Withholding Tax & Dividend Tax in Bulgaria (2026)

What is withholding tax under the CITA?

Withholding tax is a final tax withheld by the Bulgarian payer when making payments of certain types of income to foreign legal entities established in jurisdictions outside Bulgaria. The regime is regulated in the Corporate Income Tax Act (CITA), Chapter 26.

When paying the income, the Bulgarian company is obligated to withhold the tax and remit it to the budget within the statutory deadlines. The tax is levied on the gross payment amount, unless an applicable DTT provides otherwise.

• Taxable person — the Bulgarian income payer (the company making payments to the foreign person).
• Tax base — the gross amount of the accrued income.
• Applicable legislation — CITA (Art. 194–202a), PITA (for individuals), DTTs, European directives.

Withholding tax rates

The current withholding tax rates for 2026 are as follows:

Important: The dividend tax remains at 5 %. In 2024–2025, there was a legislative proposal to increase the rate to 10 %, but it was categorically rejected following mass protests and a coalition decision. The 5 % rate is in effect in 2026 as well.

Withholding tax exemptions

European and Bulgarian legislation provide for a number of exemptions that significantly reduce or eliminate the withholding tax:

Parent-Subsidiary Directive

Dividends paid by a Bulgarian subsidiary to an EU or EEA parent company are exempt from withholding tax (0 %), provided that:

• The parent company holds at least 10 % of the capital of the Bulgarian company.
• The participation has been maintained continuously for a minimum period of 2 years (or a guarantee for future compliance is provided).
• The recipient company is a tax resident of an EU/EEA member state.

Interest and Royalties Directive

Interest and royalties paid between related EU companies are exempt from withholding tax (0 %), provided that:

• The recipient directly holds at least 25 % of the capital of the payer (or vice versa, or a third company holds 25 % of both).
• The participation has been maintained for a minimum of 2 years.
• Both companies are subject to corporate taxation in their respective member states.

Other exemptions

• Bonds on a regulated market — interest on bonds admitted to trading on a regulated market in the EU/EEA is exempt from withholding tax.
• Capital gains from listed shares — income from the sale of shares traded on a regulated market is not subject to withholding tax.

Double Tax Treaties (DTTs)

Bulgaria has concluded over 80 double tax treaties that can reduce or eliminate the withholding tax on income paid to persons from the respective treaty states.

How are DTTs applied?

The application of a DTT is not automatic — it must be requested by the taxable person and approved by the NRA. The procedure depends on the income amount:

Advance clearance

For income exceeding EUR 255,646 (or EUR 102,258 for royalties and technical services) on an annual basis from the same payer, advance clearance from the NRA is required. The procedure includes:

1. Filing a request with the NRA territorial directorate where the payer is registered.
2. Presenting a tax residency certificate of the recipient, issued by the competent authority of the other state.
3. A declaration from the recipient that they are the beneficial owner of the income.
4. The NRA issues a decision within 60 days.

For lower amounts

When the income does not exceed the above thresholds, the payer may apply the DTT directly, but must have:

• A tax residency certificate of the recipient (for the relevant year).
• A declaration from the recipient as the beneficial owner of the income.
• Documentation substantiating the applicable article of the treaty.

Filing and payment

The withholding tax is subject to filing and payment on a quarterly basis:

The return is filed electronically through the NRA portal. Late payment incurs interest at the BNB base interest rate + 10 percentage points.

The payer is required to issue a certificate to the recipient for the withheld tax, which the foreign person uses for tax credit in their country.

Tax history: why the 10 % dividend tax did not materialize

In 2024–2025, during budget debates, a proposal was introduced to increase the dividend tax from 5 % to 10 %. The proponents' arguments were related to the need for additional budget revenues and equalizing the tax burden across different forms of income.

The proposal triggered:

• Mass protests from business organizations, small and medium enterprises, investor associations, and tax consultants.
• Arguments against — double taxation (10 % corporate tax + 10 % dividend = effective rate of 19 %), loss of Bulgaria's competitive advantage, risk of capital outflow and investment redirection.
• Coalition decision — the ruling coalition did not reach consensus and the proposal was withdrawn. The rate remained at 5 %.

As of March 2026, there are no new initiatives to change the dividend tax. The effective combined rate for distributed profits remains 14.5 % (10 % corporate + 5 % dividend on the remainder), which is one of the lowest in the EU.

Frequently asked questions