Bulgaria and Double Taxation Avoidance Treaties /DTT/ – A Friendly Tax Regime!

Bulgaria is one of the jurisdictions with a friendly tax regime and has the objective to provide a better business climate with less bureaucratic procedures for small and medium-sized businesses by harmonization of the national legislation with that of the European Union /EU/. 

Recently, Bulgaria has made considerable progress in successful integration of the EU law in its national legislation.

Currently, the number of foreign investors and business entrepreneurs are growing. These foreign businessmen register Bulgarian companies and/or relocate some of their activities in Bulgaria in order to benefit of the friendly business environment, great tax benefits and low business costs.  It goes without saying that this may lead to problems related to the so-called “double taxation”? Double taxation occurs when one and the same taxable entity in two or more countries is subject to the same tax for the same income received and/or property held in the same tax period. The purpose of the Double Taxation Avoidance Treaties (DTT) is to solve these and other problems.

To overcome the negative impact of double taxation, Bulgaria has concluded DTT with more than 75 countries:

Austria Iran Qatar
Albania Ireland Republic of Korea
Algeria Republic Israel Republic of South Africa
Armenia Italy Romania
Azerbaijan Japan Russian Federation
Belarus Jordan Singapore
Canada Kazakhstan Slovakia
China Kingdom of Bahrain Slovenia
Croatia Kingdom of Belgium Spain
Cyprus Kuwait Sweden
Czech Republic Latvia Switzerland
Democratic Republic of Korea Lebanon Syria
Denmark Lithuania Thailand
Egypt Luxembourg Turkey
Estonia Macedonia UAE
Finland Malta Ukraine
France Moldova United Kingdom
Georgia Mongolia USA
Germany Morocco Uzbekistan
Greece Netherlands Vietnam
Hungary Norway Yugoslavia
India Poland Zimbabwe
Indonesia Portugal  

It should be pointed out that in Bulgaria tax treaties are not applied directly. Foreign persons must certify to the National Revenue Agency (NRA) the existence of certain conditions for the application of the relevant treaty by submitting an application form, in particular that he/she is a resident of another country and receives an income from Bulgaria and he/she has no permanent establishment or a fixed base in Bulgaria.

There is also a simplified procedure to prove certain conditions for applying the DTT in force. The conditions for its application are as follows: first, the foreign person must receive an income of up to 500,000 BGN on annual base, then he does not submit a request to the NRA but proves the reasons for applying the relevant tax treaty only to the payer of the income and second, the payer of the income is obliged under article 142 (5) of TSSPC to submit a declaration by the 31st of March of the following year submitting the paid income and provided tax reliefs.

The main advantage of the simplified procedure is that there is no time-limit for issuing an opinion on the application of the DTT (usually it may take up to 60 days) and that the time needed to collect documentary evidences is shorter.            

For more information on application of double tax treaties in Bulgaria, you can contact us here.

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