A 5% withholding tax is levied on dividends and distributions arising on the liquidation of resident companies to foreign legal entities, except where the dividends are realised by a permanent establishment in Bulgaria.
Dividends and similar distributions are exempt from withholding tax where paid to companies and other legal entities resident in an EEA member state.
A 10% withholding tax is levied on the following to non-residents (except where paid to a Bulgarian permanent establishment):

  • Income from inancial assets issued by local legal entities the state and the municipalities and income originating from transactions in such assets
  • Interest including interest comprised in financial leasing contributions
  • Income originating from rent of any granting of the use movable property
  • Royalties
  • Remuneration for technical services
  • Remuneration under franchising contracts and factoring contracts
  • Remuneration under contracts for management and supervision of a Bulgarian legal entity.
  • Income from real estate or from transactions in real estate
  • Scholarships awarded for training within the country and abroad
  • Author`s and licence remuneration
  • Awards and remuneration for activities carried out in Bulgaria by nonresidents eg public figures, scientific workers, eminent figures in arts, culture and sport
  • Income originating from the sale or exchange or any other transfer for consideration of stocks, shares, compensatory instruments, investment bonds and other financial assets.

From 2010, individuals who are resident in another EU or EEA member state may be exempt, in some cases, from withholding tax on Bulgarian source income.
In addition, residents of EU or EEA countries which have received income (other than dividends and distributions) from sources in Bulgaria subject to withholding tax may opt for recalculation of the withholding tax so as to pay 10% tax on a net basis, i.e. the tax which would have been payable had the profit been derived by a Bulgarian tax resident. The income and the pertinent expenses are to be determined in accordance with the IFRS.
Recipients are entitled to a tax refund up to the amount of the tax on which they are unable to claim credit in their home territory.
If a taxpayer chooses to adopt the net basis of calculation, this must be applied to the total income of the taxpayer from all source in Bulgaria received during the calendar year. The recalculation option is exercised through filing a tax return with the Bulgarian tax authorities by 31 December of the following year.

This facility is not available to resident of EEA countries with which Bulgaria has not concluded a double tax treaty or the concluded tax treaty does not contain ‘exchange of information’ or ‘assistance in the tax collection’ clauses (e.g. Iceland and Liechtenstein).
In applying the new alternative basis of taxation, rent from movable property is deemed to be royalty income