Bulgaria's 33% Windfall Tax: What It Means for Banks, Insurers and Retailers in 2027

Bulgaria plans a one-off 33% tax on the 2027 "excess profits" of six sectors. Banks and insurers are the most discussed sectors. Food retail chains with at least five outlets and telecoms operators are also in scope. Currency exchange bureaus and payday lenders complete the list, according to BTA.

Only 2027 profit above a company's 2020-2025 average plus 20% is taxed. The Finance Ministry books an indicative €800 million from the measure in its Bulgaria 2027 draft budgetary plan, sent to Brussels on 15 October 2026 (BTA). Parliament still has to pass the law. The European Commission gives its opinion on the plan by 30 November 2026.

The information in this article is provided for educational purposes only and does not constitute financial advice. Consult a financial advisor before making investment decisions.

The debate moved again on 19 October. Deputy Prime Minister Ivo Hristov said on BNT that the government will try to keep the deficit within 3%, with final numbers set in parliament (Novinite). On the same day, MP Martin Dimitrov called a deficit of about 5% in 2027 "dangerous" once the one-off tax revenue is stripped out (Fakti).

What Is the Bulgaria Windfall Tax?

The Bulgaria windfall tax is a one-off levy on part of a company's 2027 taxable profit. The government calls it a solidarity measure. Its critics, including the Association of Banks in Bulgaria, say it breaches equal treatment (BTA). The table below collects the design as it stood at the draft budget stage.

Source: CMS, Zemedeleca, BTA. Details may change in parliament.

For market watchers, one of the most visible listed exposures sits outside Sofia. KBC Group owns UBB and the insurer DZI, and calls Bulgaria one of its core markets (KBC). The chart below shows KBC stock on Euronext Brussels.

How Does Bulgaria's Windfall Tax Work?

The mechanism has three moving parts. A historical threshold comes first. Then comes the 33% charge on the excess, followed by a partial offset that the final budget plan added.

The Bulgaria windfall tax threshold

Each company calculates its own average taxable profit for 2020-2025. A 20% uplift is added as a "normal" return. Only 2027 profit above that line is taxed at 33%, and nothing is due if the result is negative (Fakti).

The base years matter. They include the pandemic year of 2020, when bank profits fell sharply (Novinite). They also include years of high inflation. Zemedeleca's analysis of the plan looks at a company whose profit simply grew with the nominal economy. It estimates that about a quarter of its 2027 profit could sit above the threshold (Zemedeleca).

A Worked Example

The numbers below are illustrative. They show the arithmetic only and do not describe any real company.

Illustrative calculation based on the design described by Fakti and Zemedeleca. The figures are for illustrative purposes only.

The Bulgaria windfall tax 30% offset

The draft sent to Brussels added a relief. Companies keep 30% of the tax if they use it for mandatory capital reserves. Companies without such requirements must invest it in new fixed assets in their core business (Zemedeleca). The idea resembles Italy's 2023 option to move a multiple of the levy into reserves (A&O Shearman).

The Bulgaria windfall tax 90% advance

At least 90% of the tax is payable in advance. The plan sets 30 November 2027 as the deadline for that advance (Zemedeleca). The bill text may still change this date.

An Anti-Avoidance Check

The draft compares taxable profit with earnings before interest and taxes. A large gap triggers an adjustment. Deputy Finance Minister Lyudmila Petkova said economically justified cuts count in a company's favour. She gave lower prices or fees as examples (BTA).

Who Pays the Excess Profits Tax?

The Finance Ministry says the six sectors in scope hold more than 60% of excess profits in the economy. Agriculture and transport were left out because, in the ministry's view, they reinvest their gains (BTA).

Source: BTA, BTA, Club Z. Qualitative summary.

Why Bulgaria Wants the Tax: The 2027 Budget

The tax is mainly about the deficit. Bulgaria joined the euro area on 1 January 2026, and the EU Council opened an Bulgaria excessive deficit procedure on 10 July 2026 (BTA). The country must correct the deficit by 2029 (BTA).

