How Do I Pay Myself from a Bulgarian EOOD? Salary vs Dividends Explained

The #1 Question Every EOOD Owner Asks

You have a Bulgarian EOOD. It is making money. Now what? The single most common question we hear from EOOD owners is: how do I actually get the money out of the company and into my personal bank account?

The answer matters more than most people realize. Choose the wrong method and you could pay an effective tax rate above 40%. Choose the right structure and your effective rate drops to 15-17% on the same income. The difference on EUR 60,000 of annual profit is over EUR 3,000 per year.

This guide covers the three ways to pay yourself, the exact tax and social security implications of each, and the strategy that most EOOD owners use to minimize their tax burden. All figures are in euros and reflect 2026 rates following Bulgaria's euro adoption on January 1, 2026.

Three Ways to Take Money Out of Your EOOD

Bulgarian law gives EOOD owners three paths to extract company profits. Each has different tax consequences.

1. Management Contract Salary (DUK)

You sign a management contract (договор за управление, abbreviated DUK) between yourself as an individual and your EOOD. The company pays you a monthly salary. This salary is subject to personal income tax (10%) and social security contributions (~33%). The salary is a deductible expense for the company, reducing corporate profit.

2. Dividend Distribution

The company pays 10% corporate income tax on its annual profit. After tax, you distribute the remaining profit to yourself as dividends. A 5% withholding tax applies on the distributed amount. No social security applies to dividends. The combined effective rate on distributed profit is 15% (10% CIT + 5% dividend tax).

3. Combination of Both

You pay yourself a salary (subject to income tax and social security) and take dividends from the remaining profit (subject to 5% WHT only). This is the approach most EOOD owners use — and it is the most tax-efficient for the majority of income levels.

Option 1: Management Contract Salary

When you pay yourself a salary through a management contract, the company acts as both employer and (in effect) payroll processor. Three layers of tax apply:

1. Social security contributions — approximately 32.7-33.4% of gross salary, split between the EOOD as employer (~18.9%) and you as the employee (~13.8%). These apply only up to the maximum insurable income of EUR 2,112/month (EUR 25,344/year).
2. Personal income tax — 10% flat rate on salary after deducting the employee's share of social security.
3. Corporate tax offset — the salary (including the employer's social security portion) is a deductible business expense, reducing the company's taxable profit.

Social Security Breakdown (2026)

Key Thresholds for 2026

Option 2: Dividend Distribution

The dividend path works differently and is significantly simpler from a tax perspective:

1. Company profit is taxed at 10% CIT. If your EOOD earns EUR 100,000 in profit, EUR 10,000 goes to corporate tax. EUR 90,000 remains as retained earnings.
2. When you distribute dividends, a 5% withholding tax applies. On EUR 90,000, that is EUR 4,500. You receive EUR 85,500.
3. No social security contributions apply to dividends. Not a single euro.

The combined effective rate: 10% + 5% = 15% on distributed profit. Compare this to the 30-40%+ effective rate when taking everything as salary. The gap is substantial.

When Can You Distribute Dividends?

Dividends can be distributed after the annual financial statements are approved and the company has retained earnings available. As the sole owner of an EOOD, you adopt a written sole owner resolution approving the distribution. The 5% withholding tax must be declared and paid to the NRA by the end of the month following the quarter in which dividends were paid.

Advance Dividends During the Year

If your EOOD has accumulated profits from prior years, you can distribute advance dividends during the current financial year. This is common practice for established companies. For a brand-new EOOD in its first year of operations, you must typically wait until the annual financial statements are prepared and approved before distributing.

The Optimal Strategy: Minimum Salary + Dividends

Here is the core strategy that saves most EOOD owners thousands of euros annually:

1. Register as a self-insured person at the NRA. Choose the minimum insurable income of EUR 620/month. This satisfies the legal insurance requirement.
2. Pay yourself a salary of EUR 620/month through a management contract. Social security contributions on this base total approximately EUR 200/month.
3. Run the company normally — invoice clients, pay expenses, accumulate profit. The salary is a deductible company expense.
4. Distribute remaining profit as dividends after the annual financial statements are approved. Pay 5% withholding tax on the distribution. No social security applies.

This works because social security is capped and dividends are exempt from social security. Every euro above the minimum salary that you shift from salary to dividends saves you roughly 20 percentage points in social security contributions.

Real EUR Calculations at Three Income Levels

We compare the all-salary approach versus the minimum salary + dividends strategy at EUR 3,000, 5,000, and 10,000 monthly company income. We assume social security at ~32.7% (mid-range) and that the EOOD has no other significant expenses besides the owner's compensation.

EUR 3,000/Month (EUR 36,000/Year)

Savings with dividend strategy: EUR 7,334/year. At this income level, the difference is dramatic because the entire salary falls within the social security cap, meaning every euro of salary is hit with the full ~33% contribution burden.

