Tax Resident in Bulgaria

Bulgarian nationals are usually considered tax residents in Bulgaria, but foreigners can also become tax residents in Bulgaria. 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 apply for income from crypto, stocks, ETFs, rental income. Income from gambling, poker, and casino game winnings is tax-free. There are no taxes for monetary inheritance from relatives. More information about income taxes in Bulgaria can be found in our article HERE.

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 the Bulgarian Register. This legal article applies only to companies. However, individuals can also apply for a tax residency in Bulgaria as well. Tax residents in Bulgaria can be Bulgarian nationals or a foreign person, who has Bulgarian residency regardless of where the income was earned.

You can claim Bulgarian tax residence if you fall under one of the criteria stated in the relevant legislation. There is a difference between individuals who want to be considered as tax residents and entities.

Individuals

The criteria for individuals are listed in Art.4 of the Personal Income Tax Act. You should meet one of the following criteria:

The first one says that you must have an address in Bulgaria – you should be a resident of the country. We can help you to 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 12 months. You will be considered a tax resident in Bulgaria only in the year when you finish your 183 days in Bulgarian territory. You also need to prove that you have stayed in the country for more than 183 days. But our team can help you to provide the relevant documents and information.

The third one states that every person and his family who are sent by the Bulgarian state and whose institutions and businesses are located abroad are considered to be tax residents of Bulgaria.

The last and maybe the most complex, but yet very manageable option if there is good preparation, is 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 and we are here to help you with it.

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 will discuss your case and provide you with the best options and procedures for you. We also provide additional services such as freelancer registration in Bulgaria.

Entities

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.

If you want to register a company in Bulgaria there is detailed information about it in our blog post – How to register a company in Bulgaria.

Double taxation

Double taxation is a process that 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 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 to individuals in matters such as pension, salary, capital gains, compensations and other types of 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 a questionnaire, which contains information connected to the 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 has 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 accurately as required by the law. It can save you time and money.

Taxation is a very complex and specific subject, so people should be cautious 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. Most likely you will also need a qualified and knowledgeable accountant to do your taxes and we can also provide such services.

You can reach us at:

tel.: +359895443792

email: ivanov@bi-lawfirm.com

This article is written by Kamelia Kaneva.