Taxation of Dividends, Liquidation Shares and Stock Income in Bulgaria (2026)

Dividend Tax for Individuals

Dividend income distributed to resident individuals is subject to a final withholding tax of 5 % pursuant to Art. 38(1) and Art. 46(3) of the Personal Income Tax Act (PITA).

Tax Base and Withholding

The tax base is the gross amount of the declared dividends. The tax is withheld by the company distributing the dividend at the time of accrual. The payer must remit the withheld tax to the budget by the end of the month following the quarter in which the dividend was accrued (Art. 65(2) PITA).

Combined Tax Burden

When distributing profit from a limited liability company (OOD/EOOD), the total tax burden for the owner comprises two components: 10 % corporate income tax on the company's profit (under CITA) and 5 % dividend tax (under PITA). The combined effective rate is 15 % of the original profit (not 14.5 %, as the dividend tax is levied on the net amount after corporate tax).

2026 Budget and the 10 % Proposal

The draft 2026 budget proposed increasing the dividend tax rate from 5 % to 10 %. However, the proposal was not adopted — due to the early parliamentary elections scheduled for 19 April 2026, the 2025 budget was extended for 2026. Consequently, the 5 % rate remains in force for the entire 2026 tax year.

Liquidation Share

Upon dissolution of a company through liquidation, partners/shareholders receive liquidation shares, which are subject to taxation.

Rate and Legal Basis

Liquidation shares distributed to resident individuals are subject to a final withholding tax of 5 % under Art. 38(4) of PITA.

Tax Base

The tax base is the positive difference between the value of the liquidation share and the documented acquisition cost of the shares/interests. If the difference is negative (i.e. the liquidation share is less than the acquisition cost), no tax is due.

Corporate Treatment of Assets

Under Art. 165(1) of the Corporate Income Tax Act (CITA), upon liquidation, the company's assets are treated as sold at market value as of the date of distribution. This means that if the market value of assets exceeds their book value, the company owes corporate tax on the difference before distributing liquidation shares.

Withholding and Deadline

The tax is withheld by the company in liquidation and must be remitted to the budget by the end of the month following the quarter of the liquidation share accrual.

Capital Gains from Stocks (Individuals)

Income from the sale of shares and interests that does not qualify for an exemption is taxed under the general provisions of PITA.

Rate and Tax Base

Capital gains from the sale of shares and interests are subject to 10 % tax under Art. 33(3) of PITA. The tax base is the sum of realised gains from share transactions minus the realised losses from such transactions for the same tax year. Since 2024, 10 % statutory deductible expenses are recognised.

Filing and Deadline

Capital gains are declared by the individual in the annual tax return under Art. 50 of PITA, Appendix 5 (income from transfer of rights or property). The filing deadline is 10 January to 30 April of the year following the tax year.

Tax Exemption

Under Art. 13(1)(3) of PITA, tax-exempt are income from the sale or exchange of shares traded on a regulated market (Bulgarian Stock Exchange or another regulated market in the EU/EEA), provided the shares have been held for more than 24 months. This represents a significant tax advantage for long-term capital market investors.

Corporate Treatment of Dividends

The tax regime for dividends received by legal entities differs substantially from that applicable to individuals.

Dividends Between Bulgarian Companies

Under Art. 27(1) of CITA, dividends distributed by one Bulgarian company to another Bulgarian company are not subject to tax (0 %). This provision prevents double taxation at the corporate level.

Parent-Subsidiary Directive

For dividends from subsidiaries within the EU/EEA, an exemption from withholding tax applies when the following conditions are met:

• The parent company holds a minimum 10 % shareholding in the subsidiary's capital.
• The participation has been maintained for an uninterrupted period of at least 2 years.
• Both companies are tax residents of EU/EEA member states and are subject to corporate income tax.

Withholding Tax for Non-Residents

Dividends distributed to foreign legal entities (outside the scope of the Directive) are subject to a 5 % withholding tax under Art. 194 of CITA. This rate may be reduced or eliminated under an applicable Double Tax Treaty (DTT) between Bulgaria and the recipient's country of residence.

Hidden Profit Distribution

Hidden profit distribution is among the highest-risk tax violations monitored by the National Revenue Agency (NRA) during audits and inspections.

What Is Hidden Profit Distribution?

Under § 1(5) of the Supplementary Provisions of CITA, hidden profit distribution occurs when a company makes payments or incurs expenses in favour of partners/shareholders or related persons that are not characteristic of ordinary business activity and are not documented as such.

Tax Consequences

• Hidden profit distribution is treated as a dividend and is subject to the 5 % final withholding tax under PITA (for individuals) or withholding tax under CITA (for non-residents).
• In addition to the tax, the company owes a 20 % penalty on the amount of hidden profit distribution under Art. 267 of CITA. This penalty, however, does not apply if the company self-declares the hidden distribution in its annual tax return.
• Expenses qualifying as hidden profit distribution are not recognised for tax purposes and are added back to the taxable financial result.

Typical Examples

• Personal expenses charged to the company — purchase of personal property (car, electronics, furniture) at the company's expense when not used for business purposes.
• Below-market-rate loans to partners — extending loans to partners or related persons at interest rates significantly below market rates, or without interest altogether.
• Inflated remuneration — paying disproportionately high fees to related persons for services that do not correspond to their actual scope and value.
• Above-market rent — renting property from a partner at a price significantly exceeding the market rate.

Comparative Table

The table below summarises the tax rates, applicable legal bases and filing deadlines for the various types of equity participation income:

Frequently Asked Questions