Application of Double Tax Treaties in Bulgaria

In Bulgaria double tax treaties (DTTs) are not applied automatically. The procedure for the application of the tax treaties in force is regulated by Articles 135-142 of the Bulgarian Tax and Social Security Procedure Code (TSSPC). To apply a relief under a DTT, foreign persons should meet certain conditions that need to be certified before the National Revenue Agency (NRA). Those conditions are as follows:

  1. The foreign person is resident for tax purposes in the other Contracting State within the meaning of the relevant DTT;
  2. The foreign person is beneficial owner of the Bulgaria-sourced income;
  3. The foreign person does not have a permanent establishment or a fixed base on the territory of Bulgaria with which the respective income is actually connected;
  4. The special requirements for application of the DTT or individual provisions thereof have been met.

In order to apply a DTT, foreign person or their authorised representatives must file a request with the NRA supported by evidence to demonstrate that the grounds for applying the DTT are met, namely:

  • certificate of residence of the recipient of the income within the meaning of the applicable DTT for the relevant year/years, in which the income has been derived;
  • declaration by the recipient of the income that they are the beneficial owner of the income and that income is not derived through a permanent establishment or a fixed base in Bulgaria;
  • evidence for the representative powers of the person/s who signed the above declaration (most often this is an extract from the trade register of the other state);
  • contract, invoices and other documents that demonstrate the amount, grounds for realization and type of the income (the documents may vary depending on the case);
  • power of attorney in case the foreign person is represented in the proceedings by an authorised representative as well as evidence for the representative powers of the person/s who signed that power of attorney.

In cases of tax examination, the term for issuing a statement for the application of the relevant DTT is 60 days following the filing of the request.

Filing of the request

The request for application of a DTT and the supporting documents shall be filed with the territorial directorate of the NRA where the payer of the income is registered at or is subject to registration.

If the payer is not subject to registration, the request and the supporting documents shall be filed with the Sofia Territorial Directorate.

Simplified procedure

Where a payer charges to a foreign person income from sources in Bulgaria that is below BGN 500 000 per year in total (irrespective of the fact that the income may be derived under one or more contracts or is of the same or different type), a formal request with the NRA shall not be filed. The grounds for application of the relevant DTT in these cases shall be demonstrated only before the payer of the income.

Where the simplified procedure is used the payer of income shall report by March 31 of the following year the amount of the income paid and the tax relief provided. The reporting shall be carried out by filing a tax return (according to Article 142, para 5 of TSSPC) with the territorial directorate, where the payer of the income is registered at or is subject to registration.

Long-term contracts

In cases of long-term contracts (i.e. contracts that have effect over a period longer than one year) or where the income is realized by one and the same person on the same grounds, a request for application of a DTT shall be filed only once.

Applying tax relief under a DTT after the tax is paid 

After paying the withholding tax under the provisions of the domestic legislation, the grounds for application of a DTT regarding the income already taxed could be demonstrated in a tax refund procedure under Article 129 of the TSSPC. The procedure starts with filing of a request for refund with the NRA. The documents listed above certifying that the grounds for applying a DTT have been met should also be filed with the request. The statement for refund shall be issued within 30 days following receipt of the request except in cases where within the same term an audit has been assigned.

 

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