Dividend or salary: how to take money out of your Bulgarian company

The company's money is not your money

The first thing to accept as the owner of a Bulgarian EOOD (a single-member limited liability company): your company is a separate legal person. Its bank account is not your personal account, even if you are the sole owner and the only person who decides anything. Legally these are two different pockets, and the law only recognizes two legitimate ways to move money from one to the other: a dividend or a salary.

The most common beginner mistake among foreign founders is a third, informal option: pulling money out of the company account whenever needed, without running it through a dividend decision or payroll, without a paper trail. It feels harmless, especially when the company is small and the money is “obviously yours anyway.” In practice it creates accounting chaos: the withdrawals sit as unexplained amounts owed by you to the company, your accountant cannot classify them cleanly, and closing the year turns into detective work over what each withdrawal was for.

The bigger risk is tax exposure. If Bulgaria's tax authority (NRA) reviews the company and sees repeated, undocumented withdrawals, it can recharacterize them, for example as a hidden profit distribution or a non-deductible expense, with consequences less favorable than a properly declared dividend. So the first step toward a calm bank account is simple: decide upfront which of the two legal routes you use, and use it consistently, not in bursts whenever cash is needed.

The dividend route

A dividend is your share of the company's after-tax profit, distributed to you as the owner. The mechanics happen in two steps:

• The company pays 10% corporate income tax on its annual profit (Corporate Income Tax Act, Art. 20).
• What remains can be distributed as a dividend. On payout, the company withholds a further 5% dividend tax (Personal Income Tax Act, Art. 38(1)) and transfers you the rest. For Bulgarian tax residents this tax is final. You do not declare it again personally.

Who decides, and when? In a single-member EOOD, the decision to distribute a dividend is yours, but it needs to be documented with a written resolution, not just a bank transfer with no paper trail behind it. The usual practice is to distribute after the financial year closes, based on the annual financial statements, once profit is confirmed in numbers. The annual corporate tax return (Art. 92, Corporate Income Tax Act) is filed and the tax paid by 30 June of the following year, so the real dividend cash flow typically starts in spring.

Some owners want to pull a dividend during the year, before the annual accounts are finalized, a so-called interim or advance dividend. This is technically possible under certain conditions, but the legal and tax framework around it is less settled than for the regular annual dividend. If you are considering this, check with your accountant first whether and how it applies to your specific company before transferring anything.

One more layer for foreign owners: the 5% Bulgarian dividend tax is what your Bulgarian company withholds. Whether you owe anything additional back home depends on your personal tax residency and any double-tax treaty between Bulgaria and your home country. That is a real question, not a formality. Check it with a tax advisor in your home jurisdiction. We are not going to give treaty-specific advice here, because it genuinely depends on where you are tax resident.

The salary and social-security route

The second legal route is to pay yourself a salary as the company's manager. The mechanics are different here: if you personally work for your own company as its manager, you fall under the “self-insured person” category under the Social Insurance Code (Art. 4(3)). That means you owe pension and health insurance contributions on an insurable income you choose, but not below a minimum threshold that the state resets every year (which is exactly why we are not quoting a specific figure here: check the current minimum insurable income with your accountant or on the NRA/NSSI websites before you fix a salary amount).

• Unlike a dividend, a salary is a deductible business expense: it reduces the accounting and taxable profit that the 10% corporate tax is later calculated on.
• The salary itself is subject to personal income tax, plus social contributions owed by both you and the company as employer.

In short: salary saves corporate tax on the way in, but carries extra social-security weight that a dividend does not.

If you also have other employees, payroll and labor contracts are a separate topic. This section is specifically about the owner-manager's own pay.

The combo most small owners actually use

In practice, most small-company owners do not pick one or the other. They combine both: a minimal salary that covers the mandatory self-insurance floor (which also gives you health coverage, insured work history, and future pension credit), plus a dividend for the rest of the year's profit. The logic is simple: once the legal minimum is covered, extra money usually comes out cheaper as dividend, because the 5% dividend tax tends to be lower than the added social-security cost of pushing a bigger salary through.

Here is a simplified example with round numbers, purely to illustrate the logic (it does not include the manager's own salary as a separate expense):

• Company profit for the year: €10,000.
• Corporate income tax at 10%: €1,000.
• Remaining, distributable as dividend: €9,000.
• Dividend tax at 5% on that €9,000: €450.
• Left in your pocket: €8,550.

Your actual mix of salary and dividend depends on your specific company, cash flow through the year, and the current insurance thresholds (and, if you are a foreign owner, on your home-country tax treatment of the dividend). Treat the numbers above as a teaching example, not tax advice for your specific situation.

What you should never do

The two legal routes are dividend and salary. Everything else carries risk, even when it feels practical in the moment:

• Running personal expenses through the company as “costs.” Restaurants, a personal car, travel, clothing, booked through the company just because there is an invoice, with no real business connection. If the tax authority reviews these and does not accept the business justification, you lose the tax deduction and risk the amount being treated as a hidden profit distribution, taxed differently (and usually worse) than a regular dividend.
• Loans from the company to yourself. Technically possible, but a sensitive area: it needs a written agreement, a market interest rate, and a real repayment schedule. Without that, the tax authority can treat it as an attempt to sidestep dividend tax. If you are considering a loan like this, discuss it with an accountant beforehand. We are flagging the issue here, not giving you the full legal analysis.

The general rule is simple: if money moves from the company to you without going through payroll or a documented dividend decision, assume it carries risk.

What about more complex cases?

Honestly: if you are the sole owner of a simple company with no other partners, the logic above holds almost always. It gets more complex with multiple co-owners with different ownership shares (distribution is usually proportional to the share, but the founding agreement can set it up differently), with a dormant company that has no profit to distribute, or with a company whose “profit” is mostly on paper: for example a property revaluation rather than cash in the bank. In those cases, mechanically applying the example above is not enough: your specific numbers need a real look.

Useful next reads:

What annual closing looks like with FreeMe.bg
How VAT and tax filing will work
When you need an expert and what is included

This is exactly what FreeMe.bg's annual closing feature is built for: log in with your Google account, and it shows you, in plain language, what your profit is, what tax you owe, and how much you can actually take out as a dividend, before you sign off on distributing anything.