When planning payments to business owners and highly paid specialists in Bulgaria, the key question is the choice between paying a salary and paying dividends. The main factor here is the existence of a maximum threshold for social security contributions.
| Corporate tax | 10% |
| Dividend tax | 5% |
| Personal income tax (DDFL) | 10% |
| Max. insurance threshold (2026) | 2 111.64 € |
| Total insurance contributions (up to the threshold) | ~32.7% |
This is a two-stage process. First the company pays profit tax (10%), then dividend tax (5%) is withheld from the remaining amount.
Effective tax burden: 14.5% fixed on any amount.
The burden is progressive-regressive:
To determine the amount at which the taxes under both schemes become equal, we solve an equation where the company’s total costs (Total Cost) are denoted as X.
13 810 € per month
| Indicator | Salary scheme | Dividend scheme |
|---|---|---|
| Total company costs | 13 810 € | 13 810 € |
| Total taxes | 2 002 € | 2 002 € (14.5%) |
| Net in hand | 11 808 € | 11 808 € |
1. Income up to €13,800 per month: Dividends are more advantageous (a 14.5% burden versus ~33-15% for salary).
2. Income above €13,800 per month: Salary is more advantageous, since on every “extra” euro you pay only 10% tax rather than 14.5%.
3. Social aspect: A high salary generates maximum pension credits and secures maximum sick-leave payments, unlike dividends.
If you have chosen the high-salary strategy, it is essential to pay it MONTHLY. Why can’t you book one huge salary at the end of the year?
1. Risk of reclassification. There is case law in which the National Revenue Agency (NAP) treats one-off large payments at the end of the year as hidden distribution of profit. You may be accused of attempting to avoid dividend tax.
2. Litigation risks. Inspecting authorities look at the economic logic: a salary is payment for regular work. If it is paid once a year, it looks more like a bonus or a dividend, which leads to additional assessments and fines.
Do you want to save on taxes legally with high income? Set a high monthly salary. It is both cheaper (10% instead of 14.5% on the excess) and safer from a legal standpoint.
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