1/1/1900
Romania and Bulgaria have concluded on June 1, 1994 the Convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital.
The Convention applies to persons who are residents (subject to imposition) of one or both of the Contracting States, respectively to individuals, companies and other associations.
The Convention refers to the taxes on income and capital, imposed on behalf of a Contracting State, irrespective of the manner in which they are levied. Specifically, the Convention is applied to the existing taxes, respectively:
a) In the case of Romania:
(i) tax on income derived by individuals;
(ii) tax on profits of legal persons
(iii) tax on salaries and other similar remuneration;
(iv) tax on income from agricultural activities;
(v) tax on dividends.
b.) In the case of Bulgaria:
(i) tax on total income;
(ii) tax on profit.
The Convention shall apply to any other identical or substantially similar taxes, which are imposed after the date of signiture of the Convention. The contracting states shall notifiy each other of any significant changes which have been made in their respective taxation laws, within a resonable term.
The Convention establishes the criteria to determine the residents liable to pay taxes in a Contracting State, in the following order:
1. The criterion of domicile, residence, place of effective management or other criterion of a similar nature;
2. In case the persons are residents in both states, the fiscal domicile shall be determined as follows:
(a) In the state where (1) the person has a permanent home available to him, or (2) in the State with which his personal and economic relations are closer (centre of vital interests).
(b) In case it cannot be determined the centre of vital interests or when the person does not have a permanent home in any of the Contracting States, his tax residence will be considered in the state where that person usually lives;
(c) if the respective usually lives in both Contracting States or he does not usually live in any of them, he shall be deemed a resident of the Contracting State whose national he is;
(d) if that person is a national of both Contracting States or he is not a national of none of them, then the competent authorities of the Contracting States shall settle the question by mutual agreement.
(3) When, under the provisions of paragraph 1 above, a person other than an individual, is a resident of both Contracting States, then it will be considered to be a resident of a Contracting State in which is situated the place of its effective management.
The Convention stipulates what is meant by the term "permanent establishment" of an enterprise and establishes the criteria according to which it is determined.
The Convention refers to the following categories of income:
1.) Income from immovable property;
2.) The profits of the enterprises
3.) International transport
4.) Associated enterprises;
5.) Dividends;
6.) Interests;
7.) Royalties;
8.) Capital gains;
9.) Independent personal services;
10.) Dependent personal services;
11.) Fees of the board members;
12.) The incomes of artists and sportsmen;
13.) Pensions
14.) Public profession
15.) The income of students and trainees
16.) The income of professors and researchers;
17.) Other income
Regarding the imposition of capital represented by immovable property, it may be taxed in the Contracting State in which these properties are located.
The capital represented by immovable, which is part of a an asset of an permanent establishment of an enterprise or the capital represented by movable property belonging to a fixed base used for the performance of independent professional services, may be taxed in the Contracting State in which the permanent establishment or fixed base is situated.
The capital represented by ships, aircraft, rail and road vehicles operated in international traffic, and movable property having the operation of such vehicles shall be taxable only in the Contracting State in which the place of effective management is situated.
All other elements of the capital of a resident of a Contracting State shall be taxable only in that Contracting State.
The Convention stipulates the following methods to eliminate double taxation, which apply in the situations where a resident of a Contracting State derives income or owns capital which, in accordance with this Convention may be taxed in the other Contracting State. In this situation, the first-mentioned State shall exempt such income or capital tax - excluding income referred to in the paragraph below - but take into account in determining the tax rate, the total income, so the resulting tax rate shall apply only to the remaining income.
When a resident of a Contracting State derives income from dividends, interests, royalties, which, under the provisions of the Convention may be taxed in the other Contracting State, the first-mentioned Contracting State shall allow as a deduction from the income tax of that resident an amount equal with the tax paid in the other Contracting State. However, this deduction can not exceed that part of the tax, calculated before the deduction, which is attributable to such elements of income.
The Convention also refers to the possibility of amicable settlement, in case a person considers that it was injured as a result of taxation which is not in accordance with the Convention.
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