseline for 2026 claims.

Step 2: Monitor Ministry of Innovation and Growth announcements for detailed regulations and claim procedures.

Step 3: Explore access to government research facilities if your R&D activities could benefit from specialized equipment.

Step 4: Consider stacking R&D incentives with Investment Promotion Act benefits if operating in a priority sector.

Key Contacts

Ministry of Innovation and Growth: https://www.mig.government.bg/ministerstvo/za-ministerstvoto/?lang=en

For the latest updates on R&D tax break implementation, regulations, and application procedures, visit the Ministry's official website or contact their business support division directly.