Tax treatment of dividends under ITNPA

The dividend is the part of the balance sheet profit that each capital provider expects to receive after the end of the year or as agreed according to their percentage participation in the share capital of the company.

According to Art. 38 ITNPA, income from:

• dividends in favour of a sole proprietor;
• dividends and liquidation shares in favour of:

1. a local or foreign natural person where the income originates from a source in Bulgaria;

2. a local natural person where the income originates from a source abroad,

is taxable by the so-called withholding tax.

In accordance with Bulgarian tax law, the tax due is calculated on the gross amount determined by a decision of those responsible for allocating the dividends, and amounts to 5 per cent.

The tax is withheld and paid by the paying company by the end of the month following the quarter, in which the decision for allocation has been taken, in the territorial directorate of the National Revenue Agency where the company has its registered office.

A special obligation exists for businesses and self-employed persons - payers of income: to prepare a statement in standard form for the income from dividends paid by them during the year, subject to final tax.

Overpaid taxes or paid amounts without being due as taxes on income, received by foreign natural persons are refunded by the territorial directorate of the National Revenue Agency, where the income tax of the person is subject to payment.

To learn about the tax treatment of dividends under CITA, see here.