Tax Resident in Bulgaria
There are two types of people in a country – foreigners and residents. Depending on the meaning of those terms, the taxation, coming from those people’s work and the income following, is different. To clarify the taxation in Bulgaria there is some special legislation you must be aware of. Here is some more information about the definition of those terms, the requirements to become a tax resident in Bulgaria (what exactly does this mean) and the ‘double taxation’.
How to become a tax resident in Bulgaria?
What does it mean to be ‘a tax resident’? Article 3 of the Corporate Income Tax Act says that tax residents are 1.legal entities under Bulgarian law and 2.Companies and cooperative societies established under some Council Regulations, situated in Bulgaria and entered into Bulgarian Register. This article is adaptable only for companies. Some individuals can apply for a tax residency also. Tax resident in Bulgaria may be a foreigner who has an income earned in the country or a resident of the country whose income is earned abroad.
You can claim Bulgarian tax residence if you fall under one of the criteria stated in the relevant legislation. The situation defer between individuals who want to be considered as tax residents and entities.
The criteria for individuals are listed in Art.4 of the Personal Income Tax Act. You should meet one of the following criterias:
The first one says that you must have a permanent address in Bulgaria; you should be a permanent resident in the country. Your permanent residency means you have registered in the Resident Registry for the region in which you are situated. If you are not, we could help you, so you can become one through the legal procedure provided. For EU citizens – you should obtain a residence permit, as well as “Bulgarian ID card for EU citizens”. A lawyer specialized in immigration law, like us, can help you best.
The second one says that you should have stayed in Bulgaria for at least 183 days within a 12-month time period. You will be considered as a tax resident in Bulgaria only in the year when you finish your 183 days on Bulgarian territory. Specific in this case is the exception of staying in the country for educational purposes or for medical treatment because it will not be taken into account when calculating the required period of stay. Because of the lack of specific certification, there needs to be presented proof of the stay during the procedure. Such as entry and departure data, sometimes even property right for real estate, rent contracts and some social services engaging proof ( TV an Internet contracts).
The third condition states that every person and his family who are sent by Bulgarian state and whose institutions and business are located abroad are considered to be tax residents. So there is no question of doubt here.
The last and maybe more complicated than most is the requirement to have your center of vital interests in Bulgaria. It means that the interests of one should be closely related to the country. There is no specific definition of this concept and that is why it is so hard to be proven. So there will be a closer look into this person, his family, his property, work place and others.
If you would like to become a tax resident in Bulgarian it would be best if you have a consultation with one of our experts in order to discuss your case and provide you with the best options and procedures for you.
The criteria on this matter are set out in Art.3 of the Corporate Income Taxation Act. As we previously stated, those are the considered “companies” according to Bulgarian legislation and companies and cooperatives established based on the regulations of the Council of the EU, having an address in our country as well as a registration in the Bulgarian register. The main register in Bulgaria is Bulstat -register where all companies with economic activities are entered.
Double taxation is a process that the countries are trying to avoid by signing “conventions concerning the avoidance of double taxation”. The basics of this problem – if a foreigner continually gains income from the country, he will not only be a subject to taxation in the country but also in the state where he is a resident. Bulgaria has signed those conventions with more than 60 countries. This leads to lower taxes for companies operating in more than one country. Also signing those creates a tunnel of information where we could have a clear image of the legal specifics of all entities requesting the certificate for tax residency in our country.
Procedure for obtaining the certificate
After some changes, all certificates are being processed all the way through by the competent territorial office of the National Revenue agency, according to the registered address of the applicant. The required documents include two things – general data about the specific person and a statement concerning the period of their stay, including questionnaire, which contains information connected to property, main residence, activity and others.
It might be best that an attorney could help you with the particularities, listed in the legislation. Shortly, the applicant should put on the information completely independently, in two copies, with Cyrillic and Latin font, computer – written. The year for which it should be issued, must be fulfilled as well as the country, bound to the convention of avoidance – for every year and country different applications may be required. There are also some specifications about the ways of submission – in particular, there is a requirement of notary-certified power of attorney in some cases. Also depending on the place where you submitted the application, the period of the submission itself may defer within 7 to 14 days. Not to be doubted the Agency have the right to require more information when necessary.
In addition, there are some specifications where you should most probably search for the help of an attorney who can execute the legal steps precisely and accurate, as Bulgarian legislation has created some rules.
The steps are many and a bit confusing but when it comes to taxes people should be very careful and consistent. In the end if you become a Bulgarian tax resident you will benefit from the lowest tax rates in the European Union and you won’t regret taking the time to ensure your future.
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This article is written by Kamelia Kaneva.