The Bulgaria Budget 2027 in Numbers

The plan targets a deficit of 4.3% of GDP in 2027. That is down from about 5.0% expected for 2026. Debt is projected to rise to about 33.3% of GDP.

Source: Draft Budgetary Plan 2027 tables as reported by Zemedeleca and BTA. 2025 data are preliminary; 2026 and 2027 are projections. Forecasts are not a reliable indicator of future performance.

Where the New Revenue Comes From

The windfall tax is the single largest measure. It accounts for about 41% of new revenue measures worth €1,958.5 million.

Source: Zemedeleca, based on the Draft Budgetary Plan 2027. Ministry estimates. Forecasts are not a reliable indicator of future performance.

Other estimates of the tax's yield differ. Fiscal Council chair Simeon Djankov said a temporary bank windfall tax alone could raise more than €1 billion (BTA). Under unchanged policies, with none of the new measures, the plan shows a 2027 deficit of 7.4% of GDP (Zemedeleca).

The One-Off Question in Brussels

This is a technical point with real weight. The plan's text calls the tax one-off. Its measures table marks it as not one-off (Zemedeleca). One-off revenue does not count in EU net expenditure rules.

Source: Zemedeleca, based on the Draft Budgetary Plan 2027. Forecasts are not a reliable indicator of future performance.

In both cases, 2028 starts with €800 million less revenue. That gap would need another tax or lower spending if the deficit path holds.

Banks: The Core of the Tax Base

Banks are the sector most discussed. Their profits are large and easy to measure. Most big lenders also belong to foreign groups, which the government says send profits abroad as dividends (BTA).

Bulgaria Banking System Profit

Source: Bulgarian National Bank data via BTA, 30 September 2026. Past performance is not a reliable indicator of future results.

Longer-run figures show why the base years are contested. Sector profit was €0.82 billion in 2019. It fell to €0.42 billion in 2020, roughly half the 2019 level, and reached €1.85 billion in 2025, according to the Association of Banks in Bulgaria (Novinite).

Source: Association of Banks in Bulgaria data via Novinite, 14 October 2026. Percentage changes calculated from these figures. Past performance is not a reliable indicator of future results.

The Finance Ministry cites much larger growth. It says bank profits rose 588% over 2020-2025 and 320% between 2022 and 2023 (Fakti). The basis of the 588% figure has not been published, so it is best read as the government's claim.

What the Bulgarian National Bank Warns

BNB Governor Dimitar Radev said the tax is in essence a higher tax on banking. He noted that profit is the main internal source of bank capital (The Sofia Globe).

He listed possible reactions. Lower dividends would have the most limited economic effect. Higher loan pricing or tighter credit standards would pass part of the burden to customers. He also pointed to Hungary, where a bank tax introduced as temporary was continued (The Sofia Globe).

Finance Minister Galab Donev replied that this was the Governor's position, not a decision of the BNB Governing Council. He said he does not expect the tax to push up lending rates (BTA).

What the Association of Banks in Bulgaria Argues

The ABB wants the proposal rejected. It says the tax breaches equal treatment under Article 19(2) of the Constitution. It also calls the measure inconsistent with EU law (BTA).

• The ABB says Bulgarian lending rates are among the lowest in Europe.
• It reports a mortgage APRC of 2.75% at the end of June 2026, the lowest in the euro area.
• It says non-interest income is 19.5% of bank revenue in Bulgaria against 28.6% across the EU and EEA.
• It says banks have reinvested more than €5.5 billion since 2018.
• It notes that banks could not pay dividends between 2020 and 2022.

The figures in this list come from the ABB's 14 October statement, as reported by Novinite.

Could Banks Pass the Cost to Customers?

Views differ. Banker Levon Hampartzumyan warned that part of the burden could reach consumers (Fakti). The Finance Ministry argues the tax could even have an anti-inflation effect, since higher prices would raise the taxable excess.

Radev named lower dividends and higher loan pricing as possible channels (The Sofia Globe). Which one dominates may depend on competition. It may also depend on each bank's capital position.

