In the conditions of a changeable situation, some of the companies manage to adapt by implementing their commercial activity through remote work of their employees. A situation often arises when a person hired on work abroad has to perform his duties remotely from the territory of another country. Until one moment this person has paid taxes in the country where the company has its registered office, and subsequently, after beginning the remote performance of his duties in another country, the question arises about the tax treatment of the income realized through remote work.
When the remote work is performed from the territory of Bulgaria, the order for taxation of the income of the natural person depends on whether the person is considered local or foreign.
A local natural person, regardless of the citizenship, is considered to be any person:
-who has a permanent address in Bulgaria or
– who resides on the territory of Bulgaria for more than 183 days during each period of 12 months or
– who has been sent abroad by the Bulgarian state, by its authorities and / or organizations, from Bulgarian enterprises, and members of his family, or
– whose center of vital interests is in Bulgaria.
According to one of the listed hypotheses, the natural person is considered local in the sense of the Bulgarian legislation, except in cases when he has a permanent address in Bulgaria, but the center of his life interests is not located in the country. In this regard, it should be borne in mind that the center of vital interests is located in Bulgaria, when the interests of the person are closely related to the country. In determining them, the family, the property, the place from which the person carries out labor, professional or economic activity, and the place from which he manages his property are taken into consideration.
In principle, it should be borne in mind that local individuals are liable for taxes on income from sources in Bulgaria and abroad, while foreign individuals are bearers of the obligation only for taxes on income from sources in Bulgaria.
When in a tax agreement or in another international agreement, ratified by Bulgaria, promulgated and entered into force, are contained provisions other than the above rules, the provisions of the relevant tax agreement or contract shall apply.
Defining a natural person as a local or foreign person is important for the application of the respective tax agreement or contract.
Most bilateral double taxation agreements to which Bulgaria is a party provide wages, salaries and other similar remuneration for work under an employment contract received by a resident of one of the states to be taxable only in that state unless the work is performed in the other contracting state. If the work is performed in the other country, such remuneration as acquired in that country may be taxed in that other country.
Therefore, in the event that a resident of Bulgaria or a resident of another country with which Bulgaria has concluded bilateral agreement (regulating the above rules), performs its work remotely from Bulgaria, then the taxation of his income paid by the foreign employer will have to be done only in Bulgaria.
For advice on tax treatment of income you can contact our experts.