Cooperatives Act — accounting and tax specifics in agriculture

Cooperatives remain a widespread form of organisation in Bulgarian agriculture — bringing together owners of land and machinery for joint cultivation and marketing of produce. The Cooperatives Act sets out a distinctive management and distribution structure, different from that of commercial companies.

Key features of a cooperative

• It is founded by a minimum of 7 individuals with legal capacity, joining voluntarily to pursue economic, social and cultural aims.
• It is governed on the cooperative principle — each member has one vote at the general meeting, regardless of the size of their share contribution.
• Profit is distributed among members in proportion to their participation in the cooperative's activity, not necessarily in proportion to their capital share, as is the case with commercial companies.

Accounting specifics

Cooperatives keep full accounting records under the Accountancy Act, but with specific elements relating to members' share capital (which can change as members join and leave) and to the distribution of the so-called "cooperative surplus" — an analogue of profit, but with a different distribution mechanism. The variability of the membership and of the capital calls for precise tracking of share contributions per member.

Tax treatment

Cooperatives are taxed with corporate income tax under the general rules of the Corporate Income Tax Act (10%) on the profit from their economic activity. A specific tax relief exists for agricultural cooperatives under certain conditions relating to the processing and marketing of unprocessed agricultural produce grown by their own members.

Conclusion

The cooperative form remains an underrated but entirely legitimate instrument for collective farming — with clear rules for governance and taxation that differ from, but are no less advantageous than, those of traditional commercial companies.

Cooperative versus EOOD/OOD — at a glance

Frequently asked questions