Tax in Bulgaria: when do you become liable to tax?

When are you tax resident in Bulgaria?

Whether Bulgaria taxes all of your income depends on whether you are tax resident there – in Bulgarian, местно лице. According to the Bulgarian National Revenue Agency (NRA), you are resident if, among other things, you have a permanent address in Bulgaria, stay in the country for more than 183 days in any 12-month period, or have your centre of vital interests in Bulgaria.

If you have a permanent address in Bulgaria but your centre of vital interests is in another country, you are not treated as resident in Bulgaria. In that assessment, the NRA looks at factors such as family, property, place of work and where you manage your assets.

• You have a permanent address in Bulgaria, and your centre of vital interests is not in another country.
• You stay in Bulgaria for more than 183 days in any 12-month period.
• Your centre of vital interests is in Bulgaria.

What does being tax resident in Bulgaria mean?

If you are resident in Bulgaria, Bulgaria can in principle tax your total income. If you are not resident, you are only taxed on income from Bulgaria.

The standard rate of annual personal income tax is 10 percent of the taxable base. As a rule, the annual tax return is filed between 10 January and 30 April of the year following the income year.

What happens to your Danish tax liability?

Moving to Bulgaria does not automatically end your full tax liability in Denmark. If you still have access to a year-round home in Denmark, you generally remain fully liable to tax there. Full liability typically only ends when you sell the home, terminate the lease, or let the home for at least 3 years on a contract you cannot terminate yourself.

You can also become fully liable again. Without a home in Denmark, this happens if you stay in Denmark for at least 6 months. If you have a home there, anything beyond short holiday stays is enough. In Danish practice, a continuous stay of more than 3 months, or more than 180 days within 12 months, is not considered short, and work is generally not compatible with a holiday stay.

Once full tax liability has ended, you may still have limited tax liability in Denmark on Danish income, such as pension, salary for work carried out in Denmark and income from real estate in Denmark.

What if both Denmark and Bulgaria treat you as resident?

Denmark and Bulgaria have a double tax treaty, which entered into force on 27 March 1989 and has applied since 1 January 1990. If you are resident in both countries under their domestic rules, the treaty decides residence based on where your centre of vital interests is. If that does not settle the question, the two tax authorities must resolve it by mutual agreement.

The treaty then allocates the right to tax each type of income. Pensions, for example, can only be taxed in the source country, while income from real estate can be taxed in the country where the property is located. If Bulgaria may tax an item of income and you are also liable to tax in Denmark, Denmark gives relief using the credit method.

How to get an overview of your own situation

Tax residence is assessed on the actual facts, not on a single date or address. Gather documentation before you change your home, work or pattern of stays.

• A calendar of your days in Denmark and in Bulgaria.
• Documentation of what happens to your Danish home.
• An overview of income from both countries, split into salary, pension, rental and investment income.
• Information about family, home and work that shows where your centre of vital interests is.