Trading online in Bulgaria

[Ste]

Hello everyone, it would be possible for an EU citizen to move to Bulgaria and trade online professionally (several operations per month on Forex, stocks, etc., at least 15-20 operations/month) as the only source of income, without having to open a company or register the business as an individual (sole proprietorship/sole trader)? Obviously paying 10% on profits and social security (which for an EU citizen, in 2022, should be 27.8% of the monthly profit, between a minimum of 710 BGN and a ceiling of 3400 BGN; for which one would certainly pay 27.8 % of 710 bgn, monthly, even if you don't earn anything). In addition, there would be accounting costs. I read that in the EU there is thinking of equating the activity of online trader to any other activity, so in the future perhaps it will be necessary register this business as an individual (sole trader/sole proprietorship) or by registering a company; however I'm not sure about this, I've only read something on the net, which could also be unfounded. I've read that when you move to Bulgaria, Bulgaria wants to know the source of income of the person who intends to apply for residency (even if a citizen EU).Thanks

 

[algotrader]

There are in principle 3 ways to live as a trader in BG.
1. Declare your income as a private person and pay 10% on gross profit without social security contributions (capital gains from EU/EEA listed shares & corporate bonds are exempt)
2. Register as as sole trader and pay 15% on net profit (capital gains from EU/EEA and US/HK/AU shares and corp bonds are exempt) + social security
3. Create a limited company (EOOD) and pay 10% on net profit (same exemptions as sole trader) but 5% on distributed dividends + social secutity on your salary

In principle, if you have more than 3 transactions and 50.000 BGN turnover + trading is your own source of income you are considered a professional and need to register for VAT (only for reporting) but many don't. A tax advisor told me that the chances of an inspection are around 10%.

Check this site for details (use google translator):

Наръчник за данъци при доходи от акции и финансови инструменти -

Всичко за данъците при доходи от продажба на финансови активи и дивиденти, събрано на едно място от екипа на Tax Monkey.

www.taxmonkey.bg

For the residence permit of EU national it is sufficient to show them some proof of sufficient funds (such as a few thousand euros or credit card) + notarized rental contract or title deed + health insurance (private or EHIC card)

 

[Ste]

Thank you for the detailed answer.

I have one more question: in Bulgaria, as a private person, do foreign bank accounts (e.g. Revolut, N26, etc.) need to be declared? Only above a certain threshold? And foreign trading accounts (e.g. IBKR, Swissquote, Saxo, etc.) must be declared? Only above a certain threshold? And for cryptocurrency accounts (e.g. Coinbase, Binance, etc.) how does it work? Thanks

 

[algotrader]

Thank you for the detailed answer.

I have one more question: in Bulgaria, as a private person, do foreign bank accounts (e.g. Revolut, N26, etc.) need to be declared? Only above a certain threshold? And foreign trading accounts (e.g. IBKR, Swissquote, Saxo, etc.) must be declared? Only above a certain threshold? And for cryptocurrency accounts (e.g. Coinbase, Binance, etc.) how does it work? Thanks

No, bank accounts don't need to be declared by private persons but there's CRS automatic reporting if you tell your bank your residence/address in BG. All profits and year end stock holdings need to be reported to the NRA. Since you will probably do this via a tax accountant they will ask you for the yearly statements of your brokerage accounts.
The same applies to crypto profits.
Here is a guide on taxation of crypto profits:

Наръчник за крипто данъци - Tax Monkey

Всичко за крипто данъци, събрано на едно място от екипа на Tax Monkey.

www.taxmonkey.bg

 

[backpacker]

1. Declare your income as a private person and pay 10% on gross profit without social security contributions (capital gains from EU/EEA listed shares & corporate bonds are exempt)

Let's assume a private investor holds an Irish ETF and a Luxembourg SICAV mutual fund:
I am aware that capital gains of the ETF are tax exempt since it is listed on several EU/EEA exchanges.
However, what's with the Luxembourg SICAV mutual fund which is not listed (bought/sold directly with the fund company OTC)? Are capital gains of this mutual fund fully taxed or is it still exempt since the fund company resides in an EU country??

 

[algotrader]

Let's assume a private investor holds an Irish ETF and a Luxembourg SICAV mutual fund:
I am aware that capital gains of the ETF are tax exempt since it is listed on several EU/EEA exchanges.
However, what's with the Luxembourg SICAV mutual fund which is not listed (bought/sold directly with the fund company OTC)? Are capital gains of this mutual fund fully taxed or is it still exempt since the fund company resides in an EU country??

It is answered in the link I provided:

Is there a difference between company shares and fund shares?​

Many investors choose to add fund shares to their investment portfolio. These are usually Exchange Traded Funds (ETF) and Commodity Discovery Fund (CDF). ETFs are funds that allow a single investment to invest in a portfolio of companies, while CDFs are primarily related to investing in real estate.

ETFs deserve special attention, because buying shares or units of a fund does not mean that we acquire shares of the respective companies that are included in the fund. However, both ETFs and CDFs are usually structured as companies (in the US - Investment Corporation) and what we are actually acquiring when we buy shares of a fund are shares of the company that manages the fund.

In some legislations, it is possible for the funds to be structured in a different way. In Bulgaria, for example, we have so-called collective investment schemes, which can be established as a mutual fund or an investment company.

At the time of writing the handbook, we have an inquiry pending with the NRA regarding certain aspects of the taxation of income from shares in funds, but we are still awaiting a response. For now, we believe it is reasonable to assume that shares of funds are treated in the same way as those of companies.

 

[backpacker]

It is answered in the link I provided:

I saw that. However, I was hoping for something more definite.
Thanks anyway.

 

[algotrader]

I saw that. However, I was hoping for something more definite.

Yeah, the problem with Bulgaria is the legal uncertainty and complicated accounting rules with differences for private investors vs. businesses. Seems like most accountants here and even the NRA are not fully aware of these rules, only lawyers. Another problem are CFDs on shares or short positions. And the rules seem to evolve permanently. A few years ago, profits were exempt for BG shares only. This was not in line with EU single market rules and they had to amend the law for EU/EEA shares and now for US/HK/AU shares because these markets are considered equivalent by EU because of Mifid II (but only for businesses).

But when it comes to low tax juristinctions for traders/investors there are not many alternatives in Europe. Romania, Cyprus and Andorra. And each of them have their own complicated set of rules and/or higher cost of living.