Dividends from Foreign Companies and ETFs — Taxation and Reporting for Bulgarian Investors (2026)

Which investors fall within scope

The regime discussed below applies exclusively to individuals who are tax residents of the Republic of Bulgaria. Tax-resident status is determined under Art. 4 ЗДДФЛ (Personal Income Tax Act) and arises on any of the following grounds:

• Presence on the territory of Bulgaria for more than 183 days in any 12-month period (every day of presence counts, including partial days).
• Centre of vital interests in Bulgaria — family, main home, professional and economic activity, banking activity.
• Permanent address in Bulgaria, provided the centre of vital interests is not abroad.

Three investor profiles fall within the scope of this article:

• Holders of individual shares in foreign listed companies (Apple, Microsoft, Siemens, LVMH, etc.).
• Owners of interests in foreign closed companies — UK Ltd, DE GmbH, IE Ltd — where the individual is both shareholder and (often) director.
• Investors in exchange-traded funds (ETFs) — Irish UCITS, Luxembourg SICAV, US registered funds.

Corporate recipients — Bulgarian EOOD or OOD companies investing in foreign securities — are outside the scope of this article. They are governed by the Corporate Income Tax Act (ZKPO / ЗКПО). The EU Parent-Subsidiary Directive (2011/96/EU) applies only to legal entities — individual investors cannot rely on it, regardless of the size of their shareholding.

Taxation principles — two tax layers

When a Bulgarian tax resident receives a dividend from a foreign payer, two separate tax systems are in fact triggered. Understanding them as two independent layers is essential for correct planning.

First layer — withholding tax in the payer's state

Almost every country applies a withholding tax (данък при източника) on dividends paid to non-residents. The rate varies significantly — from 0 % (United Kingdom, Cyprus, Irish UCITS) to 35 % (Switzerland, absent a refund claim). The payer withholds this tax directly from the gross amount before the funds are routed to the broker.

Second layer — 5 % final tax in Bulgaria

Two provisions of the ЗДДФЛ (Personal Income Tax Act) define the Bulgarian tax on foreign dividends:

• Art. 38, para. 2 ЗДДФЛ — "taxable income from dividends and liquidation shares accruing to resident and non-resident individuals, whether from a source in Bulgaria or from a source abroad, is subject to a final tax."
• Art. 46, para. 3 ЗДДФЛ — sets the rate at 5 %, calculated on the gross amount of the dividend.

Where the payer is Bulgarian, this tax is withheld automatically. With a foreign payer, however, the obligation lies with the recipient and is settled through the annual tax return. An important clarification: for 2026 the rate remains 5 %. Claims of an increase to 10 % have circulated in the public domain, but no such change has been adopted by the National Assembly or promulgated in the State Gazette.

Why both layers apply

Bulgaria does not exempt foreign-source dividends received by individuals under a principle of exclusive territoriality. The worldwide-income principle means that a Bulgarian resident owes tax on a dividend regardless of its country of origin. The Parent-Subsidiary Directive, which eliminates double taxation between related legal entities, does not apply to individual shareholders — it addresses capital participations between companies only. The widespread claim that "EU-source dividends" are treated more favourably than dividends from outside the EU for individuals is factually inaccurate — the regime under Art. 38, para. 2 ЗДДФЛ is uniform, regardless of geographic origin.

Avoiding double taxation — two possible routes

The overlap of the two tax layers produces the classic double-taxation problem. Bulgarian law and international treaties offer two different solutions. Their order of application is set by the ЗДДФЛ itself:

Priority of the DTT — Art. 75 ЗДДФЛ

Art. 75 ЗДДФЛ provides that where an international treaty (DTT / СИДДО) ratified by the Republic of Bulgaria, promulgated in the State Gazette and in force contains provisions different from the ЗДДФЛ, the treaty provisions prevail. This is the statutory expression of the constitutional primacy of international law under Art. 5, para. 4 of the Bulgarian Constitution.

Where Bulgaria has concluded a DTT with the payer's state, the treaty generally provides for:

• A cap on the withholding rate — typically 5 %, 10 % or 15 %, depending on the size of the shareholding.
• A notification procedure to the payer (or broker), through which the recipient claims the reduced rate.
• A tax-residency certificate issued by the NRA (National Revenue Agency / НАП) in the prescribed form, evidencing Bulgarian tax residency.

