Bulgaria has a regulation regarding cryptocurrencies and, in fact, the income produced from trading or mining crypto is taxable.
But, let’s start from the beginning…
While most people have an idea of what cryptocurrencies are, there is also a legal definition which may vary slightly from one country to another.
In Bulgaria, virtual currencies are considered “a digital representation of value, that is not issued or guaranteed by a central bank or a public body, is not necessarily related to a statutory currency and has no legal status of currency or money but is accepted by natural or legal persons as a medium of exchange and can be transferred, stored and traded electronically”.
This is very important to keep in mind if you’re looking into investing in cryptocurrencies in Bulgaria, or thinking of company formation Bulgaria and crypto is part of your business.
Read also: Tax Rate for Corporates in Bulgaria: the complete Guide
Bulgaria and the crypto tax
For many years and only until recently, the government of Bulgaria had kept some distance from getting involved with cryptocurrencies and regulating its trade.
Since 2014, the National Revenue Agency had some policies in place regarding Value Added Tax rates in Bulgaria on cryptocurrencies, but it was the only agency discussing the topic until 2022, when some rumours implied the government was starting to analyse the world of cryptocurrencies. This was further confirmed as part of the 2019 program called “Digital Bulgaria 2025”.
“Digital Bulgaria 2025” is a wider program hoping to place Bulgaria at the same technological level as other European countries (because, Yes, Bulgaria is in EU), promoting innovative technologies and even considering using blockchain for certain public interests like tax or insurance.
So, changes are coming, and cryptocurrencies are part of it.
Bulgaria crypto tax for individuals
When it comes to taxes, and based on the above definition the government deals with when it comes to cryptocurrencies, crypto is considered a financial asset. Therefore, income generated from the trade of this asset is taxable at a 10% rate on an annual basis.
The Bulgarian National Revenue Agency does not differentiate between different cryptocurrencies.
As with all other taxable income, reports must be presented by April 30th of the following year. And, like with other income generated, the losses are deducted from the earnings, always looking at the value of the asset at the moment of buying and selling it.
Bulgaria crypto tax for businesses
For companies dedicated to trading financial assets like cryptocurrencies, the tax on the profit generated is 10%.
There is still some flexibility in the regulations, especially when it comes to cryptocurrencies and VAT. While mining activities are taxable, this is only in certain circumstances, and while income generated from trading crypto is taxable, using virtual currencies as a form of payment is exempt from VAT as it’s considered a financial service.
Consider talking to your accountant in Bulgaria, they can help you figure out the legal requirements if your corporation deals with crypto. Agencies like Accountancy Bulgaria offer free consultations and a lengthy and trustworthy reputation that will guarantee the success of your company. Having a tax advisor in Bulgaria, especially if you have recently opened a company in Bulgaria, is a must.
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What to expect in the future of crypto tax in Bulgaria?
As the world of virtual currencies expands, changes, and solidifies at the same time, governments are more inclined to set up regulations to have a working framework. It seems clear that cryptocurrencies are here to stay, and governments cannot ignore it any longer.
Bulgaria has already made it clear that in the next few years, a lot more attention will be paid to crypto and more specific regulations are to come. This doesn’t have to be a complication or a nuisance. In fact, newer more effective regulations will protect traders of cryptocurrencies, reducing the illegal operations, and offering overall more protection to investors.
Conclusion
While cryptocurrencies have been around Bulgaria for a while, it seems that only recently the government has decided to take a step in regulating the trade of these financial assets.
Income generated from trading virtual currencies is taxable, either as individual income tax, or as a corporation.
It seems that Bulgaria is heading in a direction of better regulations to manage the world of cryptocurrencies and help protect those involved in investing and trading these assets.