The National Corporate Governance Commission, as a permanent independent body established to promote the implementation of good corporate governance practices and bringing together representatives of Bulgarian capital market participants and the academic community, expresses its strong disagreement with the proposal to increase the withholding tax rate on dividend income and liquidation shares from 5 percent to 10 percent. We believe that the sudden doubling of the dividend tax rate would have a significant adverse impact on the Bulgarian capital market for the following main reasons:

• Investors value a stable and predictable regulatory environment – sudden changes in tax rates without prior public consultation create a sense 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 in companies admitted to trading on a regulated market and choose to invest in shares precisely because of the dividend yield. The tax increase will disproportionately affect these participants in our capital market.
• Investors may turn 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 reduced incentives to participate in the capital market.
• Public companies will encounter difficulties in raising capital through the stock market, as investors will seek alternatives with better net returns.
• Start-ups and growing companies that rely on private investors will be particularly affected, as expected returns through dividends decline.

At present, Bulgaria is one of 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 double increase in the tax on dividends, Bulgaria will equal or exceed the 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 tax on dividends distributed by public companies to individuals in 2025 in the form of cash dividends for 2024 amounts to only BGN 1,735,516 This shows that the expected effect of the double tax rate on dividends distributed by companies on the Bulgarian capital market would be insignificant compared to the huge potential negative impact.

Last but not least, we would like to point out that the procedure for initiating the change was carried out without prior dialogue with representatives of the capital market, business, and academia, which undermines confidence 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 investment rather than discourages it.

Based on the above, the National Corporate Governance Commission considers that the proposed increase in the dividend tax will have a disproportionately negative effect on investment activity in the capital market and economic growth. We expect that it will worsen the investment climate in Bulgaria and lead to capital outflows, restricted access to financing through the Bulgarian Stock Exchange, and reduced interest in public companies. Instead of generating sustainable revenue, the measure risks deterring investors, limiting access to capital, and undermining confidence in Bulgarian economic policy.

In conclusion, the National Corporate Governance Commission calls for companies on the Bulgarian capital market to be excluded from the proposal to increase the tax on dividends and expresses its confidence that this exemption will encourage more companies to become public and to operate in accordance with established good corporate governance practices, which will indirectly lead to a reduction in the „gray sector“ in the country. In addition, we call for an in-depth impact assessment and a broad public debate involving business, investors, and the academic community before introducing any tax changes.



Sofia, November 18, 2025
National Corporate Governance Commission