Income from the US, UAE and Other Non-EU Countries — Tax Treatment for Bulgarian Tax Residents (2026)

1. Who is affected — individuals taxed on worldwide income

The rules in this article apply to Bulgarian tax residents within the meaning of Art. 4 of the Personal Income Tax Act (ЗДДФЛ). An individual qualifies as a Bulgarian tax resident if at least one of the following conditions is met:

• Has a permanent address in Bulgaria;
• Resides in the territory of Bulgaria for more than 183 days within any 12-month period;
• Has the centre of their vital interests (family, property, professional activity) in Bulgaria;
• Is sent abroad by the Bulgarian State, its authorities and/or organisations, or by Bulgarian enterprises.

Bulgarian tax residents are liable to tax on their entire worldwide income — including from the US, UAE, UK or any other non-EU country. Residency is assessed separately for each tax year and does not depend on your nationality.

2. Principles of taxing foreign income

Worldwide principle

Under Art. 6 ЗДДФЛ (Personal Income Tax Act), Bulgarian tax residents are liable to tax on income from sources both inside and outside Bulgaria. This means US dividends from Apple, rent from property in Dubai, or royalties from a UK publisher — all are subject to reporting and, where applicable, taxation in Bulgaria.

Priority of DTTs

Art. 75 ЗДДФЛ provides that where an international treaty (СИДДО / DTT) ratified by Bulgaria, promulgated and in force contains provisions different from the Personal Income Tax Act, the provisions of the treaty apply. In other words — DTTs take priority over domestic law. The current list of Bulgaria's DTTs in force is maintained by the NRA (National Revenue Agency / НАП) and covers over 70 countries.

Two methods of eliminating double taxation

Where the same income may be taxed in two states, the DTT determines how the double burden is avoided. Two main methods apply:

• Ordinary tax credit under Art. 76 ЗДДФЛ — foreign tax paid is credited against Bulgarian tax, but not more than the Bulgarian tax due on the same income. This is the most frequently used method in Bulgarian DTTs.
• Exemption with progression — foreign income is not taxed in Bulgaria, but is included when calculating the rate. Rarely applied, and only for specific categories of income (e.g., Germany for public service remuneration, Greece for certain categories).

3. USA — the main rules

The DTT between Bulgaria and the United States was signed on 23 February 2007 and entered into force on 15 December 2008, and remains the applicable framework in 2026. Important clarification: the DTT covers the 50 continental states and the District of Columbia — it does not cover Puerto Rico, the US Virgin Islands, Guam and other US territories, which have a separate tax regime.

Employment income and remote work

If you work remotely from Bulgaria for a US employer and spend less than 183 days in the US within any 12-month period, employment income is taxed only in Bulgaria — 10% flat tax plus social security contributions under the general rules. If you exceed the 183-day threshold, the US acquires the right to tax the income, and a tax credit is applied in Bulgaria.

Directors' fees — reverse principle

A peculiarity of the US DTT is that directors' fees paid to board members are taxed in the State in which the company is registered. In practice: if you are a director of a US corporation, the US may tax the income, and in Bulgaria either an exemption or credit applies depending on the characterisation.

Dividends from US shares

The base US withholding rate on dividends paid to non-residents is 30%. By filing Form W-8 BEN with the broker or payer, the rate is reduced to 10% under the DTT. In Bulgaria, dividends are taxed at 5% final tax, but since the 10% already withheld in the US fully covers the Bulgarian liability through the tax credit, there is no additional tax to pay.

Interest and royalties

The US DTT provides a cap of 5% on interest and 5% on royalties. Combined burden for a Bulgarian tax resident:

• Interest: 5% withheld in the US + 8% final tax in Bulgaria (Art. 38(13) ЗДДФЛ for interest on bank accounts is 8%; other interest follows the general rules); after applying the tax credit the final burden is around 8%.
• Royalties: 5% in the US + 10% in Bulgaria = up to 15% effective burden after crediting.

Documents from the US payer

Form 1042-S is the primary document through which the US broker or payer certifies the tax withheld at source. It is a mandatory annex to Annex No. 8 or No. 9 in the Bulgarian tax return.

4. UAE (Dubai) — the advantage of zero taxation

The DTT between Bulgaria and the United Arab Emirates has been in force since 2009. The UAE traditionally does not tax personal income, which leads to a specific picture for Bulgarian tax residents.

• Dividends: the DTT provides a 5% cap, but in practice the UAE does not withhold tax at source on dividends paid to individuals. Accordingly, in Bulgaria you owe 5% final tax (Art. 38(1) ЗДДФЛ).
• Employment income: the 183-day rule applies. If you work for a UAE company but reside primarily in Bulgaria, the income is taxed in Bulgaria at 10%.
• Interest and royalties: zero taxation in the UAE; the amount due in Bulgaria follows the general rules (8% or 10% depending on the type).

