Still in touch with my solicitors but here is a copy of an article from another firm of solicitors.
Will explore the 5%Corporate Tax and EU Membership.
The Corporate Income Tax Act governs taxation of dividends
In Bulgaria, according to the Corporate Income Tax Act, dividends are subject to a withholding tax of 5 percent rate when distributed to individuals or non-profit entities, as well as to non-residents as long as they are not members of EU or EEA. As long as Special Purpose Investment Vehicles (REITS) distribute the dividends or Non-EU / EEA foreign entities, then the dividend distributed to resident companies are not included in their taxable income. Capital gains from the disposal of shares in subsidiaries are subject to the flat corporate income tax worth 10 percent on the level of the Bulgarian holding company.
In Bulgaria, withholding tax may not be necessary to be paid if shareholders in the Bulgarian companies are tax residents of an EU country and they are not residents of a third state on the grounds of a double tax treaty. Moreover, if the shareholders are payers of corporate income tax in their resident state and they are not entitled to any tax exemptions, then they are not subject to withholding tax. It also applies to non-residents that hold at least 15 percent of the shares in the Bulgarian company that distributes the dividends for at least two years.
What are the recipient’s responsibilities?
Once a dividend was received from a Bulgarian entity, the tax is applied at the source, therefore the recipient does not have to report and therefore pay any personal income tax on the dividends. However, if the dividends are received from foreign entities, they are part of the tax return and they must be reported, as they will be taxed as part of the individual’s annual personal income tax return.