I. General provisions:
Each partner in a limited liability company (LLC) in Bulgaria has the right to participate in the distribution of the company’s profit. Each partner has a partnership share of the company’s property, the amount of which is determined according to his share in the capital. The share in the capital determines the property rights of the partners, one of which is the right to part of the profit (dividend right).
An important condition for the distribution of dividends is that the company has been profitable in the last year. Even if in the last year it has been at a loss, there is no prohibition on distribution of profit for the previous years.
For tax purposes, the concept of dividend includes several categories of income: income from shares; income from shareholdings, including from unincorporated companies and from other rights treated as income from shares; hidden profit distribution.
It is important to specify the tax type on dividend income. Taxable income from dividends in favor of local individuals from sources in Bulgaria and abroad is subject to final tax. The final tax on dividend income is determined on the gross amount determined by the dividend distribution decision. The decision for distribution of profit in the form of dividends to the partners must be documented by drawing up a protocol.
II. Declaration and payment of the final tax:
When taxing income from an accrued dividend, the tax rate is 5%.
For the accrued dividend, the tax is withheld and paid by the company – the payer of the income, by the end of the month following the quarter in which the decision for distribution of the dividend was made.
Companies – payers of income, obliged to withhold and pay a final tax, submit a declaration by a template for the tax due, which is submitted within the deadlines for paying the tax due.
Another obligation of the paying company is the submission to the National Revenue Agency by February 28 of the following calendar year of a report by a template on the income paid during the year.
It is important to note that domestic source dividend income earned by an individual during the year is not subject to declaration in the annual tax return.
For consultation regarding the tax treatment of dividend income, you can contact our experts.