Bulgaria has a broad tax treaties network, under which relief from double taxation on different types of income and capital in Bulgaria could be sought by foreign investors. Austria and Bulgaria first entered into a double tax treaty in 1984. The treaty was later revised following OECD model and a new treaty came into force at February 3, 2011. Our Bulgarian lawyers offer a wide range of legal services to foreign investors and are able to guide you through different international tax treaties for avoidance of double taxation.
According to the Austria-Bulgaria double tax treaty, double taxation may be avoided as it follows:
- in Austria for: income tax, corporate tax, land tax, tax on agricultural and forestry enterprises and tax on the value of vacant plots;
- in Bulgaria: for personal income tax, corporate income tax, final tax (tax levied on specifically listed income accrued or paid in favor of foreign persons from sources in Bulgaria, but has not been realized through a fixed base in the country) and real property tax.
Our law firm in Bulgaria is committed to providing legal services that cater for every business and would be able to give advice on taxation issues.
Under Bulgarian law, the withholding tax rate for dividends paid by a Bulgaria entity to a nonresident is 5%, unless a lower rate applies under a tax treaty. According to Austria-Bulgaria double tax treaty, the tax is charged on the gross amount of the dividends paid and it will not exceed:
- 0% if the beneficial owner is a company (other than a partnership);
- 5% in all other cases.
It should be noted that dividends payable to a legal entity that is tax resident in an EU/EEA member state are exempt from withholding tax. A tax resident in Austria is therefore exempted under this category.
Interest and royalties paid to a nonresident are usually subject to a 10% withholding tax, unless the rate is reduced under a tax treaty or the EU interest and royalties directive applies. Withholding tax is levied on the gross amount of interest and royalties paid and EU resident entities can claim a refund of a portion of the withholding tax paid.
A zero withholding tax rate may apply on interest if the loan is extended by a bank and also for industrial, trade, and scientific equipment on credit.
Technical service fees, such as those for the assembly of fixed assets, services of a consultancy nature and marketing research paid to a nonresident are subject to a 10% withholding tax on the gross amount. EU resident entities can claim a refund of a portion of the withholding tax paid.
To claim relief under the Austria-Bulgaria double tax treaty, the applicant must follow certain legal formats. Given the complexity of international tax treaties, we recommend that professional help should be sought prior to taking any action under any of these treaties. For more information on any international treaties, please feel free to contact our Bulgarian attorneys.
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