Dividends from Bulgaria: What Is Left After Tax in Germany and Austria

Bulgaria promotes itself with one of the lowest corporate tax rates in the EU. For a shareholder who lives in Bulgaria, the calculation really is short: of €100 of profit, €85.50 is left after corporate tax and withholding tax. If you live in Germany or Austria instead, however, dividends from Bulgaria are taxed a second time there. Only the Bulgarian withholding tax is credited. How much is left after tax therefore depends above all on two things: where you are resident, and whether the shares are held by an individual or by a company. The following worked examples for the typical situations show what this means in practice.

The Bulgarian side: 10% and 5%

On the Bulgarian side, the company’s profit is first subject to a flat corporate tax of 10%. If the company then distributes to an individual, it withholds a tax of 5%, regardless of whether the recipient lives in Bulgaria or abroad. For shareholders resident in Bulgaria, this tax is final. If the distribution goes to a company that is tax resident in the EU or the EEA, no withholding tax is due in Bulgaria, except in the case of hidden profit distributions. A plan in the draft 2026 budget to double the dividend tax to 10% was dropped again at the end of 2025.

All of the following examples assume that the company is genuinely managed in Bulgaria. If the key decisions are taken in Germany or Austria, the company itself is already taxable there, and the calculation starts all over again. Why that is the case is explained in “Forming a Company Abroad: Seven Myths Every Founder Should Know”.

Shareholders in Germany: flat tax with a credit

If an individual resident in Germany holds the shares, dividends from Bulgaria are generally subject to the 25% flat tax on investment income, the Abgeltungsteuer (§ 32d Abs. 1 EStG, the German Income Tax Act). As no German bank withholds the tax, the income must be included in the income tax return. The Bulgarian withholding tax is given as a credit, capped at 25% and only to the extent permitted by the double tax treaty (§ 32d Abs. 5 EStG). The treaty between Germany and Bulgaria allows up to 15% for individuals, so the 5% actually levied can be credited in full. For such dividends, the treaty expressly provides for the credit method in Germany, not for exemption.

The total tax burden is therefore €32.50 per €100 of profit, plus any solidarity surcharge. For church members, the flat tax is reduced, but church tax is added.

Option for entrepreneurial shareholders: the partial income method

Shareholders with an entrepreneurial stake can apply for the partial income method (Teileinkünfteverfahren) instead of the flat tax. This option requires a holding of at least 25%, or of at least 1% if the shareholder also works for the company in a professional capacity and can thereby exert significant entrepreneurial influence on its activities (§ 32d Abs. 2 Nr. 3 EStG). In that case, 40% of the distribution is tax-free (§ 3 Nr. 40 EStG), and the remaining 60% is taxed at the shareholder’s personal income tax rate. Whether the method pays off depends on that rate. The application must be made no later than with the income tax return and, unless revoked, also applies for the following four years.

Shareholders in Austria: 27.5% with a credit

In Austria, dividends are subject to the special tax rate of 27.5% (§ 27a Abs. 1 Z 2 EStG 1988). If they are not paid out through an Austrian securities account, nobody deducts the capital gains tax (Kapitalertragsteuer); the distribution must then be declared in the tax return. According to the Ministry of Finance, foreign withholding tax can be credited up to the amount provided for in the relevant treaty. The treaty between Austria and Bulgaria allows a withholding tax of 5% for individuals, so the Bulgarian tax can be credited in full.

In Austria, the burden thus adds up to €34.75 per €100 of profit.

When a GmbH or holding company holds the shares

The picture changes when it is not you personally but a GmbH or holding company that holds the Bulgarian shares. Bulgaria then withholds no tax, provided the receiving company is tax resident in the EU or the EEA.

Where a German GmbH is the shareholder, dividends from Bulgaria are generally tax-free under § 8b Abs. 1 KStG (the German Corporate Income Tax Act); however, 5% are treated as non-deductible business expenses (§ 8b Abs. 5 KStG), so that in effect 95% are tax-free. This requires a holding of at least 10% at the beginning of the calendar year (§ 8b Abs. 4 KStG). For trade tax (Gewerbesteuer), at least 15% at the beginning of the assessment period is needed (§ 9 Nr. 7 GewStG).

An Austrian corporation receives the distribution tax-free as an international participation (internationale Schachtelbeteiligung) if it has held at least one tenth for at least one year (§ 10 KStG 1988); separate exemptions apply to smaller holdings in companies in the EU. At the latest when your own GmbH distributes to you personally, however, taxation in your country of residence comes back into play.

The comparison: residence makes the difference

A direct comparison shows how much of a difference your residence makes. All figures refer to €100 of profit of a company managed in Bulgaria that distributes everything to an individual:

Only those who live in Bulgaria themselves therefore enjoy the full benefit of the low Bulgarian rates. For shareholders in Germany or Austria, the total burden is more than twice as high. Anyone planning a structure involving dividends from Bulgaria should therefore base the calculation on their own situation, not on the tax rate in the brochure. You will find the key facts about the location on our country page on Bulgaria; how double tax treaties work in general is explained in “Double Tax Treaties: How a Treaty Protects Your Company Abroad”.

Frequently asked questions about dividends from Bulgaria

Questions that are frequently asked about this topic, answered briefly:

The worked examples are simplified and take into account neither allowances nor personal circumstances. This article is for general information only and does not replace tax or legal advice. Last reviewed: October 2026.