For US dividends, the key document is IRS Form W-8 BEN. It is filed once with the broker (Interactive Brokers, Charles Schwab, Saxo, etc.) and the dividend withholding drops from the default 30 % to the treaty 10 % under the Bulgaria–US DTT. The current list of DTTs in force is published by the NRA — СИДДО and by the Ministry of Finance.

Unilateral tax credit — Art. 76 ЗДДФЛ (no DTT)

Where no DTT is in force between Bulgaria and the payer's state — or where the DTT does not cover the specific income — the unilateral mechanism of Art. 76 ЗДДФЛ applies:

• The foreign tax paid is credited against the Bulgarian tax due.
• The credit is capped at the Bulgarian tax on the same income — i.e. no more than 5 % of the gross dividend.
• If the foreign withholding exceeds 5 %, no further tax is due in Bulgaria, but the excess foreign tax is not refunded by the Bulgarian budget.
• If the foreign withholding is below 5 %, the difference up to 5 % is paid in Bulgaria.

Example: a EUR 1,000 dividend from a no-DTT jurisdiction that suffered 30 % withholding (EUR 300). The Bulgarian tax would be EUR 50. The foreign payer withheld far more, but the credit is capped at EUR 50, so nothing is due in Bulgaria — and the EUR 250 over-withheld abroad is irrecoverably lost for the investor.

Country rates — comparative table

The following table summarises the practical tax treatment across the most common jurisdictions. The "Top-up in BG" column shows the final residual after applying the tax credit.

The table reflects treaty rates in force as of April 2026. Different share classes and REIT structures may attract a higher rate. Before any significant investment, it is advisable to consult the current text of the specific DTT on the pages of the NRA and the Ministry of Finance.

ETFs — accumulating, distributing and UCITS

For the passive investor, foreign ETFs are the primary channel to diversified exposure. Their tax treatment, however, is not uniform — it depends on the type of fund, its country of registration and the share class of the units.

Accumulating ETFs (Acc / C-class)

Accumulating funds reinvest dividends received from the underlying securities back into the portfolio, without making a cash distribution to the investor. Because there is no actual payment to the individual, under Art. 13, para. 1, item 4 ЗДДФЛ the reinvested amounts are not taxed at the individual-investor level.

Irish and Luxembourg UCITS accumulating funds typically impose no withholding on the unitholder, since no distribution is made. The taxable event for the investor arises only upon disposal of the units — the capital gain is then reported in Annex 5 under code 508 (capital gains from shares and participations), and transactions on a regulated market in the EU/EEA are exempt under Art. 13, para. 1, item 3 ЗДДФЛ.

NRA opinion on UCITS ETFs on EU-regulated markets

By letter Ref. No. 540001142 of 08.07.2025, OUI Sofia 2433, the NRA (National Revenue Agency / НАП) confirms that units of UCITS ETFs traded on regulated markets in the EU (Xetra, Euronext, Borsa Italiana, etc.) fall within the exemption in Art. 13, para. 1, item 3 ЗДДФЛ for capital gains from the disposal of financial instruments. A key clarification in the opinion: the exemption applies only to capital gains on disposal — dividends received from distributing ETFs are not exempt and remain subject to the 5 % final tax under Art. 38, para. 2 ЗДДФЛ.

Automatic 10 % statutory deduction for capital gains outside a regulated market

For capital gains on financial instruments that fall outside the Art. 13 exemption (for example, a sale of shares off a regulated market), Art. 33, para. 5 ЗДДФЛ (as in force from 01.01.2024) provides for an automatic deduction of 10 % statutory recognised expenses (НПР) from the taxable gain. This produces an effective rate of 9 % on the capital gain (10 % tax rate × 90 % taxable base). Important: the statutory deduction does not apply to dividends — dividends are taxed on 100 % of the gross payment.

