Dividend Tax in Bulgaria — 5% in Brief

You receive a dividend from a stock or an ETF and notice that the amount in your account is a little smaller than the one announced. The reason is usually one small but important tax. In Bulgaria, dividends are taxed under a separate regime from the gain on sale, and the rate is generally around 5%. This article explains how that regime works as we understand it as of 2026, and why it matters not to confuse it with capital gains tax.

⚠️ This is educational material, not tax or investment advice. Tax rules change and depend on the specific case. Verify everything with the National Revenue Agency (NRA) (opens in new tab) or a licensed tax adviser before you declare anything or make a decision.

A dividend is not the same as a gain on sale

Many people lump the two together under the general heading of "income from stocks," but for tax purposes these are two different worlds:

• Dividend — the company pays you part of its profit while you hold the stock. You are not selling anything.
• Capital gain — you realize it only when you sell an asset for more than you paid for it.

That is why the tax on gains from shares deals with one case (the sale), while this article deals with the other (the distribution of profit while you hold). Mixing them up is a common mistake that leads to wrong expectations about how much you will actually get in your pocket.

The rate in brief: around 5% final tax

The framework you should check against the current Personal Income Tax Act (ZDDFL) is roughly the following for individuals:

The key word is "final." With dividends from Bulgarian companies, the tax is usually withheld and paid by the payer before the money reaches you. You receive the net amount, and the obligation on this particular income is as a rule settled — which is where "final" comes from.

A simple numerical example: if the company distributes a gross dividend of €1,000, at a 5% rate €50 is withheld and €950 lands in your account. Usually you do not need to calculate and pay anything extra on this income yourself.

"Withholding at source" versus "you declare it yourself"

In practice, the difference comes down to who pays the tax to the treasury:

• Withholding at source. The payer of the dividend calculates the tax, withholds it, and transfers the remainder to you. Typical for dividends from resident (Bulgarian) companies.
• Declaring it yourself. When no one has withheld the tax on your behalf — most often with dividends from abroad — the responsibility to declare and pay it usually falls on you, in the annual tax return.

It is exactly this boundary that confuses people. "If it is a final tax, then there is nothing for me to do" is true for domestic dividends, but not necessarily for foreign ones. Exactly when an obligation to declare arises is something we look at in detail in do I have to declare gains to the NRA.

Foreign dividends and double taxation

If you receive a dividend from a foreign company, it is possible for two countries to claim tax on one and the same income: the country of the company (withholding tax there) and Bulgaria.

To avoid paying twice, there are double taxation treaties (DTTs). Broadly speaking, the mechanism allows the tax paid abroad to be credited, up to a certain amount, against the tax due in Bulgaria. Which countries, what rates, and what documents are needed — this is precisely the kind of matter you ask the NRA (opens in new tab) or a consultant about, rather than guessing.

A practical lesson for the investor: accumulating ETFs, which do not pay out a dividend but reinvest it internally, often simplify this question — there is no paid-out dividend to declare. More on the effect of reinvestment in reinvesting dividends: the snowball.

Three common misconceptions

How much the tax "eats" from passive income

The dividend tax looks small, but with a larger portfolio and long-term accumulation it matters. Example: you want €1,000 net per month from a portfolio with a 4% dividend yield.

Without tax you need around €300,000 of capital. With a 5% tax your effective yield drops to 3.8% and you need a little more capital for the same net income. A small difference over a year, but noticeable over decades.

Calculate your own case in the passive-income calculator — now with a 5% tax already included. The full logic of the calculation is in how many stocks you need for €1,000 of passive income.

For the other side — the tax on sale — see the stock-gains tax calculator and switch between a regulated and another market.

A small portfolio example

Say you hold three positions in Bulgarian companies that distribute a dividend for the year. Here is how the calculation looks at a 5% rate:

From gross dividends of €1,000, €950 remains net. When it comes to Bulgarian companies, the tax is usually already withheld before the amounts land in your account — that is, the table describes what you actually see, not something you have to calculate and pay separately. With foreign dividends the same arithmetic applies, but you are more likely to be responsible for the declaration.

Common questions

Does a dividend reduce my capital gain later? Not directly. A dividend is income while you hold; a capital gain is calculated on sale, from the difference between the purchase and sale price. These are two separate regimes with two separate calculations.

What if I reinvest the dividend immediately? A paid-out dividend usually remains taxable income, even if on the same day you buy more stocks with it. It is different with an accumulating ETF, which does not distribute at all — to verify with the NRA (opens in new tab).

How is a dividend in dollars treated? It is usually converted into the reporting currency at the relevant exchange rate. The exact rate and the moment of conversion are a detail to check against the current rules.

Do I need to keep anything for the tax authorities? Yes — the statements that show the gross dividend, the withheld tax, and the date. With foreign dividends, the document for the tax paid abroad is key to any possible credit under a double taxation treaty.

What this does NOT mean

• It is not personal advice. The 5% rate, the "final tax" regime, and the treatment of foreign dividends are an educational framework to be verified against the current Personal Income Tax Act (ZDDFL) — not an authoritative statement about your case.
• It does not cover every situation. Dividends received through a company (rather than as an individual), funds with a different structure, liquidation shares — these are separate cases with their own rules.
• The numbers are a guide. 5% is a starting point for understanding, not a guarantee of your specific rate. Always check the current rules.

Sources

• NRA — the National Revenue Agency (opens in new tab) — the current Personal Income Tax Act (ZDDFL), the regime for taxing dividends, double taxation treaties, deadlines, and tax-return forms.

Continue reading

• Capital gains tax on shares in Bulgaria — the other side: taxation on sale.
• Do I have to declare gains to the NRA? — when and what is reported on the annual return.
• Tax on ETFs and cryptocurrencies in Bulgaria — how these two increasingly popular asset classes are treated.
• Reinvesting dividends: the snowball — how the dividend tax affects compound interest.
• Investing for beginners — the whole picture, step by step.

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