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
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Trading online in Bulgaria
- Thread starter Ellipsis
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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):
https://www.taxmonkey.bg/taxes-financial-assets/
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)
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):
https://www.taxmonkey.bg/taxes-financial-assets/
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)
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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
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:
https://www.taxmonkey.bg/crypto-taxes/
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??
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.
thanks for the link, very instructiv
for 3- can't you just match in any case the salary with the profits (if 500k profit then give 500k salary on december) so that you pay just 10% instead of the 14.5 at the end ?
Also something which is not so clear in the description.
-Are profits of shares which are priced on EU regulated exchange exempt for BG companies too (not only individual ?) (and this apply even if you trade it elsewhere, just need to share to be traded on one pair in a EU regulated exchange ?)
-And for shares which are traded on a US/AUSTRALIA/HK this apply only for BG companies, but not phyiscal persons (as it's not clear everywhere in the article ?
"When does it make sense to move financial asset trading to a firm?
If a large portion of the portfolio is made up of stocks that trade on the NYSE or NASDAQ, the gains from trading those stocks are tax-free when realized by a company."
-to transfer your assets to the company, isn't it better to lend it than contributing it ? If you contribute it/give it, you will be taxed twice and need more experts ? "
Contribution of financial assets to a company
If an individual wants to transfer their portfolio to a company, an adequate way for this to happen is through a non-monetary equity contribution. It is also called contribution. The assets become part of the company's property after their evaluation by three experts at the Registration Agency and the registration of the transfer in the Commercial Register."what is the best way to add assets which are already taxed, and if you lend BTC or USDT, are you gonna be able to claim back the BGN value of the loan or the BTC value tax free ?
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YOu would need to ask an expert about this, theoretically yes, but you need to pay employee/employer social security on that amount (which i think is capped at 945.20 BGN per month). I don't now how often you can change your salary. Only thing I know is that you can pay dividends only once a year.
Yes, here's the exact wording from PWC, for
a) companies:
"Capital gains from trade in listed securities (shares, tradable rights) on regulated markets in the European Union / European Economic Area (EEA) are not subject to taxation. As of 1 January 2021, the same tax treatment is extended to transactions carried out on equivalent markets outside the European Union as specified in the legislation."
b) individuals:
"Capital gains from transactions with securities of public companies on the Bulgarian Stock Exchange or on a regulated securities market in EU/EEA countries."
There's a detailed article discussing equivalent regulated markets in the US:
https://www.investor.bg/a/339-novin...huzhdite-pazari-stavat-neoblagaemi-za-firmite
Probably yes, but you would need to ask a tax advisor/lawyer about this. One tax advisor suggested me transferring my portfolio directly from my personal IBKR to the company IBKR account but I decided against registering an EOOD limited company in Bulgaria and instead registered as a sole trader for various reasons. Amongst others is the problem with opening corporate bank accounts as a foreigner (Bulgarian Banks ask you for giving PoA to a Bulgarian citizen which is an absolute no go for me). Also, it is much more complicated to open brokerage accounts in the name of the company abroad. Asset protection and having greater flexibility in the case of a financial crisis is more important to me than having a 5% lower tax rate, especially since there's no difference for capital gains from EU/US shares.
I thought I was mistaken but min social contributions are 710 bg .......that is 350 euro per month minimum. And they claim to be the overal lowest tax option in europe yes you get 10% tax rate. In belgium minumum is 780 euro per quarter 260 euro/month and you will get more in social benefits compared bg)
I am surprised by these bg numbers and how can rural farmers afford this...
I am surprised by these bg numbers and how can rural farmers afford this...
You are talking about the minimum "base" not the contributions themselves (which are about 33% of that amount for a self employed person). I was referring to the maximum contribution to be paid each month. The max base is 3400 BGN/month x the applicable rate.
https://taxsummaries.pwc.com/bulgaria/individual/other-taxes
This is interesting, however couldn't this be an issue, let's say you hold a delta neutral position, for example bought shares on your broker, and at the same time hold a swap short, or a short, elsewhere, if the price goes down, you didn't make any money, just remained delta neutral, however you would have a gain on your swap position, which would be taxable (whether individual or company), and a loss on the share holding, which wouldn't be deductible (once position gets unwound), or could you opt in for having all the trade actually counted in your account(deducting a loss on a EEA market)
As it seems a bit blurry which market are concerned, in the taxmonkey article they seem to include etfs for individuals, and switzerland.
Oh really, I would have thought that it wouldn't be hard to open brokerage account for the company with it's activity being "trading his own equity", and as a source of fund the loan you make to that company (for a bulgarian eood owned by a bulgarian resident, non bulgarian citizen).
I never heard about that PoA requirement but in fact it would be lame if it's actually needed, this PoA would exclusively give power over one specific BG account right ? not the whole company ?
Isn't it easy to bank without other bank in EU with Eood setup, and maybe transferwise ?
Thanks for the insight, but from the PWC you quoted, and the taxmonkey link about financial assets declaration, US shares trading would be exempted only as a company and not as an individual. As a sole trader would you also get that same benefits ?
I was in similar dilemma and would have thought the company setup looked better (for crypto+tradfi day trading), but there are certainly things I do not see.
