Bulgaria-UK Double Taxation Treaty

Bulgaria signed its first double taxation agreement with the United Kingdom in 1987. The convention was enabled in 1988 in Bulgaria and gradually in the United Kingdom. According to the content of the documents, the agreement contains provisions about the avoidance of double taxation regarding the income and the capital gains tax in order to promote economic cooperation between Bulgaria and the United Kingdom. In order to achieve economic cooperation, the double taxation agreement covers both UK and Bulgarian companies and citizens. The double taxation agreement was last amended in March 2015, but it hasn’t been enforced yet.

What are provisions of the current Bulgaria-UK double tax treaty?

The current double taxation agreement between Bulgaria and the United Kingdom covers several taxes. In the case of the United Kingdom, the following taxes are covered:

• - the income tax,
• - the corporate tax,
• - the capital gains tax.

The agreement applies to the following Bulgarian taxes:

• - the total income tax,
• - the corporate tax,
• - the income tax applied to singles, widowers, Bulgarian divorced persons and families without any children.

With respect to the taxation of income resulting from the alienation of immovable property, UK and Bulgarian companies and citizens may be taxed in the taxpayer’s resident country. Companies’ business profits will also be taxed in the taxpayer’s resident country, unless the company has a permanent establishment in the other country, case in which the permanent establishment’s profits will be taxed in that country. Dividends, interests and royalties will be taxed in the taxpayer’s resident country.

What does the new Bulgaria-UK double taxation agreement contain?

Among the amendments brought to the Bulgaria-UK double taxation treaty, one refers to the introduction of the Bulgarian corporate tax in the convention. The new agreement also contains provisions about the sharing of tax information. New tax rates have also been established for the taxation of dividends:

• - 5% of the gross amount of dividends, if they come from an investment company or a pension fund,
• - 15% of the gross amount of the dividends in all other cases.

The new double taxation agreement signed by Bulgaria and the United Kingdom will be enforced in both countries as soon as they will ratify it.

For more information about the new double taxation with UK, please contact our law firm in Bulgaria.