Tax Optimization Is an Art

Residence Status

The basic principle on taxation in Bulgaria is that if an individual is resident in Bulgaria he may be required to pay taxes on his worldwide income. If he is a non-resident, he is still liable for tax on income received in Bulgaria but not for income generated abroad.

A person can be considered as resident in several countries. Whether he is a resident or not is determined for each tax year. If a person is present in Bulgaria for 183 days, he is treated as a Bulgarian resident. A person who has been resident in Bulgaria for a number of years is likely to continue to be regarded as Bulgarian resident despite temporary periods of absence from Bulgaria.

In order to eliminate the possibility two or more countries to charge tax on the same income or profit countries agree to use the special mechanism of Double Tax Conventions, which allows allocating jurisdiction between the Parties (two countries) in relation to profits and income from various types of activity. Double Tax Conventions define who is a resident person, where the place of business is and what the source of income is.

There is also specific order for taxation of foreign and local individuals on income from dividends and liquidation quotas, replacement of shares in company restructuring, additional voluntary provision of health insurance, sale and exchange of movable property.

An individual who is working full-time abroad, transfers his place of residence to a different country and his place of interests ceases to be in Bulgaria shall not be regarded as a resident.

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