-not sure if you trade any crypto or solely tradfi, but about the crypto brokers, I think they all open accounts to companies, so not a big difference with individuals
-about tradfi brokers, IB, etc, I think for an EOOD with a clear scheme it would be as difficult to get, compared with an individual ? (for some broker, with crypto wealth even individual have hard time to get)
-about banking, I heard in fact in Bulgaria it will be very hard to get corporate bank account, as a company even harder, even if you would open an account for a company would simply want to trade stocks on interactive brokers, however you could use the EU banks and emis instead easily ? The fact the company will be clearly audited, and to have this initial "loan" documented, a clear structure (company trading his own assets and you are the only shareholder), I would think it wouldn't be that hard banks account in EU?
-an other advantage of the eood I would imagine(just talking out loud) would be the fact you get a salary, so it create a stronger source of funds for later opening as an individual any brokerage
With the current situation in Europe, you are right to think of asset protection, but why do you feel that as a company you would be less protected ? Couldn't we imagine a scenario where all personnal sparrings get an haircut while corporate bank accounts are safe guarded...seems hard to forecast such things. Maybe the risk would be a kind of "war tax" on Eu companies ? This would then apply to sole traders too I guess.
Also something I do not really get, does it matter where your share are traded as long as it exists a regulated market within EEA where that one share is traded ?
Example you trade stocks of a German PUBLIC company on whatever, on a brazilian stock exchange, then the sale is not exempt ?
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Actually I am thinking now, for the specific of trading assets on regulated EU market, as a sole trader you will be exempted, but as a company, to get the profits in your pocket, you will have either to pay anyways the 10%, but in this case the 5% dividend tax right ? As even if the corporate profits will be exempted, these profit will exist and need to be distributed to you at a point, which will trigger, either as a salary 10% either as a dividend 5%, so for this particulat assets you seem to be better off as a sole trader right ? Or I am missing something and there is a way to distributed these corporate tax free profit to yourself still tax free ?
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Does IBKR transfer portfolio from individual to corporate account internally, or do you have to sell everything at IBKR, transfer to personal bank account, transfer to corporate bank account, transfer to corporate account at IBKR?
Losses (regardless from which market) can always be offset against profits. But only profits from EU/EEA (+ US for companies) are not taxable. That is explained in the taxmonkey article.
Tax advisor suggested me to open company trading account with karoll.bg (a Bulgarian introducing broker for IBKR). I never tried opening a company trading account abroad, so I don't know how difficult it is. But I heard that some EMIs such as wise wouldn't accept corporate clients from Bulgaria anymore.
The PoA would be only for an account not for the whole company. You need to distinguish between the capital account (which has to be in BG) for the initial capital deposit and the normal business account (which can be abroad). I heard that Airwallex is easy to deal with from BG.
I will probably also start trading with Crypto but in my case it has to be together with other asset classes for reasons of diversification. So, I will probably use CFDs and ETNs with tradfi brokers. I think for a pure crypto setup other jurisdinctions such as Dubai are better.
Almost everywhere it gets more and more complicated to open bank accounts. Here in BG you can hire lawyers to help you opening a business account.
You can take the 2013 Cyprus crisis as an example. Haircut is just one scenario. Another one is capital controls and hyperinflation or CBDC with govt forcing you to hold specific assets or currencies that will result in a loss in real terms (just another form of taxation). Best is to have accounts outside EU and Eurozone. Again, it's easier to open accounts and move your funds as an individual. Or imagine you want to leave BG quickly for whatever reason. Liquidating an EOOD is very complicated, takes more than 1 year, dividends cannot be paid out quickly... On the other hand an EOOD has limited liability but this is less relevant if you trade your own funds. If there are issues with authorities you can also be held liable personally as a director.
Right, the exchange where it is traded matters.
added to post :
Correct, only as a sole trader you will pay 0% on US/EU/EEA capital gains in the end (except some social security contributions). Although the tax rates are different for a sole trader vs. company, the process of income determination is the same:
"he tax regime for ST is governed by the Income Taxes on Natural Persons Act (ITNPA) and the Corporate Income Tax Act (CITA). The Corporate Income Tax is applied to determine which ST income is subject to taxation."
https://www.bulgaria-tax-law.bg/taxation-sole-traders.html
Yes, the tax advisor told me that some of his clients did it like this, transfer within IBKR without liquidation.
"The norms in Art. 44 of the ZKPO introduce the rule for the elimination of profits and losses from the disposal of financial instruments in the sense of §1, item 21 of the DR of the law when determining the tax financial result."
"
- The financial results of all transactions during the year are collected;
- Profits and losses from transactions with shares and financial assets traded on regulated markets in the EU and EEA are deducted from them;
- The financial results of transactions with shares in markets whose legal framework is equivalent to that of the EU are also subtracted (more on this in a moment);
- Other expenses related to the activity are also deducted."
"Similar to natural persons, the exemption applies to tax-exempt gains and non-recognized losses, i. e. gains and losses arising from transactions in financial instruments admitted to trading on a regulated market and offered to the public in the state, in another Member State of the European Union or Contracting State of the European Economic Area Agreement (Art. 44 CITA)."
https://ruskov-law.eu/bulgaria/article/tax-trade-shares.html
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https://www.bulgaria-tax-law.bg/tax-reliefs.html"Here, exempt from taxation are profits realized from transactions with certain financial assets when the transactions are carried out on the stock exchange. Similarly to profits - losses are not recognized for tax purposes. "
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