Let's start from this premise: the residence of an entity should be verified according to the local definition of residence (country-specific) and only in case of double residency a treaty could be used to determine the only residency of an entity.
Having said that, I noticed that while in many countries the internal tax code defines an entity as resident based on POEM, in Bulgaria the internal tax residency is defined exclusively by the incorporation principle.
"The criteria for an entity to be considered a tax resident in Bulgaria are set out in Art. 3 of the Corporate Income Taxation Act. The following entities are considered as tax residents in Bulgaria: 1. legal entities established under the Bulgarian law; 2. companies established under Regulation (ЕC) No. 2157/2001 of the Council, and cooperative societies established under Regulation (ЕC) No. 1435/2003 of the Council where they have their registered office within the country and are entered in a Bulgarian register."
As a consequence we can imagine that Bulgarian fiscal agency, if there is no significant presence of the company in the country to trigger the PE definition, should not be able to claim that a foreign entity is resident in Bulgaria and - as a consequence - it would be feasible (without too much substance in BG to trigger a PE) to have an offshore entity fiscal resident in another state which includes registration as one criteria to be fiscal resident there.
For example: Romanian SRL owned by a bulgarian resident. For the romanian code a SRL is resident in romania if incorporated there OR managed from there. This means a romanian srl will never be resident in bulgaria but will definitely be resident in Romania.
Now let's mix this the CFC provisions. CFC provisions have been recently amended in Bulgaria but they still regard (correct me if i am wrong) the companies and NOT individuals.
From the above please correct me if i am wrong:
An IOM company, resident in IOM based on registration, will not be resident in BG even if managed from there without a PE (and this REGARDLESS of the presence of a DTA).
An Hong Kong company, resident in Hong Kong based on registration, will not be resident in BG even if managed from there without a PE (and this REGARDLESS of the presence of a DTA) and will not be a CFC if individually owned.
A Romanian company, resident in Romania based on registration, will not be resident in BG even if managed from there without a PE (and this REGARDLESS of the presence of a DTA) and will not be a CFC if individually owned.
An Hungarian company, resident in Hungary based on registration, will not be resident in BG even if managed from there without a PE (and this REGARDLESS of the presence of a DTA) and will not be a CFC if individually owned.
now moving a bit "hardcore":
A Cyprus company, NON resident in Cyprus since managed from BG, will not be resident in BG even if managed from there without a PE (and this REGARDLESS of the presence of a DTA) and will not be a CFC if individually owned.
I would be very glad to get the opinion from any international tax expert eventually present in the forum.
Many thanks
Having said that, I noticed that while in many countries the internal tax code defines an entity as resident based on POEM, in Bulgaria the internal tax residency is defined exclusively by the incorporation principle.
"The criteria for an entity to be considered a tax resident in Bulgaria are set out in Art. 3 of the Corporate Income Taxation Act. The following entities are considered as tax residents in Bulgaria: 1. legal entities established under the Bulgarian law; 2. companies established under Regulation (ЕC) No. 2157/2001 of the Council, and cooperative societies established under Regulation (ЕC) No. 1435/2003 of the Council where they have their registered office within the country and are entered in a Bulgarian register."
As a consequence we can imagine that Bulgarian fiscal agency, if there is no significant presence of the company in the country to trigger the PE definition, should not be able to claim that a foreign entity is resident in Bulgaria and - as a consequence - it would be feasible (without too much substance in BG to trigger a PE) to have an offshore entity fiscal resident in another state which includes registration as one criteria to be fiscal resident there.
For example: Romanian SRL owned by a bulgarian resident. For the romanian code a SRL is resident in romania if incorporated there OR managed from there. This means a romanian srl will never be resident in bulgaria but will definitely be resident in Romania.
Now let's mix this the CFC provisions. CFC provisions have been recently amended in Bulgaria but they still regard (correct me if i am wrong) the companies and NOT individuals.
From the above please correct me if i am wrong:
An IOM company, resident in IOM based on registration, will not be resident in BG even if managed from there without a PE (and this REGARDLESS of the presence of a DTA).
An Hong Kong company, resident in Hong Kong based on registration, will not be resident in BG even if managed from there without a PE (and this REGARDLESS of the presence of a DTA) and will not be a CFC if individually owned.
A Romanian company, resident in Romania based on registration, will not be resident in BG even if managed from there without a PE (and this REGARDLESS of the presence of a DTA) and will not be a CFC if individually owned.
An Hungarian company, resident in Hungary based on registration, will not be resident in BG even if managed from there without a PE (and this REGARDLESS of the presence of a DTA) and will not be a CFC if individually owned.
now moving a bit "hardcore":
A Cyprus company, NON resident in Cyprus since managed from BG, will not be resident in BG even if managed from there without a PE (and this REGARDLESS of the presence of a DTA) and will not be a CFC if individually owned.
I would be very glad to get the opinion from any international tax expert eventually present in the forum.
Many thanks