Listed Groups With Bulgarian Banks

Investors abroad usually gain exposure through parent groups. In Sofia, the listed banks are First Investment Bank (Fibank) and Central Cooperative Bank, both SOFIX members (Wikipedia).

Source: KBC, Wikipedia (DSK Bank), Wikipedia (UniCredit Bulbank), Wikipedia (SOFIX). Ownership summary.

For each parent, Bulgaria is one market among several. A one-off charge on a Bulgarian unit therefore may weigh less on group results than on local earnings. The chart below shows OTP Bank stock on the Budapest exchange.

Insurers: Capital Rules Shape the Hit

Insurers and reinsurers are in scope. A statement from an insurer association could not be found at the time of writing. The 30% offset may matter most here, since insurers face mandatory solvency capital rules.

Groups with Bulgarian insurers include KBC through DZI (KBC). Eurohold, a SOFIX member, owns Euroins (Wikipedia). Our guide to insurance stocks explains how the sector is usually analysed.

Retailers and Telecoms

Food Retail Chains

The Association for Modern Trade calls the tax extraordinary and economically unjustified. Its executive director, Nikolay Valkanov, gave a simple example. A chain that grows from 100 to 150 stores at the same profit per store would show "excess" profit only because it expanded (Club Z).

He said nine of every ten euros of sector profit are reinvested in Bulgaria. He also said modern retail has created more than 20,000 jobs over the base period (Club Z). Donev has said profit from expansion should be treated differently from market-driven gains (BTA).

Telecoms and Smaller Lenders

Public comments from telecoms operators could not be found at the time of writing. The 30% offset may matter for them, since it can go into new fixed assets in the core business. The plan does not break down revenue by sector. The share paid by exchange bureaus and quick-loan firms is therefore unknown.

Supporters and Critics of the Tax

The tax has split economists and bankers. Politicians are divided too. The table sets out the main arguments on each side.

Source: BTA, The Sofia Globe, BTA, Club Z, BTA. Qualitative summary.

On 24 September, former finance minister Temenuzhka Petkova of the opposition party GERB called the plan "a very bad message to investors" (BTA).

One market question may be whether a tax described as one-off stays one-off. Radev's Hungary example shows why investors may watch that point closely.

How Europe Has Taxed Bank Windfalls

Bulgaria is not the first EU country to do this. Djankov's analysis lists twelve member states with extra bank taxes in recent years (BTA).

Source: BTA, A&O Shearman, The Sofia Globe. Qualitative summary.

Lessons From Italy's 2023 Levy

Italy offers the clearest market precedent. Its surprise announcement in August 2023 wiped more than €10 billion off Italian financial shares the next day (A&O Shearman). Banks could instead place at least 2.5 times the tax in non-distributable reserves. The chart below shows UniCredit stock, owner of UniCredit Bulbank.

Hungary's Experience

Radev used Hungary as a warning. There, a temporary bank tax was continued and changed alongside other credit market measures. He added that high Hungarian loan costs have several causes, so a single tax does not explain them (The Sofia Globe).

SOFIX and the Bulgarian Stock Market

SOFIX has traded near multi-year highs during the tax debate. Past performance is not a reliable indicator of future results, and SOFIX is a small, less liquid index. It closed at about 1,556 on Monday 19 October 2026, up 2.24% on the day (Trading Economics). Intraday price ranges and volumes were not available from a verifiable source. The index fell 5.4% in 2022 and remains below its October 2007 peak (FocusEconomics, Wikipedia).

Recent Closing Levels

Source: BTA, BTA, Trading Economics. Closing levels. Past performance is not a reliable indicator of future results.

SOFIX Five-Year Performance

The index has had one losing year out of the last five full calendar years. It also sits below its October 2007 peak of 1,981.80 (Wikipedia).

Source: FocusEconomics, annual change of the SOFIX index. Period 2021-2025, price index, before taxes and costs, which may vary. Past performance is not a reliable indicator of future results.