Distributing ETFs (Dist / D-class)

Distributing funds pay dividends received through to unitholders — usually on a quarterly, semi-annual or annual basis. Each such payment is a dividend within the meaning of Art. 38, para. 2 ЗДДФЛ and is subject to the 5 % final tax in Bulgaria, irrespective of whether the broker withholds anything additional at the exchange level.

UCITS versus non-UCITS

UCITS (Undertakings for Collective Investment in Transferable Securities) is the pan-European regulatory standard for collective investment schemes. Ireland and Luxembourg are the two main domiciles. Their advantages for the Bulgarian investor are:

• Zero or very low fund-level withholding on distributions to foreign investors.
• An accumulating class that defers Bulgarian taxation until disposal.
• Access to a broad DTT network, which the fund uses at the level of the underlying assets.

US ETFs (SPY, VOO, QQQ, VT) are non-UCITS from a European perspective. They typically withhold 15 % on distributions once a W-8 BEN has been filed, which is then credited against the Bulgarian tax. However, MiFID II restrictions in force since 2018 make the direct purchase of many US ETFs through a European broker difficult for retail clients.

Reporting in the annual tax return

Foreign-source dividends are reported in Annex 8 / Приложение №8 — Income from Sources Abroad, filed together with Form 2001 (the individual annual tax return). The reporting obligation arises under Art. 50, para. 1, item 3 ЗДДФЛ.

Deadline and channel

• Deadline — by 30 April of the year following the year in which the dividend was received (Art. 53, para. 1 and Art. 67, para. 4 ЗДДФЛ).
• Channel — electronically through the NRA e-services portal, using a qualified electronic signature (QES / КЕП) or a PIK.
• Payment — the tax due is paid within the same deadline to the account of the competent NRA territorial directorate at the permanent address.

Documents supporting the tax credit

To obtain the foreign tax credit, the investor must have the following documents available (for production on NRA request — they are not physically attached to the return):

• A certificate from the foreign payer or broker regarding the tax withheld at source — recommended for every payment.
• An annual statement (tax voucher, dividend statement) from the broker, summarising all dividends received during the year.
• A Bulgarian translation if the document is in a language other than English — a certified translation may be requested on audit.
• Apostille — for official documents issued by Hague Convention states, where the NRA specifically requests it.

Completing Part III of Annex 8 / Приложение №8

Part III of the annex covers dividends and liquidation shares. Each payment from a different payer is entered on a separate row. The columns are completed as follows:

1. Row number — automatic.
2. Name of the payer (company or fund).
3. Country of the payer's registration — by ISO code.
4. Source code — 8141 (foreign-source dividend) in most cases. For capital gains from shares, code 508 is used and is reported in Annex 5, not Annex 8.
5. Taxation code — "1" where foreign tax has been withheld, "3" where no withholding has been applied.
6. Gross income — in euro, after conversion at the exchange rate on the payment date (since 2026 Bulgaria is in the eurozone, so USD→EUR conversion uses the ECB fixing rate).
7. Recognised expenses — always 0 for dividends.
8. Taxable income — equals the gross amount for dividends (no recognised expenses).
9. Foreign tax paid — in euro, at the rate on the withholding date.
10. Permitted tax credit — calculated as 5 % of the gross amount, not exceeding the actual foreign tax.
11. Tax credit used — normally equal to line 10.
12. Tax due in Bulgaria — the formula is max(5 % × gross − line 11, 0).

Practical example: a EUR 1,000 dividend from a US company with 10 % withheld (EUR 100). Bulgarian tax = 5 % × 1,000 = EUR 50. Permitted credit = min(50, 100) = EUR 50. Due in Bulgaria = 50 − 50 = EUR 0.

Russian dividends after the partial suspension of 2023

This is one of the least understood areas in the tax planning of Bulgarian investors with Russian exposure. By Decree No. 585 of 08.08.2023 (Указ № 585), the President of the Russian Federation unilaterally suspended, in part, the operation of DTTs with 38 countries, including Bulgaria. This is not a full termination (denunciation) of the treaty, but a temporary suspension of certain clauses.

Which clauses are suspended

The suspension covers the provisions that reduce Russian tax rates for non-residents:

• Dividends — the reduced rates of 5 % / 10 % are suspended.
• Interest — exemption or reduced rates of 5 % / 10 % are suspended.
• Royalties — reduced rates are suspended.
• Income from immovable property.
• Capital gains.
• Income from employment.

