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How to Distribute Dividends in Bulgaria as a Foreign Shareholder – 2025 Guide
If you are a foreign shareholder, understanding how dividends are distributed from a Bulgarian company is essential. The process involves specific legal steps, taxation rules, and documentation requirements. In this guide, we explain how to plan your dividend payments correctly in 2025 and avoid unnecessary tax costs. Stay with us to learn more about how to distribute dividends in Bulgaria as a foreign shareholder.
When Can Dividends Be Paid?
In Bulgaria, dividends can only be paid if the company has reported a profit. There are two main options:
- After the financial year ends – based on the approved annual financial report and confirmed profit. This is the most common method and is often applied after the general meeting approves the yearly accounts.
- As interim (advance) dividends – during the year, based on quarterly financial statements. This is allowed only if the company has sufficient profit for the specific period.
If you plan to distribute interim dividends, you must:
- Prepare quarterly accounting statements proving the availability of profit.
- Issue a shareholder or sole owner resolution specifically approving the interim dividend.
- Follow the same procedures as with final dividends, including tax declaration and payment.
Legal Steps for Dividend Distribution
The distribution of dividends requires strict compliance with Bulgarian corporate law. Below is a step-by-step overview:
| Step | Action Required |
|---|---|
| 1. Shareholder Decision | Hold a General Meeting or issue a sole owner resolution approving the dividend amount. |
| 2. Dividend Protocol | Prepare a written protocol specifying the amounts for each shareholder and the payment date. |
| 3. Accounting Record | Record the dividend as a liability in the company’s accounting books. |
| 4. Withholding Tax | Calculate and pay the 5% withholding tax and file the required declaration with the National Revenue Agency (NRA) within the statutory deadlines. |
Taxation for Foreign Shareholders
Foreign individuals and companies are generally subject to a 5% withholding tax on dividends paid by Bulgarian companies. However, a reduced rate or tax exemption may apply if your country has a Double Tax Treaty (DTT) with Bulgaria.
To benefit from a DTT:
- Obtain a valid Tax Residency Certificate from your local tax authority.
- Submit the certificate together with the relevant NRA form before the dividend payment.
Failure to provide these documents on time means you will pay the standard 5% withholding tax, and reclaiming it later can be a lengthy process. Planning your tax documentation in advance is strongly recommended.
How Are Dividends Paid?
Once all approvals are in place, dividends can be paid:
- Directly to your foreign bank account or to a Bulgarian bank account under your name.
- In BGN, EUR, or another agreed currency, depending on the shareholder’s preference.
- Via bank transfer or another legally accepted payment method, provided it is properly documented.
Your accounting records must reflect the payment, and the withholding tax must be declared and paid to the NRA. Incorrect or delayed reporting can lead to fines and additional tax obligations.
Practical Tips for 2025
- Plan your dividend payments together with your accountant to ensure compliance with Bulgarian corporate and tax rules.
- Always keep copies of shareholder resolutions, tax certificates, and NRA filings for future audits.
- If you plan to reinvest your dividends or expand your business, consider consulting on corporate taxation to optimize your overall tax burden.
Key Takeaways
- Dividends can be distributed annually or as interim payments if sufficient profit is available.
- Foreign shareholders are subject to 5% withholding tax unless a DTT reduction or exemption applies.
- Proper resolutions, protocols, and timely tax filings are mandatory for legal compliance.
- Consulting a professional accountant ensures correct documentation and avoids future tax complications.
At ASB Accounting Services Bulgaria, we assist foreign investors with dividend distribution, tax planning, and compliance. Contact us today to ensure a smooth and legally compliant process in 2025.