Could you elaborate? Of course I do have a local accountant, and if what you're saying is true, I am disappointed she didn't mention that; they just said, paying salary will end up being more expensive than dividends.
By paying yourself with a salary via your company, you'd pay 10% revenue tax + health insurance (ЗО) + social insurance (ДЗПО, ДОО)... except the insurance part is capped on a maximum revenue of 3000 BGN or something like that... so as you make more money, your total tax rate converges to 10%.
Take these numbers with a grain of salt because I'm no accountant, but I know for sure your accountant is wrong, because I know how much tax I pay, and that's close to 11.5% total.
If we take a gross income of 20K BGN (which is not a bad income for a software engineer), then with dividends, net income will be roughly this:
20000*0.9*0.95-710*(0.148+0.05+0.08) = 16902, which means taxes are 15.59%.
And if it all goes as a salary, then net is roughly this:
20000*0.9-3000*(0.148+0.05+0.08) = 17166, which means taxes are 14.17%. It's lower than dividends, but still far from the 11.5% that you mentioned.
To get to 11.5%, the gross income has to be around 50K:
50000*0.9-3000*(0.148+0.05+0.08) = 44166, so the taxes are around 11.67%.
Could you clarify in which range your gross income is, is it closer to 50K BGN than 20K BGN?
I guess there can be some bonuses which aren't taxed, and this way one could reduce the tax, but paying large bonuses to myself smells too much to me since it's clearly done just to pay less taxes.
In the meantime, I clarified in the article that as long as a company is concerned, the article only focuses on the dividends option, and added the link to your comment.
I'm not from Bulgaria but I think what was said is that you depending on profitability of your company you can pay out a part of the profit as a dividend (using the lower tax rate until the cutoff) and then the rest as a salary.
It's not one or the other. As a company owner you can use both the dividend and pay yourself a salary.
While I def agree that those are not mutually exclusive and I considered paying myself a salary, but paying a salary still involves a bunch of extra taxes, which end up being more than the dividend's 5%. At least that's what I had from my accountant, but I'd be happy to know details of how to make the combination of salary+dividends to require less taxes than just dividends.