Which clauses remain in force

The suspension is partial. The following remain operative:

• The personal scope of the treaty (the persons covered).
• Tie-breaker rules for determining the tax residency of a person who is resident in both states.
• Exchange of tax information between the two administrations.
• The mutual agreement procedure (MAP).

New Russian domestic rates at source

Following the suspension, the Russian Tax Code applies its domestic (not treaty) rates to income accruing to non-residents:

• 15 % on dividends (instead of the treaty 5 % or 10 %).
• 20 % on interest (instead of exemption or 10 %).
• 20 % on royalties (instead of treaty rates).

Practical consequence for Bulgarian residents

Status of the suspension

Decree No. 585 has been effective since 08.08.2023 and remains in force until the "underlying breach is remedied" or the treaty is fully denounced. As of April 2026, the suspension remains in effect. The Bulgarian side has not taken any reciprocal measures. Any investor with Russian assets is advised to:

• Document every foreign withholding with an official document from the Russian payer or broker.
• Anticipate an unrecoverable 10-percentage-point loss on dividends.
• Consider unwinding Russian positions if the weight of the non-creditable tax exceeds the yield.
• Seek advice on the availability of the MAP procedure, which formally remains in force.

СПБ-8 — statistical reporting to the BNB

In parallel with the tax reporting to the NRA, Bulgarian individuals with foreign investments are also subject to statistical reporting to the BNB (Bulgarian National Bank / БНБ) under BNB Regulation No. 27 on the statistics of the balance of payments, the international investment position and the securities statistics.

Who is obliged

The reporting is done via form СПБ-8 and is mandatory for individuals who are residents within the meaning of the Currency Act and hold claims on or liabilities to non-residents, including:

• Investments in foreign securities (shares, ETFs, bonds) exceeding EUR 25,000 in aggregate at the end of the quarter;
• The investments are held without the intermediation of a Bulgarian licensed investment firm — i.e. directly through a foreign broker (Interactive Brokers, Saxo Bank, Trading 212, Revolut, eToro, etc.);
• Loans, equity participations in foreign companies, foreign bank accounts above the threshold.

Where the broker is Bulgarian (e.g. Elana, Karoll, PFBK), it already reports client positions to the BNB, and the individual client is not required to file СПБ-8 for instruments held through it.

Deadline and filing format

• Deadline — by the 20th day of the month following the quarter (i.e. by 20 April for Q1, 20 July for Q2, etc.).
• Format — electronic filing through the BNB system using a qualified electronic signature.
• Content — portfolio position at period end, movements during the period, accrued income (including dividends).

Sanction for non-filing

Failure to file or inaccurate СПБ-8 reporting is penalised under the BNB Act and the Currency Act with an administrative fine of BGN 500 to BGN 2,500 (EUR 256 – EUR 1,278) for individuals. Penalties for legal entities are significantly higher. This sanction is independent of any tax penalties under the ЗДДФЛ — the two regimes accumulate.

In practice, many Bulgarian investors skip СПБ-8, confusing it with tax reporting. In fact, the BNB receives CRS data from foreign banks and brokers, and any mismatch against the СПБ-8 filings can trigger an inspection.

5 % early-filing discount

A frequently overlooked tool for reducing the tax burden is the discount under Art. 53, para. 6 ЗДДФЛ. Where three conditions are met cumulatively, the taxpayer receives a 5 % discount on the tax due:

• The annual tax return is filed by 31 March of the year following the reporting year (i.e. one month before the general deadline);
• Filing is made electronically with a qualified electronic signature (QES / КЕП) — filing with a PIK is, in some cases, not accepted for the discount;
• The entire tax due is paid by 31 March inclusive.

The discount is capped at BGN 500 (EUR 256) per taxpayer. For an investor owing 5 % on EUR 100,000 of gross dividends (i.e. EUR 5,000 of tax), the discount is EUR 250 — practically the full 5 %. For larger portfolios with tax above EUR 5,120, the discount is capped at EUR 256.