Reported year-end closes were 601.49 for 2022 and 765.12 for 2023 (Investor.bg), then 892.74 for 2024 and 1,156.43 for 2025 (BTA). Past performance is not a reliable indicator of future results.

SOFIX Key Levels

Source: Wikipedia, Trading Economics, BTA, BTA. Closing levels. Past performance is not a reliable indicator of future results.

Moving averages and momentum readings were not available from a verified source, so they are left out. SOFIX is a raw index, so it is not shown as a chart here.

Macro Backdrop: Growth Forecasts and ECB Rates

The tax lands in an economy with high inflation. The IMF raised its inflation estimate for 2026 and expects a large current account deficit (Novinite).

Source: IMF World Economic Outlook, October 2026, via Novinite. Forecasts are not a reliable indicator of future performance.

Interest rates feed straight into the tax base. The ECB deposit rate has been 2.50% since 16 September 2026. The next decision is due on 29 October, as our ECB meeting preview explains. Higher rates tend to lift bank interest income, which could enlarge the 2027 excess.

Bulgaria now uses the euro, so wider euro moves also matter for foreign investors. The chart below shows EUR/USD.

Scenarios for 2027

The scenarios below are illustrative. They describe possible paths and their triggers, and none of them is a forecast.

Illustrative scenarios based on the plan and the positions reported by Zemedeleca and The Sofia Globe. Forecasts are not a reliable indicator of future performance.

Each path has a downside for someone. A softer tax helps the sectors in scope. It also leaves a larger hole in the budget, which may mean other taxes later.

Key Dates to Watch

The autumn calendar is busy. The Admirals economic calendar lists many of the euro area releases.

Source: BNT, Admirals, Zemedeleca, Trading Economics. Dates may change.

How Traders Often Approach Policy-Driven Bank News

Tax news can move bank shares quickly. Here are points that market participants often watch around events like this one.

• Many traders follow the parliamentary readings of the tax bill.
• Some analysts focus on the Commission's one-off classification by 30 November.
• Bank results calls often reveal how parent groups plan to absorb the cost.
• Dividend plans from KBC and other parents may signal the expected hit.
• Changes to Bulgarian loan and deposit rates can show whether costs reach customers.

Exposure to KBC is possible through CFDs. Admirals offers CFDs on shares, including a KBC Group NV CFD (#KBC). The wider range of CFDs on shares covers other European listings. Our guide on what CFD trading is explains how these products work.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Position sizing and stop-loss orders are common ways to manage risk, as our article on risk management describes. A stop-loss order can be filled at a worse price in fast markets. A demo account uses virtual funds, and results may differ from live trading. For background on the sector, see our overview of bank shares.

Pros and Cons of the Tax for Markets

Source: summary of positions reported by BTA and The Sofia Globe. Qualitative summary.

Frequently Asked Questions

What Is Bulgaria's Windfall Tax?

It is a proposed one-off 33% tax on 2027 profits above each company's 2020-2025 average plus 20%.

Who Pays the Bulgaria Windfall Tax?

Six sectors would pay. They include banks and insurers, plus food retail chains with five or more outlets.

How Does Bulgaria's Windfall Tax Work?

Each firm averages its 2020-2025 taxable profit and adds 20%. It then pays 33% on 2027 profit above that line.

When Does Bulgaria's Windfall Tax Start?

It applies to 2027 profits only, with at least 90% payable in advance by 30 November 2027 under the plan.

How Much Could the Tax Raise?

The Finance Ministry books an indicative €800 million, about 0.57% of GDP, in its 2027 draft budgetary plan.

Is Bulgaria's Windfall Tax Constitutional?

The Association of Banks in Bulgaria says it breaches equal treatment under Article 19(2). Courts have not ruled yet.

Will Bulgarian Banks Pass the Windfall Tax to Customers?

The BNB Governor warns some cost could reach borrowers. The Finance Minister does not expect higher lending rates.

Some of the content on this page was created with the help of automated tools. All final text has been reviewed by Admirals and is under its editorial responsibility.

Sources

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