Double Taxation - Agreement Between Germany and Bulgaria

The international relations between Bulgaria and Germany were given new content with the new German-Bulgarian double tax Agreement from 2010.

Article 1 of the Agreement governs the taxation of income and assets in one of the Contracting States. In Bulgaria the agreement applies to the income tax of individuals, corporation tax, withholding tax and the real estate tax. The inheritance tax is excluded from this Agreement, i.e. in cases of German-Bulgarian inheritance there is no protection against double taxation.

The new agreement aims to promote and develop the economic relations between the Federal Republic of Germany and the Republic of Bulgaria tackling better fiscal obstacles. The taxation framework of the agreement in the context of cross-border activities forms an important foundation for current and future investments in Bulgaria. The new agreement is based on the structure and content of the OECD model convention. In particular, an inducement for foreign investments is the reduction in the rate of withholding taxes on dividends from 15% to 5%. Furthermore, From 1 January 2015 lease payments for equipment would not fall under the term royalties and therefore are going to be no longer subject to withholding taxes from that date on.

• Incomes of a resident person in Bulgaria, which are taxed in accordance with the agreements in Germany, are exempt from taxation in Bulgaria.
• Incomes of a resident person in Bulgaria from royalties, interests, dividends and profits from the alienation of shares or similar rights, which may be taxed in Germany, the taxes due in Bulgaria are to be set off with the amount paid in Germany.

The agreement establishes the principle of equal treatment of residents and non-residents of the States Parties as guiding principle of the tax policy in the States Parties.