Withholding tax in Bulgaria: when your company must withhold on payments abroad

If your Bulgarian company pays interest, royalties, technical services, rent of movable property, franchise or factoring fees or management remuneration to a non-resident, it must normally withhold 10% at source and remit it. Dividends and liquidation proceeds paid to non-residents carry 5%. The tax is declared and paid quarterly, by the end of the month following the quarter — and the obligation sits with the payer, not the recipient.

Current as of September 2026. Bulgaria uses the euro at the fixed rate of 1 € = 1.95583 BGN. This is general information, not tax advice — treaty positions in particular depend on the exact contract and on the recipient’s residence.

What actually triggers the tax

Withholding tax is not a general levy on cross-border payments. The Corporate Income Tax Act lists the income types, and the list is narrower than most founders assume:

Two consequences follow immediately. First, buying goods abroad never triggers it — the invoice is simply a cost. Second, a great many service invoices do not trigger it either, because they fall outside the listed categories. The awkward middle is consulting, which is inside the list and which is exactly how a lot of freelance and agency work abroad is described on the invoice.

Where founders get caught

The foreign consultant. A one-person UK or US consultancy invoices your Bulgarian company for advisory work. That is consulting, therefore technical services, therefore in scope — unless a treaty says otherwise. The consultant expects the full invoice amount; you are obliged to remit 10% of it to the state. Fix this in the contract before the first invoice, not after.

The shareholder loan. A non-resident owner lends money to their own Bulgarian company and charges interest. The interest is in scope. This is a common surprise for owners who financed the company from abroad and later formalised the loan.

Director’s fees. Remuneration to a member of the management body who is a non-resident is in scope. Salary under an ordinary employment contract is a different regime — see the salary versus dividend comparison for how the two paths differ.

Dividends. 5%, with an important exception: dividends distributed to a legal entity that is tax resident in an EU or EEA member state are exempt. For an owner who is a private individual outside the EU, the 5% applies. The wider picture is in our note on extracting profits as a non-resident owner.

The tax is the payer’s problem

This is the part worth repeating. The recipient abroad has no filing obligation in Bulgaria and, in practice, no interest in the question. If the tax is not withheld, the revenue authority collects it from the Bulgarian company — plus interest, plus penalty.

The commercial consequence is that the withholding must be priced into the contract. Either the fee is agreed gross and the supplier receives 10% less, or the contract is grossed up and your company carries the cost. A contract that says nothing usually ends with the Bulgarian side paying twice.

Treaty relief: available, but not automatic

Bulgaria has a wide network of double tax treaties, and most of them reduce or eliminate the rates above. None of it applies by itself.

To use a treaty rate you need evidence that the recipient is a tax resident of the other state, that they are the beneficial owner of the income, and that they have no permanent establishment in Bulgaria to which the income is attributable. In practice that means a certificate of tax residence plus a declaration from the recipient, collected before you pay.

The procedure then splits by size. Below the threshold in the Tax and Social Security Procedure Code — total income of 500,000 BGN (roughly 255,600 €) paid to that recipient in the year — the payer applies the treaty itself, keeps the evidence on file, and files a declaration with the revenue authority by 31 March of the following year. Above the threshold, relief runs through a formal advance clearance procedure with the tax administration, which takes time and should be started well before the payment date.

Filing and payment

• Quarterly declaration by the payer, due by the end of the month following the quarter in which the liability arose.
• Payment in the same period.
• Fourth-quarter filing also carries the annual information reporting on certain cross-border payments.

Missing a quarter is not a small matter: the tax is due whether or not it was withheld, so an unnoticed obligation compounds every three months until someone checks the ledger.

A short checklist before you pay a foreign invoice

1. Classify the payment against the list above. Goods, out. Consulting, in.
2. Check the recipient’s residence and whether a treaty applies.
3. If it does, collect the residence certificate and the beneficial-owner declaration before paying.
4. Decide who bears the tax and write it into the contract.
5. Diarise the quarterly declaration and payment.

If a large payment abroad is coming up and you are unsure which box it falls into, the classification is worth an hour of an accountant’s time — the alternative is discovering the answer during an audit.

Would rather not deal with this yourself? See how we handle it and what it costs.