Dividends in Bulgaria: 5%, and 0% to an EU/EEA parent company

What is the dividend tax rate in Bulgaria?

When a Bulgarian company (a DPK/EDPK, or an EOOD, for example) distributes its profits, it applies a 5% withholding tax on the amount paid to individual shareholders. This levy comes after the 10% corporate income tax, which is charged on the profit before distribution.

It is precisely the combination of the two — 10% then 5% — that gives Bulgaria its overall tax burden among the lowest in the European Union once profits are actually distributed.

The distribution regime is the same regardless of the company form. The EOOD (or the OOD with several shareholders) remains the classic form, with a capital deposit through a Bulgarian bank. For a 100% remote formation, with no capital deposit or prior bank account, the DPK/EDPK is often the simplest choice — see EOOD, OOD or DPK.

You often read that Hungary does better with a 9% headline corporate tax. That is an illusion: that rate covers only the company's profit. Once distribution is taken into account, Hungarian taxation exceeds 20%, whereas Bulgaria stays around 14.5%.

So it is not Bulgaria that has "the lowest corporate tax", but Bulgaria that offers one of the most advantageous total burdens for the entrepreneur who actually takes their money out.

To put the gap in perspective, here is a comparison of how distribution is taxed in three common settings:

This withholding sits between 0 and 5% depending on the recipient: 0% to an EU/EEA parent company, with no threshold or holding period (чл. 194, ал. 3, т. 3 ЗКПО; see below), and 5% paid to an individual. The 5% share is final in Bulgaria for the Bulgarian part: the company withholds it and remits it to the Bulgarian tax authority (NRA).

Legal basis: the 0% exemption to an EU/EEA parent company rests on чл. 194, ал. 3, т. 3 ЗКПО; the 5% withholding paid to an individual on чл. 38, ал. 1, т. 2 + чл. 46, ал. 3 ЗДДФЛ. чл. 200 ЗКПО sets the rate of the withholding tax on dividends (consolidated texts on lex.bg).

This 5% rate is the one in force for 2026: an increase to 10% appeared in the draft budget but was not adopted — the rate holds through the rollover of the previous budget.

Like any tax parameter, it may change: check the rate applicable on the date of your distribution. That leaves the question of your country of residence, covered below.

How do you obtain 0% via the Bulgarian parent-subsidiary exemption?

The Parent-Subsidiary Directive (Directive 2011/96/EU) aims to remove the double taxation of profits distributed between companies of the same European group. And this is where Bulgarian law is more favourable than people think.

Under Bulgarian law, the exemption from withholding tax on dividends paid to an EU/EEA parent company has neither a participation threshold nor a holding period: the only condition is that the recipient be a legal entity that is tax-resident in the EU or EEA (excluding hidden profit distributions). The rate is then 0%. Legal basis: чл. 194, ал. 3, т. 3 ЗКПО (Corporate Income Tax Act, lex.bg).

The famous "~10% holding for ~2 years" you read everywhere are in fact the minimums permitted by Directive 2011/96/EU — ceilings that states may require. Bulgaria, however, did not adopt them as domestic conditions: its national rule is more generous. Do still check eligibility on the parent-company side, as its own state of residence may impose those thresholds for the exemption on receipt.

This mechanism is mainly of interest to entrepreneurs who already hold (or create) a European holding company and want to pass up the profits of their Bulgarian operating subsidiary without tax friction at the intermediate level. The final distribution, from the holding to the individual, then remains subject to the tax regime of the holding's country and of the beneficiary's residence.

From profit to net: what is really left?

To understand your real net income, you have to follow the whole chain, not a single isolated rate. Take a simple case, purely for illustration, of a €100,000 profit in an EOOD formed remotely in Bulgaria and distributed directly to its shareholder:

1. Pre-tax profit: €100,000.
2. Corporate income tax (10%): −€10,000 → €90,000 left to distribute.
3. Bulgarian dividend withholding (5%): −€4,500 → €85,500 paid out.
4. Taxation of your country of residence: to be applied next, subject to treaties.

The table shows only one line. A generic incorporation sells you step 1 — the registered company, the EIK — and stops there. Yet a dividend can only be distributed at the end of the chain: without an open bank account, without the OTP codes received, without mail handled or accounts kept, there is simply nothing to distribute.

Here, line by line, is what you need to bring together to genuinely operate remotely — and what a generic offer leaves on your plate:

Eurotrade ticks every box in this column; a generic incorporation stops at the 1st line and leaves you alone with the next seven — precisely the ones that determine whether the dividend arrives at the end of the chain. It is this integrated file, not the EIK alone, that turns the headline rate into genuinely distributable income.

The cumulative tax rate in Bulgaria (corporate tax + dividends) therefore comes to around 14.5% on the initial profit — before any resident taxation. The €100,000 figure above is only a basis for calculation: it is neither a projection nor a promise of income.

What is structural, on the other hand, is the gap in rates. For the same effort, the entrepreneur structured in Bulgaria keeps a markedly higher share of net income.

Over a comparable activity cycle, a Bulgarian expatriate keeps on the order of +63% more net, and a French structure typically pays nearly 5.9× more tax on the same chain — a defensible relative gap, whereas the absolute amounts depend entirely on your actual activity.

It is this mechanism, and the economic substance that secures it, that makes the Eurotrade offer attractive for structuring an online business. For the bigger picture, see the pillar guide forming a Bulgarian company remotely.

How do Bulgarian dividends and tax residence interact?

This is the point most often misunderstood. The Bulgarian 5% withholding does not close the matter: as an individual, you are taxable on your worldwide dividends in your country of tax residence. Fortunately, Bulgaria has signed many double tax treaties that prevent being taxed twice on the same euro.

In practice, two mechanisms coexist depending on the treaty:

• Credit — the 5% withholding already paid in Bulgaria is credited against the tax due in your country;
• Exemption — rarer, the dividend is exempt in the country of residence under certain conditions.

The net result therefore depends as much on Bulgaria as on where you live. For a resident of a country with heavy dividend taxation, the real gain is mostly built when the tax residence is itself consistent with the structure — hence the importance of comparing jurisdictions in Bulgaria vs Estonia vs Dubai vs France.

To rely on a double tax treaty, the foreign authority often requires proof of the paying company's tax residence. The tax residence certificate (удостоверение за местно лице) is issued by the National Revenue Agency (НАП), not by the Commercial Register — not to be confused with the company's registration certificate. This is a step Fenchell can carry out for you, with a sworn translation of the document.

What to watch before distributing?

A 5% rate (or 0% to an EU/EEA parent company, via the Bulgarian parent-subsidiary exemption) is never automatic: it is earned through compliance. Three reflexes are essential.

Beyond substance, it is bookkeeping that secures the distribution. Clean accounts — where salaries, expense reimbursements, shareholder loans and dividends are each recorded under their proper heading, with supporting documents — make the distribution traceable and remove the risk of re-characterisation as a hidden distribution.

Conversely, poorly documented flows to shareholders expose you to that re-characterisation, more costly than the 5% withholding. This is one of the roles of the locally kept bookkeeping included in the Eurotrade pack.

Concretely, a re-characterised distribution is added back to the corporate income tax base (10%), subject to dividend tax (5%) and hit with a 20% penalty (чл. 267 ЗКПО) — barring voluntary correction. The game is never worth the candle: a clean distribution, at 0 to 5%, always costs less.

General information current as of 8 June 2026, not constituting personalised tax, legal or accounting advice. Rates, thresholds, deadlines and amounts are indicative, may change and vary according to your situation and your country of residence. Fenchell Capital OOD — Bulgarian firm based in Plovdiv (EIK 207945095).