TL;DR: Salary or Dividend?
| Method | Tax on Amount | Social Insurance | Pros | Cons |
|---|---|---|---|---|
| Salary | 10% income tax | ~25–30% total | Good for residence status, pension, and health | Expensive, slow, monthly burden |
| Dividend | 5% tax | None | Efficient, simple, once per year | No pension, no health insurance |
| Both | 10% + 5% | Only on salary | Balanced benefits & costs | Still partially taxed at full rates |
If you’re a non-resident foreigner, dividends are often more efficient.
If you’re a resident or applying for residency, a small salary may be advisable.
Who Does This Apply To?
- Foreigners who own an EOOD or OOD company in Bulgaria
- Digital nomads and remote workers who generate foreign income
- Entrepreneurs who want to extract profit from their company legally
- Founders evaluating tax residency, pension, and health contributions
Frequently Asked Questions
What happens if I pay myself a salary?
You become both the employer and employee of your own company. This triggers:
- 10% personal income tax on your salary
- Social security contributions are split as follows:
- ~13.78% employee share (withheld from salary)
- ~18.92% employer share (paid by the company)
Example: Gross salary €1,000/month
- Net to you: ~€860
- Total cost to company: ~€1,200/month
You gain:
- Social security record (for future Bulgarian pension)
- Health insurance if you’re a resident
- Stronger eligibility for residence permits
You lose:
- High ongoing cost
- Monthly payroll filing obligation
- No refund if you leave Bulgaria later
What happens if I pay myself only dividends?
You can declare company profit at year-end and take part of it as dividends.
- Corporate tax: 10% on profits
- Dividend tax: 5% on the amount distributed to you
- No social contributions
Example: Company earns €20,000 net profit
- You pay €2,000 corporate tax
- You withdraw €18,000 as dividends → pay €900 (5%) tax
- Total tax paid: €2,900 (14.5%)
You gain:
- Simpler accounting
- No monthly filings
- Minimal tax burden
You lose:
- No access to the state health system
- No social/pension security in Bulgaria
- Less helpful if applying for residency
Dividends are declared once per year, based on actual profit.
No dividends = no tax due.
Can I take both salary and dividends?
Yes — many foreign founders use a hybrid strategy:
- Take a modest salary (e.g. €300–€500/month) to maintain social insurance and residence status
- Extract most income as dividends at year-end
This approach:
- Reduces total social tax
- Keeps your legal presence strong
- Gives you health insurance if you are a resident
- Ensures you don’t appear inactive to the tax office or banks
Do I need to pay a salary if I’m not living in Bulgaria?
No, you can run the company without any payroll.
If you:
- Are not a Bulgarian tax resident
- Don’t live or work physically in Bulgaria
- Are not applying for any local benefits or permits
Then you’re under no obligation to pay yourself a salary. You can:
- Leave the company dormant
- Take only dividends
- Hire local staff or freelancers (optional)
Can I be employed by my Bulgarian company and live abroad?
Yes — but it creates tax complexity.
If your Bulgarian company employs you but you live in another country:
- You may become subject to foreign tax and social insurance rules
- You may trigger Permanent Establishment (PE) in your country of residence
- You may need to register the company abroad for compliance
This is where international tax planning becomes essential. Speak to a cross-border accountant if you live outside Bulgaria but draw a salary from your Bulgarian company.
What about freelancer or consulting income?
If your company earns freelance income (e.g., marketing, design, software), and you’re the only worker:
- The company pays 10% tax on net profit
- You can extract that profit as dividends
However, be cautious not to blur the line between personal services income and other types of income if you operate in multiple countries.
How often can I pay dividends?
Once a year, after the Annual Financial Statement and General Assembly resolution (even if you’re the only owner).
- Declare profit for the previous financial year
- Pay corporate tax (10%)
- Then distribute dividends to yourself
- File a declaration and pay 5% dividend tax
Your accountant must handle the process — it’s not automatic.
How do banks or immigration officers view this?
Banks: May prefer to see payroll for regularity
Immigration: Residence applications are stronger when you:
- Have a salary
- Show social tax payments
- Maintain a stable business that pays you legally
Tip: Even if it’s just €300/month, payroll helps show you are economically active and compliant.
Summary Table: Salary vs. Dividend
| Feature | Salary | Dividend |
|---|---|---|
| Tax Rate | 10% income + ~25% social | 5% (after 10% corp tax) |
| Monthly Reporting | Required | No |
| Social Security | Yes | No |
| Health Insurance | Yes (if resident) | No |
| Pension Rights | Yes | No |
| Immigration Support | Strong | Weak |
| Cost to Company (net €1K) | ~€1,200 | €1,050 (inc. corp + dividend) |
| Best for | Residents, permit seekers | Non-residents, remote founders |
Final Thoughts
- Non-resident founder, not living in Bulgaria → Dividends only
- Resident wants health + pension benefits → Salary or hybrid
- Planning to apply for digital nomad or business residence → A Small salary is helpful
- Want to minimize total tax → Maximize dividends, minimize salary
Always work with an accountant who understands international tax, especially if you have ties to more than one country.
You Will Also Like To Know About:
- How to Register a Company in Bulgaria
- Types of Companies in Bulgaria – Explained for Foreigners
- How to Keep Your Company Alive — Even If You’re Abroad
- Staying in Bulgaria – Visas & Residence for Founders and Freelancers
TL;DR – Too Long; Didn’t Read 😉
Disclaimer: The information provided in this article is for general informational purposes only and does not constitute legal, tax, or financial advice. While we strive to ensure accuracy and relevance, laws and administrative practices are subject to change. Always consult a qualified legal or tax advisor before making business or residency decisions in Bulgaria. Last updated: September 2025.
