How to Become a Tax Resident in Bulgaria

Bulgaria stands out for having the lowest tax rates in the entire European Union, an aspect that attracts more and more individuals and businesses seeking to optimize their tax burden. Becoming a tax resident in Bulgaria can prove to be a very advantageous choice for reducing taxes on worldwide income, benefiting from a simple and convenient tax system. In this guide, we will explore in detail how to obtain tax residency in Bulgaria and the most significant benefits of this process.

Why Become a Tax Resident in Bulgaria?

One of the main reasons why more and more people are choosing Bulgaria as their country of tax residence is the advantageous taxation. Let’s see the key benefits of becoming a tax resident in Bulgaria:

• Personal Income Tax Rate: In Bulgaria, the personal income tax rate is set at a fixed 10%. This rate is among the lowest in Europe and represents an attractive opportunity for those looking to minimize their tax burden. If you obtain tax residency in Bulgaria, you will pay 10% tax on your worldwide income.
• Corporate Income Tax Rate: The corporate income tax rate is also 10%. This fixed rate is very competitive compared to other EU countries, making Bulgaria an excellent choice for businesses looking to optimize their tax management.
• Capital Gains and Dividends Tax Rates: The capital gains tax is also set at 10%, while capital gains from the sale of shares through the Bulgarian stock market or a regulated market in an EU/EEA member state are taxed at 0%. Additionally, dividends are taxed at 5%, while if paid to legal entities resident in an EU/EEA member state, the tax is 0%. This makes Bulgaria one of the most favorable tax destinations for investors and entrepreneurs.
• Double Taxation Treaties: Bulgaria has signed double taxation treaties with more than 60 countries, including Italy, France, Germany, the United Kingdom, the United States, Switzerland, and many others. This means that Bulgarian tax residents can avoid paying double taxes on income earned in other signatory countries, further reducing their overall tax burden.
• Low Social Contributions: In Bulgaria, social contributions are shared between the employer and the employee. Employer contributions are 18.92%, while employee contributions are 13.78%. The maximum monthly taxable base for social contributions is 3,400 BGN (approximately 1,740 EUR) from April 1, 2022. This level of social contribution is lower compared to other EU countries, providing another incentive for businesses and workers looking to settle in Bulgaria.

Read also: Taxation of Stock Capital Gains in Bulgaria: A Complete Guide

How to Become a Tax Resident in Bulgaria

Obtaining tax residency in Bulgaria is a relatively simple process, but it’s important to understand the necessary requirements and procedures. There are two main ways to apply for tax residency in Bulgaria:

1. Residency for 183 Days per Year: The most straightforward method to obtain tax residency in Bulgaria is to spend at least 183 days per year in the country. This is a common rule in many countries and ensures that anyone residing in Bulgaria for more than half the year is considered a tax resident.
2. Center of Vital Interests in Bulgaria: The second option is to demonstrate that the “center of vital interests” is in Bulgaria. This could mean that your family, economic activities, job, or other significant aspects of your life are primarily in Bulgaria. This approach offers more flexibility compared to the 183-day requirement and may be the best choice for those who cannot spend most of the year in the country.

For example, if you decide to open a company in Bulgaria, you could demonstrate that the center of your vital interests is in Bulgaria and thus apply for tax residency without meeting the 183-day limit.

Procedure for Obtaining a Tax Residency Certificate

One of the most important steps to becoming a tax resident in Bulgaria is obtaining a tax residency certificate. This document is required to prove to tax authorities that you are effectively a resident in Bulgaria and can benefit from reduced tax rates. The procedure for obtaining the certificate usually takes between 7 and 14 working days but may take longer if Bulgarian authorities request additional information.
Each country has a separate application process to obtain a tax residency certificate, and the certificate must be registered with the country with which Bulgaria has signed a double taxation agreement.

Read also: Real Estate Investment in Bulgaria: The Complete Guide

Conclusions

Bulgaria offers an extremely advantageous tax environment, with low rates and a simple and straightforward system for becoming a tax resident. Whether you are an entrepreneur looking for opportunities to reduce corporate taxes or a self-employed individual interested in minimizing personal tax burdens, this nation can be an excellent choice.

However, becoming a tax resident in Bulgaria is a process that requires attention to detail and a good understanding of local regulations. The Accountancy Bulgaria team consists of tax advisor in Bulgaria with years of experience advising individuals and businesses wishing to transfer their tax residency to Bulgaria.
We can assist you at every stage of the process, from preparing the necessary documentation to the final registration with the Bulgarian tax authorities.