EUR 5,000/Month (EUR 60,000/Year)

*Social security capped at EUR 2,112/month (EUR 25,344/year). Contributions calculated only on income up to cap.

Savings with dividend strategy: EUR 3,605/year.

EUR 10,000/Month (EUR 120,000/Year)

*Social security capped at EUR 25,344/year for both approaches.

Savings with dividend strategy: EUR 905/year. At higher income levels, the advantage narrows because most salary already exceeds the social security cap. The salary portion above EUR 25,344 is taxed at just 10% PIT, which is close to the 15% combined dividend rate.

When Salary-Only Makes Sense

The dividend strategy is not always the right choice. There are legitimate reasons to pay a higher salary:

• Pension credits. Your Bulgarian state pension is calculated based on insurable income and years of service. Paying minimum salary means minimum pension credits. If you plan to retire in Bulgaria or claim a Bulgarian pension, a higher salary increases your future pension.
• Mortgage applications. Bulgarian banks evaluate personal income when approving mortgage applications. Dividend income may not be weighted as heavily as salary income. If you are applying for a property purchase loan, a documented salary helps.
• Maternity leave eligibility. Maternity benefits in Bulgaria are calculated based on the insurable income for the last 24 months. A higher declared salary directly increases maternity pay.
• Income above EUR 180,000. At very high income levels, the all-salary approach can become slightly cheaper because most income exceeds the social security cap and is taxed at just 10% PIT — below the 15% combined dividend rate. Consult your accountant for the exact crossover point in your situation.

Risks and Pitfalls

NRA Scrutiny of Low Salary

The National Revenue Agency (NRA) can and does scrutinize companies where the owner takes minimum salary while the company shows high revenue. While the minimum salary + dividends strategy is legal and well-established, you must maintain proper documentation:

• A management contract specifying the insurable base
• Written sole owner resolutions for every dividend distribution
• Clean separation of company and personal bank accounts
• Timely filing of the 5% withholding tax declarations

Hidden Profit Distribution

If the NRA determines that your EOOD is making disguised distributions to you — personal expenses paid by the company, loans to the owner that are never repaid, below-market transactions between you and the company — they can reclassify these as dividends and impose a 20% penalty tax on top of the standard 5% withholding. Keep company and personal finances strictly separated.

Undistributed Profits Accumulation

There is no legal obligation to distribute profits every year. However, if you accumulate large undistributed profits while taking minimum salary and claiming to live modestly, the NRA may question the arrangement. Distribute profits regularly and document the business rationale for any retained earnings.

Timing of Distributions

Dividends distributed without sufficient retained earnings — before the annual financial statements are approved or in excess of available profit — create a compliance risk. The excess distribution may be reclassified as a loan from the company to the owner, which has its own tax and documentation requirements.

Step-by-Step: How to Execute the Dividend Strategy

Here is the exact process to implement the minimum salary + dividends approach, from company formation onward:

1. Register your EOOD. Incorporation through the Trade Registry. Lawyer fees typically range EUR 700-999 + VAT. Registered address is separate. The process takes 3-5 business days. See our registration guide for details.
2. Open a corporate bank account. DSK Bank and UniCredit are the most commonly used. KYC takes approximately one week, with non-refundable application fees of EUR 100-500. A fintech account (Wise, Revolut Business) can replace a Bulgarian bank for day-to-day operations.
3. Sign a management contract. Between you (individual) and the EOOD (represented by you as sole owner). This contract establishes your role and specifies the remuneration. Your lawyer drafts this during company formation.
4. Register as self-insured at the NRA. File a Declaration of Commencement of Activity (OKD-5) within 7 days. Select the minimum insurable income of EUR 620/month. A KEP (qualified electronic signature) is mandatory for legal entity filings.
5. Pay monthly social security. Your accountant submits Declaration 1 and Declaration 6 monthly. Total contributions on EUR 620 base: approximately EUR 200/month. Due by the 25th of the following month.
6. Prepare annual financial statements. Your accountant prepares the annual accounts and CIT return. The filing window is March 1 to June 30 for the previous financial year. Corporate tax (10%) is due at the same time.
7. Adopt a sole owner resolution for dividend distribution. A written document specifying the amount to be distributed from retained earnings. Sign and date it.
8. Declare and pay the withholding tax. File the quarterly withholding tax declaration and pay the 5% to the NRA by the end of the month following the quarter in which dividends were paid.
9. Transfer dividends to your personal account. Make the bank transfer with a clear description referencing the sole owner resolution. Keep the documentation.

Common Concerns We Hear

Frequently Asked Questions

Disclaimer: This article provides general information and does not constitute legal or tax advice. Tax optimization strategies depend on your individual circumstances, income level, and residency status. Social security rates and thresholds are subject to change pending the adoption of the 2026 State Budget. Consult our team for personalized guidance. Last updated: April 8, 2026.