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International double taxation

When an international agreement for avoiding international double taxation ratified by Republic of Bulgaria, published and having come into force contains some regulations different from the regulations of the Corporate Income Taxation Act, the regulations of the respective international agreement are applied.
/Art. 13 of Corporate Income Taxation Act/

A special procedure is applied for implementation of the agreements for avoiding international double taxation of incomes and property of foreigners.

Procedure for application of the agreements for avoiding international double taxation of incomes and property of foreigners.

The procedure for tax concessions for foreigners, provided in the adopted agreements for avoiding double taxation (AADT) are applied after proving the grounds for the same.

The grounds for application of the agreements for avoiding double taxation are certified before the tax authorities by the foreigner, as follows:

1. The foreigner is a local person in another country within the meaning of the relevant AADT.
2. The foreigner is owner of the income from a source in the Republic of Bulgaria.
3. The foreigner does not own a permanent establishment or a specific base on the territory of the Republic of Bulgaria, with which the relevant income is actually connected.
4. The special provisions for the implementation of AADT or particular provisions in respect of certain persons defined in the AADT, where such specific requirements are contained in the relevant AADT.

• These grounds are specified by the foreigner or their proxy in a request following a model approved by the chief tax director.
• The grounds that the foreigner is a local person in another country within the meaning of AADT is to be certified by the foreign tax administration in the request or in another document in compliance with its usual practice.
• The grounds that the foreigner is owner of the income from a source in the Republic of Bulgaria and does not own a permanent establishment or a specific base on the territory of the Republic of Bulgaria, with which the income is actually connected, shall be declared by the foreigner.
• The grounds under item 4 shall be certified by official documents, including excerpts from public records. When such documents are not issued, other documentary evidences are allowable. These grounds can not be certified by declarations.

In case the rights to receive a certain income stem from contractual type of relations, the document could be a written contract, or in case there is no such contract - any written evidence for the presence of contractual relations between the payee of the income and the foreigner, on which the right to receive the income is based.

Apart from the stated documents, the request can be accompanied by any other written evidence which would facilitate the process of clarification and establishment of the grounds for application of the relevant AADT and the type and grounds for realization of the relevant income.

The request and the documents attached to it shall be submitted by the foreigner or their proxy at the territorial tax directorate where the payee of the income is registered or at the directorate where the latter is subject of registration. When the payer is not subject to registration, the request and attached documents shall be submitted at the territorial directorate – Sofia.

The tax authorities control the application of AADT by carrying out tax inspections or revisions. In case of a tax inspection, an opinion is issued on the presence or lack of grounds for application of AADT and the same is issued to the foreign person within 60 days from submission of the request.

The tax authorities issue an opinion on the lack of grounds for application of AADT in case the foreigner has not complied with the requirements of the Tax Insurance Proceedings Code. In case no opinion is issued within a 60-day period, that shall be considered as a decision for presence of grounds for application of AADT.

From the moment the opinion is received or in case no opinion is issued within the 60-day period, the provisions of the relevant material tax law are applied. The opinion stating lack of grounds for application of AADT is subject to appeal only if accompanied by the tax revision act or the act for offset or return, with which the application of AADT was refused.

Regardless of the opinion, the application of AADT in compliance with the law is subject to follow-up control during tax inspections.