The National Corporate Governance Commission, as a permanent independent body established for the purpose of promoting the implementation of good corporate governance practices and uniting representatives of the participants of the Bulgarian capital market and the academic community, expresses its categorical disagreement with the proposal to increase the tax rate of the withholding tax withheld on income from dividends and liquidation shares from 5 percent to 10 percent. We believe that a sudden double increase in the dividend tax rate would have a significant detrimental impact on the Bulgarian capital market for the following main reasons:
Investors value a stable and predictable regulatory environment - a sudden change in the tax rate without prior public discussion creates a feeling of instability, which is highly discouraging for long-term investments.
Dividends are an important source of income for many individual investors who have acquired shares of companies admitted to trading on a regulated market and choose to invest in shares precisely because of the dividend yield. The tax increase will affect these participants in our capital market disproportionately.
Investors may shift to other markets where dividends are taxed at a lower rate and/or where there is greater predictability in tax policy or change their dividend policy.
This will lead to reduced market liquidity, lower valuations of public companies, limited growth opportunities and a reduced incentive to participate in the capital market.
Public companies will encounter difficulties in raising capital through the stock exchange, as investors will look for alternatives with better net returns.
Startups and growing companies that rely on private investors will be particularly affected, as the expected return through dividends decreases.
Currently, Bulgaria is among the few countries in the EU with a relatively low tax on dividends, which makes our country attractive to investors and entrepreneurs. With the proposed doubling of the dividend tax, Bulgaria is on par with or exceeding tax rates in countries such as Romania, the Czech Republic and Hungary.
Furthermore, historical experience shows that increasing the tax burden does not necessarily lead to higher revenues. According to unofficial data, the amount of dividend tax distributed by public companies to individuals in 2025 in the form of cash dividends for 2024 amounts to only BGN 1,735,516 (EUR 887,356.77), which indicates that the expected effect of doubling the dividend tax rate on companies’ dividends distributed to the Bulgarian capital market would be insignificant compared to the huge potential negative impact.
Last but not least, we draw attention to the fact that the procedure for initiating the change was carried out without prior dialogue with representatives of the capital market, business and the academic community, which undermines trust in the decision-making process and creates a sense of unpredictability. The National Corporate Governance Commission insists on a responsible, transparent and predictable approach to tax policy that encourages investments, not discourages them.
Based on the above, the National Corporate Governance Commission believes that the proposed increase in the dividend tax will have a disproportionately negative effect on investment activity in the capital market and economic growth. Our expectations are that it will worsen the investment climate in Bulgaria and lead to an outflow of capital, limiting access to financing through the Bulgarian Stock Exchange and reducing interest in public companies. Instead of generating sustainable revenues, the measure risks repelling investors, limiting access to capital and undermining trust in Bulgarian economic policy.
In conclusion, the National Corporate Governance Commission calls for the exclusion of companies on the Bulgarian capital market from the proposal to increase the dividend tax and expresses confidence that this exclusion will encourage more companies to acquire public status and carry out their activities in accordance with the established practices of good corporate governance, which will indirectly lead to the limitation of the “gray
sector” in the country. In addition, we call for the preparation of a thorough impact assessment and the holding of a broad public discussion with the participation of business, investors and the academic community before introducing any tax change.
Sofia, November 18, 2025
National Corporate Governance Commission
