Bulgaria's 5% Dividend Tax: How EU Founders Use It

Bulgaria applies a 5% final tax to dividends paid to individual shareholders. For a founder who first pays 10% corporate tax and then distributes the remaining profit, that produces a company-level combined burden of about 14.5% before any additional tax in the shareholder's country of residence.

The low rate is real, but a dividend is not simply a bank transfer. The company must have distributable profit, approve the distribution correctly, declare the tax, and pay it by the quarterly deadline. This guide was reviewed on 19 July 2026 against the Bulgarian National Revenue Agency's dividend guidance and the European Commission's Parent-Subsidiary Directive overview.

What is the Bulgarian dividend tax rate in 2026?

For dividends paid by a Bulgarian company to an individual, the standard Bulgarian final withholding tax is 5%. The company paying the dividend normally withholds, declares, and pays the tax.

The recipient's residence matters after that. A shareholder living in Germany, the Netherlands, the United States, or another country may also have to report the dividend there. A tax treaty can determine credit relief and prevent the same income from being fully taxed twice, but the Bulgarian 5% does not automatically settle the shareholder's worldwide personal tax.

For payments to a corporate shareholder, the analysis is different. Qualifying distributions to EU/EEA legal entities are generally exempt from Bulgarian withholding under the domestic implementation of EU rules, subject to the legal conditions and anti-abuse provisions. Other corporate recipients may face the domestic rate or a treaty-reduced rate. Confirm the recipient's legal form and residence before approving payment.

How does the 10% plus 5% calculation work?

The dividend tax applies to profit left after corporate tax, not to the original pre-tax profit.

Worked example: EUR 100,000 company profit

Step	Calculation	Amount
Accounting profit before tax		EUR 100,000
Bulgarian corporate tax	100,000 x 10%	EUR 10,000
Profit available after corporate tax		EUR 90,000
Dividend tax for an individual	90,000 x 5%	EUR 4,500
Net dividend after Bulgarian taxes		EUR 85,500
Combined Bulgarian tax	10,000 + 4,500	EUR 14,500

That is an effective Bulgarian company-level rate of 14.5% on the original profit. It is not a promise that the founder's final worldwide rate is 14.5%, because the residence country may tax the dividend and grant credit for Bulgarian tax.

When can a Bulgarian company legally distribute a dividend?

A distribution should be supported by:

1. Approved financial statements showing profit or retained earnings
2. A shareholder or general-meeting resolution identifying the amount and recipient
3. Confirmation that the distribution does not breach capital-maintenance or solvency rules
4. Correct accounting entry and payment record
5. Declaration and payment of the 5% tax where applicable

The usual and lowest-risk route is to distribute profit after the annual accounts are completed and approved. Before paying an interim amount during the year, obtain Bulgarian legal and accounting advice. Bulgarian limited-company rules do not provide the same general interim-dividend mechanism found in every other jurisdiction, and a payment unsupported by distributable profit can be reclassified or reclaimed.

When is Bulgarian dividend tax declared and paid?

For dividends to individuals, the paying company generally reports and pays the final tax by the end of the month following the quarter in which the dividend decision was made. The declaration is commonly filed under Article 55.

Example: if the sole shareholder approves a dividend on 12 February, the decision falls in the first quarter. The usual declaration and payment deadline is 30 April.

Do not use the end of the month after the bank transfer as a universal deadline. The triggering event and recipient type matter, and cross-border corporate payments can follow separate withholding-tax rules. The NRA dividend page is the primary current reference.

Are dividends to an EU parent company tax-free?

Qualifying dividends paid to an EU or EEA corporate shareholder are generally exempt from Bulgarian withholding tax. The EU Parent-Subsidiary Directive is designed to remove withholding and double taxation within qualifying company groups, while domestic Bulgarian rules can provide the relevant exemption.

This is not a blanket rule for every entity with an EU address. Check:

• The recipient is a genuine company and tax resident in an eligible jurisdiction
• It is the beneficial owner of the income
• The payment is a real dividend, not interest, a service fee, or a hidden distribution
• The structure has commercial substance and is not an artificial conduit
• The required residence and ownership documents are retained

Where the corporate shareholder is outside the EU/EEA, check the relevant double-tax treaty and Bulgaria's domestic withholding rules before payment.

