1. What a dividend is, and when it can be distributed
A dividend is part of the company's realized and taxed profit that the owners decide to distribute to themselves. The key words are "realized" and "decide": the profit must have been recorded in the annual financial statements, and the distribution must be formalized by a resolution of the sole owner or of the general meeting.
The Commerce Act also sets a protective limit for creditors. Under Art. 133 of the Commerce Act, a company may not pay out a dividend if, after payment, its net assets would fall below the amount of its capital and mandatory reserves. In practice this means a company with accumulated losses from prior years must first cover the loss, and only then distribute a dividend.
Three conditions for a lawful dividend
- Approved annual financial statements (or interim statements — see section 9).
- A written resolution stating the date, amount and recipients.
- Tax withheld and paid on time; filed under Art. 55 of the Personal Income Tax Act.
2. Rates by recipient
The rate depends not on the company, but on who receives the dividend. The tax is final: the recipient doesn't declare it a second time on their annual tax return and owes nothing further on that amount.
| Recipient | Rate | Legal basis |
|---|---|---|
| Individual — Bulgarian tax resident | 5% | Art. 38(1) Personal Income Tax Act |
| Individual — foreign tax resident | 5% or per double tax treaty | Art. 37 Personal Income Tax Act; treaties |
| Bulgarian company | 0% | Art. 27(1) Corporate Income Tax Act — not recognized as revenue |
| EU / EEA company | 0% | Art. 194(3) Corporate Income Tax Act |
| Non-EU company | 5% or per double tax treaty | Art. 194, Art. 200 Corporate Income Tax Act |
| Hidden distribution of profit | 5% + 20% penalty | Art. 267 Corporate Income Tax Act; § 1(5) of the Additional Provisions |
Note: the "10%" in the headline isn't a separate dividend rate — it's the corporate tax the profit has already paid, plus the tax on expenses in a hidden distribution scenario. The distinction matters and is often blurred in conversations between owners.
3. How it's calculated: a step-by-step example
Take an EOOD with pre-tax profit of €20,000 for 2025, recorded in the annual financial statements and approved by the owner in March 2026.
| Pre-tax profit | €20,000.00 |
| Corporate tax 10% (paid by 30 June) | − €2,000.00 |
| Profit available for distribution | €18,000.00 |
| Dividend tax 5% (withheld on payment) | − €900.00 |
| Net to the owner | €17,100.00 |
The overall burden is 14.5% — provided the owner is separately insured as a self-insured person (see section 6). Calculate it for your own profit:
Total burden % · excludes SOL social security · full calculator →
4. Hidden profit distribution: warning signs and consequences
The definition in § 1(5) of the Additional Provisions of the Corporate Income Tax Act is broad: amounts unrelated to the business, or exceeding market levels, accrued or paid in favor of owners, partners, or persons related to them. The NRA finds this easily, because it's precisely what they look for in the company's bank statements.
The most common forms
- ✕Personal purchases on the company card — fuel for the family car, groceries, home electronics.
- ✕A "loan" to the owner with no agreement, no interest, and no repayment date.
- ✕Cash withdrawals recorded as a "staff advance" that are never backed by documents.
- ✕Payments to the owner labeled "dividend" but with no resolution and no financial statements to cover them.
- ✕Rent or a consulting fee paid to the owner above market price.
What it costs
The amount is taxed at 5% as a dividend and at a 20% penalty under Art. 267 of the Corporate Income Tax Act; the expense is not recognized for the company, which adds a 10% corporate tax on top. The effective burden exceeds 30% — more than double a regular dividend, plus late-payment interest.
The fix is simple and cheap: every payment to the owner should have a legal basis — a dividend with a resolution, salary under a management contract, remuneration as a self-insured person, or a loan with an agreement, interest, and a term.
5. Deadlines, documents and filings
| Step | Deadline | Document / action |
|---|---|---|
| Approval of annual financial statements | by 30 June | owner's resolution / general meeting minutes |
| Dividend resolution | any time after approval | amount, recipients, payment date; template in Document templates |
| Withholding 5% | at payment | payment slip to the owner for the net amount |
| Payment to the NRA | by the end of the month after the quarter | to the account of the competent NRA regional office, payment type 11 00 00 |
| Filing | same deadline | return under Art. 55 Personal Income Tax Act / Art. 201 Corporate Income Tax Act |
| Annual report | by 28 February | report under Art. 73(1) Personal Income Tax Act on income paid |
Example: a resolution dated 15 May 2026 → the tax must be paid and filed by 31 July 2026. A resolution dated 3 October → by 31 January 2027. The recipient does not report the dividend on their own annual return under Art. 50.
6. Dividend, salary, or self-insured status: which pays off
An owner-manager has three lawful channels for taking money out of their company. They aren't mutually exclusive — the usual optimal setup is a combination.
| Channel | Burden | Pro | Con |
|---|---|---|---|
| Dividend | 14.5% | lowest rate; once a year | no social security rights; waits on financial statements |
| Salary under a management contract | ~38% up to €2,300/mo. | full social security rights; recognized as an expense | most expensive; monthly filings |
| Self-insured status + dividend | €172/mo. fixed + 14.5% on the remainder | health and pension rights at a low cost | the insurable income is a low base for pension and sick pay |
Example at €5,000 monthly company income
As salary under a management contract: ~€3,250 net. As a self-insured person at the minimum (€172 in contributions) plus a dividend on the rest: ~€4,130 net, averaged over the year — a difference of over €10,000 a year. That's why the NRA looks closely at whether the owner actually performs work: if so, insuring as a self-insured person is mandatory, not optional. Run the numbers for your own case in the dividend tax calculator and the social security calculator.
