Foreign Income Tax Bulgaria: A Guide for Residents

Private Clients Insights, Private Tax

How Bulgaria taxes income earned abroad – salary, dividends, rental income and cryptoassets – and how to avoid paying tax on it twice.

Bulgarian personal income tax operates on principles very different from the architecture built for multinationals under Pillar Two of the OECD Global Anti-Base Erosion Model Rules.

Why Tax Residence Comes First

Tax residence determines whether foreign income is taxable in Bulgaria, which part of it is taxable, and how it is taxed. Bulgarian tax residents are taxed on worldwide income, while non-residents are taxed only on Bulgarian-source income.

This distinction makes it essential to first establish whether you qualify as, or how to become, a Bulgarian tax resident before assessing the treatment of any foreign income — since the same salary, dividend or capital gain can be taxed very differently depending on the answer.

An individual is treated as a Bulgarian tax resident if any one of three tests is met:

• a permanent address in Bulgaria;
• physical presence exceeding 183 days in any 12-month period; or
• a “centre of vital interests” in Bulgaria — broadly, the place with which the individual’s personal and economic ties are closest.

Worldwide Income vs Bulgarian-Source Income

Residents are taxed on worldwide income. Non-residents are taxed only on Bulgarian-source income.

Although the above criteria are presented as alternative, with respect to the criteria “permanent address” and “centre of vital interests” there arises a doubt as to whether additional criteria under the Personal Income Tax Act (ZDDFL) are to be applied cumulatively or in a layered manner. Article 4, paragraphs (4) and (5) thereof provide as follows:

• The centre of vital interests is deemed to be in Bulgaria when the person’s interests are closely connected with the country. In determining this, account may be taken of the person’s family, property, the place from which the person carries out employment, professional or business activity, and the place from which the person manages their property.
• A person who has a permanent address in Bulgaria but whose centre of vital interests is not in the country shall not be considered a resident individual.

For Bulgarian tax residents, the timing of income recognition and the place where income arises both affect how and when it is reported, even though the underlying liability covers worldwide income. Worldwide income means any income irrespective of the jurisdiction of its source — once someone is considered a tax resident of Bulgaria, their worldwide income is subject to Bulgarian tax rules. Where a double taxation matter may arise, the relevant double tax treaty (DTT) should be reviewed, along with any national rules allowing a taxpayer to deduct tax already paid abroad from the tax owed in Bulgaria.

With regard to non-EU Member States, as well as EU Member States with which Bulgaria has concluded Double Taxation Avoidance Agreements (DTAAs), the provisions on conflict of laws contained in the respective DTAAs shall apply, to the extent that such provisions exist. Accordingly, this is a matter to be examined on a case-by-case basis for each country and allows for interpretation of the provisions in their application by the National Revenue Agency (NRA), as well as by the tax administrations of the other relevant state.

Non-residents are taxed only on income treated as arising in Bulgaria, such as income from Bulgarian real estate or Bulgarian employment. They may still face double taxation exposure, which is resolved through DTTs or other applicable provisions.

Foreign Employment Income

Salary paid by a foreign employer to a Bulgarian tax resident is generally taxable in Bulgaria, including for remote work performed from Bulgaria for an overseas employer.

Short-term assignments and secondments abroad, along with benefits, bonuses and share-based remuneration, each require careful analysis, and payroll and social-security treatment can differ from the income tax position.

Self-Employment and Professional Income

Freelance and consultancy income, including income received through foreign platforms, is taxable for Bulgarian residents, with deductible expenses reducing the taxable base.

Advance tax payments may apply during the year, and VAT-registration thresholds should be reviewed separately from the income tax position.

Foreign Dividends, Interest and Rental Income

Dividends from foreign companies and interest from non-EU bank accounts are taxable for Bulgarian residents, subject to any foreign withholding tax already paid.

Foreign rental income is taxable in Bulgaria after deductible expenses, even where tax has also been paid in the country where the property is located. Treaty relief and correct declaration are key to preventing double taxation.

Capital Gains, Investments and Cryptoassets

Gains on foreign shares, investment funds, private-company interests and bonds are generally taxable, calculated in the relevant foreign currency and converted for Bulgarian reporting purposes. Some exemptions apply to securities traded on regulated EU and EEA markets.

Cryptoasset transactions require particular care: the sale or exchange of cryptoassets is a taxable event, trading activity is treated differently from long-term investment, and income received directly in cryptoassets must be valued and reported. Clear record-keeping of acquisition cost and disposal proceeds is essential.

