Bulgarian solutions for EU residents
A non-Bulgarian resident can (i) become professionally active in Bulgaria and (ii) receive a (high) salary from a Bulgarian company as a compensation for these activities. This salary constitutes a tax deductible cost for the Bulgarian company and the receiving individual pays 10% Bulgarian personal income tax on that income in Bulgaria. Bulgaria has concluded double tax treaties with other EU member states and hence, the country of residence will exempt this personal income derived from Bulgarian sources (because taxes were already paid in Bulgaria). In the case of a Belgian resident for example, this means the individual pays a 10% flat tax on his/her Bulgarian-sourced income and avoids the annoying Belgian progressive income tax rates of up to 50% in the highest income tax bracket. In other words, transforming taxable business income of a Bulgarian company into a deductible cost (salary) allows a resident of a high-tax country to pay only 10% tax at the corporate and personal tax level combined. In such a scenario, social security contributions are still to be paid in the country of residence and other (non-Bulgarian) income derived from within the country of residence will be taxed according to the normal rules. In most cases, this other (non-Bulgarian) taxable income is added on top of the Bulgarian-sourced income, meaning higher income tax rates will apply immediately if the country of residence applies a progressive personal income tax system (like Belgium does).
Some individuals are willing to become a Bulgarian taxpayer by relocating to Bulgaria, depending on their professional and personal situation. The advantage of such a relocation is that also social security contributions become payable in Bulgaria. The advantage of Bulgaria’s social security system is that the social security contributions payable are limited. In other words, social security contributions have a low monthly upper limit compared to other EU member countries (contributions are calculated on a fixed gross salary).