In practice, the UAE is a predictable jurisdiction — there is no risk of double taxation, and everything is concentrated in Annex No. 8 or No. 9. However, since 1 June 2023, the UAE has introduced a corporate income tax (9%), which may indirectly affect distributions from free-zone companies.

5. United Kingdom after Brexit

The DTT between Bulgaria and the United Kingdom from 1987 continues to apply after the UK's departure from the EU — Brexit does not affect bilateral tax treaties. Key parameters:

• Dividends: DTT cap of 5%; the UK generally does not withhold tax on dividends — in Bulgaria you owe 5% final tax.
• Interest: zero withholding in the UK under the treaty; 8% or general rules in Bulgaria.
• Royalties: zero withholding in the UK; 10% final tax in Bulgaria (Art. 38(10) ЗДДФЛ).

Caution: shares traded on the London Stock Exchange (LSE) no longer benefit from the exemption under Art. 13(1)(3) ЗДДФЛ, as it is limited to regulated markets in the EU/EEA. Capital gains from the LSE are subject to 10% tax in Bulgaria.

6. Russia — partially suspended DTT

By Decree No. 585 of 8 August 2023 (Указ №585), the President of the Russian Federation suspended the operation of key provisions of the DTT with numerous countries, including Bulgaria — primarily those on employment income, dividends, interest and royalties. The status remains unchanged in 2026.

Consequences for a Bulgarian tax resident earning Russian-source income:

• Russia applies its domestic rates for non-residents: 15% on dividends, 20% on interest, 20% on royalties;
• The preferential DTT rates (5% on dividends, 5% on interest, 15% on royalties) are no longer available;
• In Bulgaria, the tax credit under Art. 76 ЗДДФЛ is capped at the Bulgarian tax due on the same income — the excess withheld in Russia is not refundable;
• Practical effect: on a dividend of EUR 1,000 → EUR 150 withheld in Russia, EUR 50 maximum credit in Bulgaria = unrecoverable loss of EUR 100.

It is advisable that any transaction generating Russian-source income be structured after a prior tax consultation.

7. Switzerland, Turkey, Serbia, Singapore — comparative table

The table below summarises the withholding caps under several common DTTs. Actual withholding may be lower if the domestic law of the source country so provides.

The current and complete list of DTTs in force is maintained by the NRA (НАП) and the Ministry of Finance.

8. Filing in the annual tax return

Foreign income is declared by Bulgarian tax residents through the annual tax return (ГДД) under Art. 50 ЗДДФЛ — form 2001, due by 30 April of the year following the year of receipt.

Which annex for which income

• Annex No. 8 (Приложение №8) — for dividends and liquidation shares from a source outside Bulgaria, including code 8141 for dividends from foreign companies. Used both for US ETFs and for dividends from UAE entities.
• Annex No. 9 (Приложение №9) — for other foreign income: employment, civil-contract remuneration, rent, interest, royalties, copyright fees, and capital gains. The tax credit under Art. 76 ЗДДФЛ is also claimed here.

Mandatory supporting documents

Documents evidencing the foreign tax paid must be attached — original (or certified copy), accompanied by a legalised translation into Bulgarian. For countries outside the 1961 Hague Convention, an apostille or full legalisation is required. US Forms 1042-S and UK P60s are accepted as primary documents.

Early e-filing discount

Under Art. 53(6) ЗДДФЛ, where the return is submitted electronically by 31 March and the taxpayer has no public debts, a 5% discount applies on the tax due — capped at EUR 256 (BGN 500).

9. Where no DTT exists

If the income originates from a country with which Bulgaria has no DTT in force (for example, the British Virgin Islands, Cayman Islands, Panama, Belize), only the domestic framework applies — Art. 76 ЗДДФЛ with a unilateral tax credit.

The mechanism is straightforward but limited:

• Foreign tax paid is credited, but not more than the Bulgarian tax on the same income;
• For dividends the cap is 5%; for other income typically 8% or 10%;
• Excess withholding is not refundable in Bulgaria nor (in most cases) in the source State;
• For offshore jurisdictions that do not tax at all, the burden is concentrated in Bulgaria — which usually leads to a predictable 5–10%.

Caution: certain offshore jurisdictions are included in the list under §1, item 64 of the Additional Provisions of the Corporate Income Tax Act ("preferential tax regimes" / ДР ЗКПО), which triggers anti-avoidance rules in corporate structures.

10. Frequently asked questions