Bulgarian tax residency for EU, non-EU and British citizens

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Tax residency in Bulgaria, where both personal and corporate income tax rates are 10 %, is a popular option for quite some time for many EU and non-EU citizens. Recently British citizens doing business and travelling in EU countries are anxious about their rights after Brexit. Over one million Brits are now already living outside the Island all over Europe.

The draft Withdrawal Agreement between the UK government and the EU envisages that British citizens will keep the right to live and work in the country where they reside at the time of the withdrawal. Both parties confirm that this has been surely agreed and further amendments in this section of the Withdrawal Agreement are not expected. Moreover, the negotiators agreed that there shall be a transitional period of 21 months (from 29 March 2019 until the end of 2020) before UK leaves the EU completely. So, according to the last draft of the Withdrawal Agreement, UK citizens residing on the basis of EU law before the end of the transitional period will maintain the residence rights they currently enjoy, under the currently applicable conditions and limitations. This protection includes also rights which are in the process of being obtained: citizens will be able to acquire the right to permanent residence after five years of lawful residence, even if the five-year period is completed after the end of the transition period. So, if you are a British citizen trading with EU partners, travelling around Europe or you are self -employed, providing services to EU clients, or you simply need to lower your taxes, and you wish to become a Bulgarian (tax) resident benefiting from current EU laws and the rights they give, you have a little time to do it.

What does it mean to be a Bulgarian resident for tax purposes?

That means that all your world income will be taxed in Bulgaria. For example, if you receive income in a country where income tax is 40 % but you are considered as Bulgarian residence for tax purposes, you are entitled to declare this income in Bulgaria and pay as per Bulgarian tax system. Please note that this rule does not refer to property taxes – property taxes are paid in the country where the property is located.

How one can be sure that there will be no double taxation?

Bulgarian National Revenue Agency issues a tax residency certificate which you show to tax authorities in other countries where you generate the income and they will no longer chase you to pay taxes in these countries and all your income will be taxable only here.

What is necessary to obtain such certificate?

EU laws give an opportunity a person to be considered tax resident of the country where his centre of economic interest is. To show that Bulgaria is your centre of economic interest you need to do the following:

  1. First step is to obtain a Bulgarian long term residence as an EU citizen and a Bulgarian ID card with a Bulgarian personal ID number. The procedure is relatively easy and the only one significant requirement is to have a registered address. There are three possible options – to rent an apartment and use it for real, to rent an apartment just for the address registration without the possibility to actually stay there, to buy your own property in Bulgaria. If you buy a property, but do not plan to stay in Bulgaria physically most of the time, you can even rent it for income.
  2. Register a Bulgarian company or register as a self-employed service provider and invoice your clients for the work provided to them. Incorporation of a Bulgarian company is the best option, because as a company you can deduct expenses, pay only 10 % on profit and 5 % on dividends.
  3. Pay social and health contributions here in Bulgaria.

A few months from starting your Bulgarian company and paying social and health contributions here, you can apply for a tax residence certificate. On filing the application, the applicant needs to declare how many days within the year he/she has spent in Bulgaria. The general rule is that a person must stay in Bulgaria more than 183 days in a year in order to be considered tax resident. But as long as the person can show that Bulgaria is the centre of his/her economic interest as described above, obtaining such a certificate is possible without the necessity of matching this particular requirement.

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