Salary or dividends? How owners pay themselves

Once the company makes a profit, every owner asks the same question: what is the best way to pay myself? In Bulgaria there are two main routes, salary and dividends, and the answer is usually a mix of both.

Route 1: dividends

The company pays 10% corporate tax on its profit. When the remaining profit is paid out as a dividend to an individual, a further 5% dividend tax is withheld. On €100,000 of profit that leaves about €85,500 for the owner, an effective 14.5%. There are no social security contributions on dividends.

The catch: dividends can only be paid from profit shown in approved financial statements, so they come once the year is closed (interim dividends are possible under conditions). They also do not build up any pension or social security rights.

Route 2: salary or management fee

A salary is a cost for the company, so it reduces the profit taxed at 10%. For the person, it is taxed at a flat 10% income tax, plus social security and health insurance contributions shared between employer and employee, up to a monthly cap on insurable income. You get regular income, pension and health insurance rights, and a clear record of income, which helps with banks, loans and visas.

If you manage your own company and work in it, you usually need to be insured on at least a minimum basis anyway, so some salary or management fee is often unavoidable.

Why the answer is usually a mix

• A reasonable salary covers your monthly needs and keeps you insured.
• Dividends take out the rest of the profit at a low, predictable rate once the year is closed.
• Above the monthly cap on insurable income, extra salary costs less in contributions, which changes the comparison for higher earners.

The part people forget: where you live

The 5% dividend tax and 10% income tax are Bulgarian rates. If you are tax resident in another country, that country may tax the same income again, with a credit for the Bulgarian tax depending on the double tax treaty. This is the first thing to check before choosing a mix, and it is where most of the real optimization happens.

The short version

For most owners living in Bulgaria, a modest salary plus dividends gives the best balance of low tax, security and flexibility. For owners living abroad, the right answer depends on their home country. Either way, it is worth working out the numbers for your case once a year.

This article is general information based on the rules in force in October 2026. It is not tax or legal advice for your specific situation.