Avoiding Double Taxation

Bulgaria’s network of more than 70 double taxation treaties allocates taxing rights and provides exemption or tax-credit mechanisms for income already taxed abroad.

Claiming relief requires evidence of the foreign tax paid, typically a withholding-tax certificate or equivalent, and credits are generally limited to the Bulgarian tax otherwise due on the same income.

Rates

Since 2008 Bulgaria has applied a flat 10% rate to employment income, self-employment and business income and rental income, with no tax-free threshold and no progressive brackets. It is one of the lowest and simplest personal income tax regimes in the EU.

Certain categories carry separate rates:

• dividends are taxed at a final 5%;
• interest income is generally taxed at 8%; and
• capital gains are usually taxed at 10%, although gains on shares traded on the Bulgarian Stock Exchange, and gains on the sale of a sole family home held for more than three years, are exempt.

Employees and the self-employed also bear social security and health insurance contributions of roughly 13% to 14%, matched by a larger employer share, both capped once monthly income exceeds a set threshold. Combined with the flat rate, this makes Bulgaria comparatively attractive to high earners, entrepreneurs and remote workers, notwithstanding the absence of a dedicated digital nomad visa.

Wealth, Inheritance and Gifts

Bulgaria has no general wealth tax and no national inheritance or gift tax. Inheritance and gift taxation is a municipal-level tax instead, with rates varying by municipality and by the degree of kinship between the donor or deceased and the recipient. Close family members are typically exempt altogether.

This decentralised and narrow approach stands in direct contrast to the harmonised, EU-wide minimum-taxation logic now applied to large corporate groups.

Bulgaria’s treaty network is not uniform

For individuals, the treaty network is decisive in a way it is not for the groups covered by Pillar Two, which benefit from the same floor regardless of where they operate.

Bulgaria’s roughly 70 DTAAs are of very different vintages. A substantial number were concluded during, or shortly after, the socialist period and have never been renegotiated to reflect the current OECD Model Tax Convention. Those older treaties often:

• lack modern tie-breaker rules for dual residents;
• contain narrower information-exchange articles; and
• allocate taxing rights on pensions, directors’ fees or capital gains differently from Bulgaria’s more recently updated treaties.

An individual splitting time between Bulgaria and a treaty partner cannot therefore assume a consistent outcome. The relief available depends entirely on the drafting of the specific convention in force with that country.

The Multilateral Instrument adds a further layer

Bulgaria has ratified the OECD Multilateral Instrument (“MLI”), which has been in force for Bulgaria since 1 July 2023. The MLI overlays the BEPS minimum standards — including a principal purpose test for treaty benefits and strengthened mutual agreement procedures — onto the subset of Bulgaria’s treaties which both Bulgaria and the treaty partner have listed as “covered”. The main exception of the latter refers to individuals.

Because participation in the MLI, and the reservations each country has entered, differ treaty by treaty, an individual claiming relief under one Bulgarian DTAC may face a materially different anti-abuse standard than under another, even on similar facts.

Information exchange: CRS and DAC, not Pillar Two reporting

Where the corporate framework relies on structured reporting under DAC 9 and coordinated exchange between tax authorities by the end of 2026, individuals are covered by the pre-existing Common Reporting Standard (“CRS”) and its EU implementation through the Directive on Administrative Cooperation. Under those rules, Bulgarian financial institutions report account balances, interest, dividends and certain other income of foreign tax residents for automatic exchange with the account holder’s home jurisdiction.

The distinction matters. Unlike Pillar Two’s minimum-tax backstop, CRS and DAC do not themselves impose or guarantee any particular tax outcome. They ensure only that the Bulgarian tax authorities, and their counterparts abroad, have visibility of cross-border accounts and income.

Procedures

In Bulgaria, a certificate of tax residence (certificate of local person status) under Art. 4 of the Personal Income Tax Act (for individuals) or under Art. 3 para. (1) of the Corporate Income Tax Act (for legal entities) is issued in accordance with Ordinance No. 32 of the NRA, which governs the submission procedure, the content of the application, time limits, and related matters. The approved NRA template “Application for Issuance of a Certificate of Local Person Status” is used (in practice often referred to as Form OKd‑273 / DTA form).

The application is submitted to the competent territorial directorate of the NRA where the person is registered (for individuals – at the permanent address; for legal entities – at the registered office / NRA correspondence address). If submitted to another NRA office, the certificate may still be issued, but the processing time is extended.

Submission methods are as follows:

• In person at the registry of the relevant NRA territorial directorate;
• Through an authorized representative (with a notarized power of attorney, if required);
• By post (registered mail);
• Electronically via the NRA portal using a qualified electronic signature (QES) or identification code (for registered users).

