General Information on Withholding Tax

Bulgaria levies withholding tax on various types of income (dividends, interest, royalties, capital gains from shares and real estate disposal, technical services, etc. ) due by local payers to foreign legal entities.

The general withholding tax rate is 10% on the gross amount (in the common case) of the accrued income, except for the dividend and liquidation quota distribution which is subject to 5% withholding tax.

Those rates may be reduced or the income recipient may be exempt from withholding tax under a Double Tax Treaty (DTT) between Bulgaria and the recipient state. Currently, Bulgaria has 68 effective bilateral DTTs (incl. with all European Union countries, the USA, Canada, Japan, China, India, Turkey, Russia, etc.).

EU/EEA Benefits

Some favourable rules are available for income payable to eligible recipients from the EU and/or the European Economic Area:

  • no withholding tax is levied on dividend and  liquidation quota distributions in favour of EU/EEA tax resident legal entities
  • no withholding tax is levied on certain EU tax resident recipients of interest and royalties income
  • there is a possibility for a net taxation of certain types of income payable to qualifying EU/EEA legal entities

Administrative Issues

There are detailed rules for:

  • withholding tax chargeability
  • terms for declaration and payment
  • the person liable for withholding, payment and declaring the withholding tax
  • application for a DTT clearance
  • obtaining a certificate for the paid withholding tax