Practical calculator

Note: the discount does not apply if the return is a correcting one, or if payment is made after 31 March, even where the filing itself was on time. In practice, the most common mistake is filing late on 31 March but paying on 1 April — in that case the discount is lost in full.

Hidden profit distribution from foreign companies

Particular attention is warranted in the scenario where a Bulgarian resident is a shareholder and (often) director of his own foreign company — typically a UK Ltd, Irish Ltd, German GmbH or Cypriot Ltd. In such structures, cash flows to the owner are often not documented as formal dividends but as loans, advance payments or compensation that is subsequently not returned.

Bulgarian tax rules treat such payments as a hidden profit distribution, taxed on the same basis as an explicit dividend — a 5 % final tax plus any withholding in the company's state. Typical risk scenarios:

• A loan from the owner's foreign company to the resident owner that is subsequently written off or not serviced.
• "Expense" payments from the company's account that are in fact personal (family trips, personal real estate).
• Under-charged interest on the company's receivable from the owner.
• Excessive management remuneration lacking an economic basis.

NRA oversight in this area has been substantially reinforced following the introduction of the Common Reporting Standard (CRS) and the DAC6 rules on mandatory disclosure of cross-border tax arrangements. Foreign banks report annually on the ultimate beneficial owners, and structures with a Bulgarian resident fall within the scope of the automatic exchange.

An additional risk is the requalification of the foreign company itself. If effective management is carried out from Bulgaria (decisions are taken here and the director lives here), the company may be treated as a Bulgarian tax-liable person within the meaning of Art. 3, para. 1, item 2 of the ЗКПО (Corporate Income Tax Act), triggering an obligation to file an annual return under Art. 92 ЗКПО and be taxed on corporate income in Bulgaria.

Common mistakes and how to avoid them

Practice shows that recurring failures in reporting foreign dividends fall into several categories. Most are easily avoided with upfront planning.

• No evidence of foreign tax. Without a certificate from the payer or a tax voucher from the broker, the NRA is entitled to deny the credit and tax the gross dividend at 5 % in Bulgaria. Archive every annual statement.
• Reporting in Annex 1 by mistake. Annex 1 is for employment income. Dividends — even from a company in which the person is director — go into Annex 8, code 8141.
• Treating accumulating ETFs as current dividend income. Capitalised amounts are not income received within the meaning of the ЗДДФЛ. Taxation arises only on disposal.
• Failing to convert currency on the correct date. The gross amount and the foreign tax are converted separately — at the rate on the payment date, not using an average annual rate.
• Failing to report where no foreign tax was withheld. The fact that the UK or UAE withheld nothing does not relieve the reporting obligation — on the contrary, in such cases the Bulgarian investor owes the full 5 %.
• Attempting to invoke the Parent-Subsidiary Directive. The directive applies to legal entities only. An individual cannot rely on it, even when holding more than 10 % of the capital of an EU company.
• Skipping СПБ-8 to the BNB. Statistical reporting is independent of tax reporting and is mandatory where the portfolio exceeds EUR 25,000 without a Bulgarian intermediary. Sanction up to BGN 2,500.
• Missing the Art. 53, para. 6 ЗДДФЛ discount. Filing with QES by 31 March with the tax paid by the same date yields up to EUR 256 of tax relief.

Sanctions for incorrect or missed reporting

The sanctions regime for foreign dividends is the same as for other income subject to annual reporting, but with added weight due to the automatic exchange of information. The key risks are:

Limitation periods. Tax obligations for uncollected tax expire on a 5-year limitation period, counted from 1 January of the year following the year in which the obligation arose (Art. 171, para. 1 DOPK / Tax-Insurance Procedure Code). For intentionally concealed income the limitation is 10 years. This difference matters in practice — a case from 2018 is typically already outside a standard audit, but where there are indications of concealment (a CRS signal, noticed absence of filing against an obvious cash flow), the limitation period is extended.

Voluntary correction. Where the taxpayer detects the omission, filing a corrective return within the regular reporting period (by 30 April) does not trigger a sanction. After that date and up to the start of an audit, a correction is still possible but interest accrues. Once an audit order is served, the options for voluntary correction narrow significantly.

Frequently asked questions