The general principles and substantive conditions for the application of Bulgarian tax legislation are regulated in Article 135 of the Bulgarian Tax and Social Security Procedure Code (TSSPC). These provisions apply to resident persons and to non-resident persons who have derived income from a Bulgarian source. There is an express requirement that the grounds for claiming relief under a DTAA, where available, must be evidenced in advance.

Article 136 of the TSSPC sets out the three mandatory conditions that a non-resident person must prove:

• That they are a resident of the other state within the meaning of the relevant agreement.
• That they are the beneficial owner (the real person entitled) of the income derived.
• That they do not have a permanent establishment or a fixed base in Bulgaria to which the income is effectively connected.

The TSSPC regulates the procedure for proving the above circumstances and the NRA’s procedures, namely:

• Submission of a formal Request for Application of a DTAA using the NRA’s approved form, indicating the accompanying documents (certificate of residence, declarations, etc.).
• Additional specific written evidence required depending on the type of income received (e.g., for dividends, interest, royalties, or services).
• A description of the actions of the revenue authorities: carrying out an inspection, the right to request additional documents, the time limits for issuing a decision, and the issuance of an official ruling (positive or refusing relief).

The TSSPC also provides for a Simplified Procedure for smaller amounts. 

Article 142 of the TSSPC introduces a threshold for a facilitated regime.

• Where the non-resident person’s annual income does not exceed BGN 500,000 (EUR 255,646), prior approval by the NRA is not required. The documents are submitted directly to the Bulgarian payer of the income.
• The payer of the income is obliged to declare to the NRA the tax reliefs granted under the simplified procedure by 31 March of the following year.

Resolution of disputes between EU Member States

In connection with possible complications in the application of DTAAs, such as the emergence of conflicts between states, Chapter Seventeen, Section IIa of the TSSPC also regulates the special rules for resolving disputes between Bulgaria and other EU Member States arising from the interpretation and application of the agreements.

What this means in practice

An individual relocating to Bulgaria, investing here, or receiving Bulgarian-source income should not assume that the flat 10% rate operates in isolation.

• Confirm residence status under the three domestic tests before anything else. The 183-day count is only one of them, and the centre of vital interests test is the one most often overlooked.
• Read the applicable DTAА, not the OECD Model. Check the tie-breaker, withholding and anti-abuse provisions in the actual text of the treaty in force with the relevant country.
• Check whether the DTAA is brought up to date with the MLI, and what reservations each side has entered.
• Obtain a certificate of tax residence. It remains the practical foundation of any treaty claim.
• Assume visibility. Given automatic exchange, income and assets reported to one tax authority will ordinarily become visible to the other.

For large corporate groups, the position is now the opposite: a uniform floor, guaranteed across the Union. For individuals, the picture remains fragmented and treaty-dependent.

Frequently asked questions

Does the 15% global minimum tax apply to individuals in Bulgaria? No. Pillar Two applies to multinational enterprise groups and large-scale domestic groups above the EUR 750 million revenue threshold. It creates no obligations for individuals, and the EU has no general competence to harmonise personal income taxation.

Has Bulgaria’s flat 10% personal income tax been affected by the OECD reforms? No. The flat rate has applied since 2008 and is unchanged by either Pillar. Personal direct taxation remains a matter of national law, subject to the Treaty freedoms and to Bulgaria’s bilateral treaties.

How many double tax treaties does Bulgaria have? Approximately 70. They are not uniform: several date from the socialist era and have never been updated to follow the current OECD Model Tax Convention.

Is cryptocurrency taxed in Bulgaria? Yes. Gains from selling or exchanging cryptoassets are taxable, and the treatment can differ depending on whether the activity is trading or investment. Accurate records of acquisition cost and disposal value are essential for correct reporting.

Is Bulgaria within the Article 50 delay for small Member States? No. Estonia, Latvia, Lithuania, Malta and Slovakia made that election.

When must in-scope groups file their first top-up tax information return? By 30 June 2026, with exchange between tax authorities to follow by 31 December 2026.

How NBLO can help

New Balkans Law Office advises Bulgarian and international clients on corporate tax, including the scope and application of the Pillar Two rules to groups with Bulgarian constituent entities, and on private client tax, including residence analysis, treaty relief and certificates of tax residence.

We also advise individuals relocating to Bulgaria under the residence by investment and other immigration routes on the tax consequences of the move.

If you would like an assessment of your position under a particular treaty, or of your group’s exposure under Pillar Two, please write to us at sofia@newbalkanslawoffice.com or use our contact form.