How are dividends taxed for a non-resident founder?

The practical sequence is:

1. The Bulgarian company withholds 5% where the individual rate applies.
2. The founder reports the gross dividend and Bulgarian tax in their country of tax residence if local law requires it.
3. The residence country applies its domestic dividend rate.
4. Treaty or unilateral credit relief may give credit for the Bulgarian 5%.

A Dutch, German, French, British, or US founder therefore should not compare only the Bulgarian 5% with their local rate. They should compare the complete corporate and personal chain and verify whether local controlled-foreign-company, management-and-control, or anti-avoidance rules apply. Start with the Bulgaria tax residency guide and get departure-country advice before relocating.

Can a founder take monthly dividends?

A standing monthly transfer labelled "dividend" is risky unless each payment is supported by distributable profit, a valid resolution, correct accounts, and tax compliance. Salary, director remuneration, expense reimbursement, and dividends are different legal categories.

For predictable personal cash flow, a founder may use a defensible salary or management remuneration and make properly approved dividend distributions separately. The Bulgarian payroll guide explains the salary contribution cost.

What is a hidden profit distribution?

A hidden distribution can arise when the company gives value to a shareholder outside a properly approved dividend, for example:

• Paying private rent, holidays, groceries, or family costs as business expenses
• Giving a shareholder an interest-free or non-commercial loan
• Selling company property to a shareholder below market value
• Paying excessive related-party fees without evidence of services
• Writing off a shareholder's debt

The tax authority can reclassify the value, deny the company's expense deduction, assess dividend tax, and add interest or penalties. Keep personal and company spending separate and document every related-party transaction at arm's length.

How do dividends compare with salary?

Issue	Salary or director remuneration	Dividend to an individual
Deductible for the company	Usually yes if genuine and documented	No, paid from after-tax profit
Personal income tax	10% on taxable salary base	5% Bulgarian final tax
Social contributions	Usually apply within statutory limits	Generally do not apply to a genuine dividend
Payment timing	Regular monthly payroll	Only from legally distributable profit
Documentation	Contract, payroll, declarations	Accounts, resolution, tax declaration

A low dividend rate does not make a zero-salary structure automatically safe. The founder's work, residence, social-security position, and local-country rules still need analysis.

What dividend documents should the company keep?

Retain at least:

• Approved annual financial statements
• Sole-shareholder or general-meeting resolution
• Calculation of distributable profit
• Dividend tax calculation
• Filed Article 55 declaration and payment evidence
• Bank transfer record
• Recipient tax-residence evidence where cross-border relief is used
• Beneficial-ownership and group documents for corporate exemptions
• Any treaty-relief application or advice

Good documentation matters when opening or maintaining bank accounts too. Banks commonly ask for the resolution and accounts before processing a large shareholder payment.

Frequently asked questions

Is Bulgaria's dividend tax really only 5%?

Yes, the Bulgarian final tax rate for dividends paid to individuals is 5%. The shareholder may still owe additional tax in their country of residence, usually with treaty credit considered.

Is the 5% calculated before or after corporate tax?

After. The company first pays 10% corporate tax on taxable profit. The 5% dividend tax is then applied to the amount distributed from after-tax profit.

Do dividends carry Bulgarian social contributions?

A genuine dividend does not normally carry payroll social contributions. It must come from distributable profit and must not disguise payment for employment or management work.

Can the company distribute all cash in its bank account?

No. Cash balance and distributable profit are not the same. The company must retain enough to meet liabilities and comply with company-law and accounting requirements.

Are dividends to every EU company automatically exempt?

No. The recipient's legal status, residence, beneficial ownership, substance, and the nature of the payment must support the exemption. Validate the structure before payment.

For the wider tax stack, read Bulgaria's 10% corporate tax guide, the withholding tax guide, and annual company costs. For a review of your proposed distribution, book a consultation.