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, 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’.
Why to become a tax resident in Bulgaria?
Bulgaria has the lowest tax rate for both personal and corporate taxes. The corporate tax rate is fixed at 10% of the profits of the company and the personal income tax rate is fixed at 10% of the income.
The same tax rates applies for income from crypto, stocks, ETFs, rental income. Income from gambling, poker, casino game winnings is tax free. There are no taxes for monetary inheritance from relatives.
At the same time Bulgaria is a member of the European Union (=the EU). You would have free access to the common European market and you can sell your goods and services across the whole of EU.
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 applicable only for companies. Some individuals can apply for a tax residency as well. 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 resident in the country. We can help you, so you can become such in the best and most appropriate way for your specific situation.
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. You also need to prove that you have stayed in the country more than 183 days,. But we can help you to provide the relevant documents and information.
The third one 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 of Bulgaria.
The last and maybe the most complicated 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 you most likely would need professional help to define your center of vital interest. .
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. We would 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. Entities according to Bulgarian legislation are all companies. registered in Bulgaria It also includes companies established based on the regulations of the Council of the EU, having an address in our country and a special registration in the Bulgarian Commercial Registry.
Double taxation is a process that the countries are trying to avoid by signing “conventions concerning the avoidance of double taxation”. What’s the problem with double taxation? If a foreigner continually gains income from one country, he will not only be a subject to taxation in the country, but also taxed in the country of his residency. Bulgaria has signed such conventions with more than 60 countries. This leads to lower taxes for companies operating in more than one country, but it also applies for individuals in matters such as pension, salary and other income.
Procedure for obtaining Tax residency certificate
Аll certificates are issued 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. The application was to be drafted in Bulgarian language.
It might be best to use an attorney to help you with the specifics, listed in the legislation. The document is issued within 7 to 14 days. However the Agency have the right to require additional information and documents from the applicant.
In addition, there are some specifics, so it would be most beneficial for you to use the help of an attorney. The lawyer can execute the legal steps precisely and accurate as required by the law. It can save you time and money.
Taxation is very complex and specific subject, so people should be very careful and consistent.
At 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.