Bulgaria has signed numerous tax avoidance agreements, among which one with the United States of America. The agreement was signed at the beginning of 2007 and contains provisions about the avoidance of double taxation with respect to the income tax and prevention of fiscal evasion. The Bulgaria-USA double taxation agreement only applies to individuals residents of the contracting states.
The taxation agreement between Bulgaria and the United States applies to the taxes on incomes imposed by each contracting party. The convention applies on the total income or on certain elements considered part of the income a company makes in Bulgaria or the United States. In the case of Bulgaria, the tax treaty applies to the personal income tax and to the corporate tax.
In the case of the United States, the double taxation treaty applies to the federal income tax as deemed by the Internal Revenue Code and to the taxes imposed on the income from investments made by foreign private foundations. The convention will also apply to other similar taxes imposed in the US and Bulgarian taxation systems. In the case of both states, social security taxes will not be taken into consideration when enforcing the double taxation agreement.
The agreement for the avoidance of double taxation between Bulgaria and the United States applies to both natural persons and companies. With respect to companies, the agreement will cover any permanent establishments, among which subsidiary companies opened by US companies in Bulgaria and Bulgarian subsidiaries opened in the United States.
The applicable tax rates, according to the double taxation agreement signed by Bulgaria and the United States, are 5% of the gross amount of the dividends, if the beneficial owner holds at least 10% of the voting power in the company paying the dividends, and 10% of the gross amount of the dividends in the remaining cases. Interests will be taxed at a maximum rate of 5% of the gross amount of the interest, while royalties will also be taxed at a maximum rate of 5%.
For complete information about the provisions of the tax treaty signed with the United States, you may contact our Bulgarian lawyers.
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