How do I pay myself as a Bulgarian company owner?

As an owner of a Bulgarian OOD or EOOD, you have two main ways to extract profit from your company: a director's salary and dividends. The right approach depends on your social insurance situation, your personal income needs, and your cash flow requirements.

Option 1: Director's salary

A director can receive a management fee or salary from the company. This is deductible from the company's taxable profit for CIT purposes, reducing the 10% CIT base. However, salaries are subject to:

• Personal income tax (PIT): 10% flat rate, withheld at source
• Employee social and health insurance: approximately 13.78% of gross salary (withheld from the employee)
• Employer social and health insurance: approximately 18.92% of gross salary (paid by the company on top of the salary)

For every BGN 100 of gross salary, the company pays approximately BGN 18.92 in employer contributions in addition. The employee receives roughly BGN 76.22 after PIT and employee contributions.

The mandatory minimum insurable income for self-employed individuals and directors who are also owners is BGN 933 per month (2024 figure). The maximum insurable income cap is BGN 3,750 per month. Contributions above the cap are not required on the excess.

Social insurance contributions fund the Bulgarian state pension, sick pay, maternity pay, and the National Health Insurance Fund (NHIF). Directors who pay social insurance accrue pension rights and are entitled to state health cover.

Option 2: Dividends

Once the company has paid corporate income tax at 10%, the remaining after-tax profit can be distributed as dividends to shareholders. Dividends are subject to a 5% withholding tax, deducted at source by the company before the net amount reaches you.

Dividends are not subject to personal income tax, social insurance, or any other charge beyond the 5% withholding. This makes dividends highly tax-efficient for owners who have other sources of social insurance coverage or who are not concerned with accruing additional Bulgarian social insurance benefits.

The combined effective tax rate on profit extracted as dividends: - BGN 100 pre-tax company profit - Less 10% CIT: BGN 10.00 - After-tax profit: BGN 90.00 - Less 5% dividend withholding on BGN 90: BGN 4.50 - Net in your pocket: BGN 85.50 - Effective rate: 14.5%

Option 3: Mixed approach

Many owners take a small salary (at or just above the minimum insurable base of BGN 933 per month) to maintain social insurance coverage, accrue pension rights, and ensure eligibility for sick pay and state health insurance. They then take most of their income as dividends.

A salary at the BGN 933 minimum base costs the company approximately BGN 1,109 per month all-in (salary plus employer contributions). This provides full state insurance coverage at relatively low cost.

Dividend frequency and documentation

Dividends must be approved by a formal shareholder resolution (Reshenie na sobstvenika for an EOOD, or a General Meeting resolution for an OOD). There is no legal minimum or maximum frequency: dividends can be paid monthly, quarterly, or annually. Most Bulgarian accountants recommend quarterly or annual distributions to keep administration simple.

The 5% withholding tax must be declared on the monthly NRA declaration for withholding tax and paid to the NRA by the 25th of the month following the distribution.

Non-resident shareholders and double taxation

If you are not a Bulgarian tax resident and receive dividends from a Bulgarian company, the 5% withholding tax in Bulgaria is usually the final Bulgarian tax liability. Your home country may or may not have further tax obligations depending on its own rules and any applicable double tax treaty with Bulgaria.