How to tax crypto in Bulgaria: In Bulgaria, the taxation of cryptocurrencies is governed by general national tax law principles, as no specific legislation is dedicated to crypto-assets. The Bulgarian National Revenue Agency (NRA) treats cryptocurrencies as financial assets, and income derived from their sale or exchange is subject to taxation.
How to tax crypto in Bulgaria
- Individuals: When an individual exchanges cryptocurrency for fiat currency (e.g., BGN, USD, EUR) or for other cryptocurrencies, it is considered a taxable event. The income generated from such transactions is classified as income from the sale of a financial asset and is subject to a flat tax rate of 10%. This income must be declared in the annual tax return.
- Legal Entities: For companies engaging in cryptocurrency transactions, the general corporate tax rules apply. Profits derived from crypto-related activities are included in the company’s financial results and taxed accordingly.
Professional vs. Non-Professional Activity
The NRA distinguishes between casual and professional activities concerning cryptocurrency transactions. An activity is deemed professional if it is conducted systematically, defined as occurring three or more times within a year. Individuals engaged in professional crypto trading are subject to a 15% tax rate on their annual profit, calculated as the difference between income and related expenses.
Offsetting Losses
In Bulgaria, losses from cryptocurrency transactions can only be offset against gains within the same fiscal year. There is no provision for carrying forward losses to subsequent years. Therefore, it is crucial to accurately calculate and report both gains and losses within the same tax year.
Legally recognized expenses
There are 10% of legally recognized expenses when you tax crypto in Bulgaria, which means that you can decrease your taxable income by 10%. There is no need to prove that you actually incurred these 10% costs, but they are automatically applied. In this case, the effective tax rate goes to 9%.
Taxation of Mining and Staking
- Mining: Income earned from cryptocurrency mining is considered income from a professional activity and is taxed at a rate of 15%. The NRA views mining as an economic activity due to the utilization of specialized equipment for generating tokens.
- Staking: Rewards obtained from staking are generally taxed upon disposal of the staked tokens. The acquisition cost of these tokens is considered zero, and upon sale, the entire proceeds are subject to taxation. There is no distinction in taxation between validators and delegators.
Taxation of Non-Fungible Tokens (NFTs)
The NRA does not differentiate between fungible and non-fungible tokens for tax purposes. Both are treated as financial assets, and income derived from their sale or exchange is subject to taxation under the same rules applicable to other cryptocurrencies.
Reporting Requirements
All income from cryptocurrency activities must be declared in the annual tax return. Failure to report such income can result in penalties and interest on unpaid taxes. It is essential to maintain detailed records of all transactions, including dates, amounts, and counterparties, to ensure accurate reporting and compliance with Bulgarian tax laws.
If you want to tax crypto in Bulgaria you need to submit an Annual Tax Return for individuals must be submitted by the end of April of the year following the year to which they relate, e.g. capital gains for 2024 should be reported by the end of April 2025.
Taxation of Other Capital Gains
In Bulgaria, capital gains from the sale of financial assets, including stocks, bonds, and other securities, are generally subject to a 10% tax rate for individuals. Similar to cryptocurrency transactions, these gains must be reported in the annual tax return. For legal entities, capital gains are included in the corporate tax base and taxed according to corporate tax regulations.
Our Services
Navigating the complexities of cryptocurrency taxation can be challenging. Our accounting and tax services are designed to assist you in preparing and submitting your annual tax returns, ensuring compliance with Bulgarian tax laws. We offer:
- Comprehensive Tax Consultation: Tailored advice on your cryptocurrency transactions and investments.
- Accurate Tax Return Preparation: Ensuring all income, gains, and losses are correctly reported.
- Timely Submission: Guarantee that your tax returns are filed within the statutory deadlines.
- Ongoing Support: Assisting with any tax-related queries or issues that may arise.
Contact us today to ensure your cryptocurrency dealings are managed efficiently and in full compliance with Bulgarian tax regulations.
You can reach us at:
tel.: +359895443792
email: ivanov@bi-lawfirm.com