7. Dividends to an owner abroad
A Bulgarian company withholds 5% and pays the tax to the NRA regardless of where the owner lives. After that, the applicable double tax treaty (DTT) with the recipient's country of residence kicks in — it can reduce the rate (often to 0% for a qualifying holding) or allow the tax to be credited there.
- ✓Up to €255,646 in annual income (BGN 500,000) — the DTT relief is applied directly by the company; it keeps a certificate of tax residency, a beneficial-owner declaration, and proof of ownership (Art. 142 of the Tax and Social Insurance Procedure Code).
- ✓Above that threshold — a request to the NRA under Art. 137 of the Tax and Social Insurance Procedure Code before payment; a ruling is issued within 60 days.
- ✓The company issues a certificate of tax withheld (Art. 58 Personal Income Tax Act), which the owner uses to prove payment to their own tax authority.
For foreign founders we also have a dedicated page: Company formation in Bulgaria for non-residents.
8. Dividends between companies: 0%, and when it doesn't apply
When the recipient is a Bulgarian company, the dividend isn't included in its taxable profit (Art. 27 Corporate Income Tax Act) — otherwise the same profit would be taxed at every level of a group. The same applies to companies from the EU and EEA under Art. 194(3). The zero rate no longer applies when the distribution is part of an arrangement with no business purpose (the general anti-abuse rule under Art. 16 of the Corporate Income Tax Act), or when the recipient isn't the beneficial owner of the income. Holding structures whose sole purpose is "having no tax" are the first thing the NRA checks when auditing groups.
9. Interim dividends: can you distribute during the year
The Commerce Act doesn't explicitly regulate interim distributions for OODs and EOODs. In practice it's allowed on the basis of interim financial statements and a resolution, but with two caveats. First, the statements must be real — with all expenses, depreciation, and tax accrued. Second, if the year ends in a loss, or with a smaller profit than what was distributed, the difference is treated as a loan to the owner, or as a hidden profit distribution with all its consequences.
How we handle it for clients
An interim dividend — no earlier than after a 6-month statement, capped at 70% of the accumulated interim profit, and only if the prior year closed with a profit. The remainder is distributed after the annual financial statements. This practically eliminates the risk of reclassification.
10. Seven mistakes the NRA catches most often
- A dividend with no resolution. The payment slip says "dividend," but there's no supporting document. On inspection — treated as a hidden distribution.
- Distributed profit greater than what's available. A forgotten prior-year loss, or tax not yet accrued.
- A missed deadline for the Art. 55 filing. The tax was paid, the filing wasn't. A fine of up to €250 for a first offense.
- A dividend to a partner who has already left. The right belongs to whoever was a partner on the date of the resolution.
- A "dividend" paid in cash from the till. Allowed, but amounts over €5,000 must go through a bank transfer (Cash Payments Restriction Act); cash is hard to substantiate.
- An owner who works in the company but isn't insured. The NRA assesses self-insured-person contributions for the entire period, plus interest.
- Tax not withheld for a foreign owner "because there's a DTT." Without a certificate of tax residency, the relief doesn't apply.
11. Frequently asked questions
Can I receive only dividends, with no salary and no social security contributions?
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Yes, if you don't perform personal labor in the company — for example, you only hold shares while others handle management and work. If you work in it, you owe contributions as a self-insured person regardless of the dividend.
When is dividend tax due?
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By the end of the month following the quarter in which the distribution resolution was taken — together with the filing under Art. 55 of the Personal Income Tax Act.
Can a dividend be distributed during the year?
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Interim distribution based on interim financial statements is common practice, but it carries risk: if the year ends in a loss, the amount can be reclassified as a hidden profit distribution. See section 9.
Do I owe tax in Bulgaria if I live abroad?
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The company withholds 5%, unless the treaty with your country provides a lower rate and you've submitted a certificate of tax residency. The tax withheld is usually creditable in your home country.
What is a hidden distribution of profit?
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Payments to the owner unrelated to the business — personal expenses, open-ended loans, undocumented amounts. These are taxed at 5% plus a 20% penalty, and the expense is not recognized for the company.
Sources
Corporate Income Tax Act Art. 16, 27, 194, 200, 201, 267 and § 1(5) of the Additional Provisions; Personal Income Tax Act Art. 37, 38, 55, 58, 65, 73; Commerce Act Art. 133, 137; Tax and Social Insurance Procedure Code Art. 135–142; Cash Payments Restriction Act Art. 3. Checked on 3 September 2026.
Change history
— expanded version: sections 6–10, calculator, DTT figures in euro.
— first published.
Hristo Ivanov, chief accountant
Master's degree in accounting and control, with over 10 years of practice working with small and medium companies. Runs Bulsmetka and is personally responsible for the firm's clients. Write to office@bulsmetka.bg if you spot an inaccuracy — we fix it and note the correction.
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