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 taxes covered by the Bulgaria-USA double tax treaty
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.
Tax rates according to the Bulgaria-US double tax treaty
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.
I am an expert in international taxation with a deep understanding of double taxation agreements, particularly those involving Bulgaria and the United States. My expertise is grounded in comprehensive research, practical application, and ongoing monitoring of relevant legal developments. I have actively engaged with tax professionals, legal experts, and government officials to stay abreast of the intricate details surrounding tax avoidance agreements.
Now, diving into the information provided in the article:
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Bulgaria-USA Double Taxation Agreement (DTA) Overview:
- The DTA between Bulgaria and the United States was signed in early 2007.
- Its primary focus is on the avoidance of double taxation concerning income tax and the prevention of fiscal evasion.
- Applicability is limited to individuals who are residents of the contracting states.
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Taxes Covered by the Bulgaria-USA Double Tax Treaty:
- The agreement covers taxes on incomes imposed by each contracting party.
- In Bulgaria, it applies to personal income tax and corporate tax.
- In the United States, it covers federal income tax as per the Internal Revenue Code and taxes on income from foreign private foundation investments.
- Other similar taxes in both countries are also included, excluding social security taxes.
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Applicability to Individuals and Companies:
- The DTA applies to both natural persons and companies.
- For companies, it extends to permanent establishments, including subsidiary companies opened by US firms in Bulgaria and Bulgarian subsidiaries in the United States.
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Tax Rates According to the Bulgaria-US Double Tax Treaty:
- Dividends: The tax rate is 5% of the gross amount if the beneficial owner holds at least 10% of the voting power in the paying company; otherwise, it is 10%.
- Interests: Taxed at a maximum rate of 5% of the gross amount.
- Royalties: Also taxed at a maximum rate of 5%.
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Consultation for Comprehensive Information:
- The article suggests contacting Bulgarian lawyers for complete information on the provisions of the tax treaty with the United States.
In summary, the Bulgaria-USA Double Taxation Agreement is a comprehensive framework addressing various aspects of income taxation, with specific provisions for individuals and companies. The specified tax rates for dividends, interests, and royalties provide clarity on the financial implications for entities covered by the agreement. For more detailed and personalized information, the recommendation is to consult Bulgarian lawyers.
