March 16, 2026 - After years of pressure from the business community, Bulgaria finally introduces tax breaks for companies investing in research and development. MPs approved changes to the Corporate Income Tax Act at the end of last week, which raises both expectations and questions about the future.
What does the new law provide?
According to the new rules, companies will be able to recognize up to 25% of their research and development (R&D) expenses for tax purposes. This covers current expenses, but also cases where intangible assets are created, notes the Association for Innovation, Business Services and Technologies (AIBEST).
"This reduces the real cost of innovation, making investments in R&D more predictable for businesses. In the medium term, we expect growth in private investment, the opening of new jobs for engineers and the attraction of international technology companies," commented Natalia Georgieva, Executive Director of AIBEST, to Money.bg.
Why is this important for the sector?
For the digital and business services sector in Bulgaria, such a measure is key. With the increase in the share of R&D centers, an opportunity is opened to move towards activities with higher added value, which means a step forward from the ordinary outsourcing of processes.
It is not surprising that the latest AIBEST report shows significantly higher revenue growth in R&D centers compared to companies offering business or IT services. Among the big players in this field are VMWare, SAP Labs, DXC, Experian and Chaos Software.
The numbers speak
In 2024, the turnover in the R&D sector in Bulgaria for the first time exceeded 1 billion euros, and the forecasts for the following year are for nearly 1.7 billion euros. Over 14 thousand people are employed in these companies, and their number is expected to continue to grow.
"The law creates conditions for R&D to develop as a sustainable element of the economy, and not as something isolated," emphasized Yordan Ginev, chairman of AIBEST.
How are the neighbors doing?
Natalia Georgieva is categorical: the changes in the law are only "the beginning of a process of catching up with regional competition".
In Central and Southeastern Europe, much more aggressive policies are already being applied to stimulate research and development. Greece, for example, offers a 200% tax credit for R&D expenses, plus a regime that reduces the taxation of income from intellectual property. Romania is not lagging behind, providing a 150% additional tax deduction for R&D expenses and relief for specialists in this area.
This explains why large technology companies are choosing our southern neighbor for their investments in the region, including Microsoft, which is creating a development center there, focused on the automation of robotic processes.
The global picture
At a global level, tax incentives for research and development are widely used - they are applied in 33 of 38 developed economies within the OECD.
"In order for Bulgaria to be competitive in attracting new R&D centers, a more extensive and consistent policy to promote innovation, intellectual property and highly qualified personnel will be needed," believes Natalia Georgieva.
What follows? Will the new tax incentives be enough to attract large investments and retain talent? Is this enough, or are we yet to see the true potential of the Bulgarian R&D sector?