Bulgaria has no official legal definition for cryptocurrencies and is orientating its legal approach at the European Union and the existing local financial framework. The Bulgarian National Revenue Agency issued a statement to roughly define the tax treatment of cryptocurrencies but is not taking a closer look at special cases. They defined which category applies for private persons and legal entities, which are income from the sale of financial assets or in the case of companies corporate income tax. Concerning the latter, no licence is required for operating a business as cryptocurrencies are neither defined to be financial instruments, nor electronic money.
Cryptocurrency taxes for individuals in Bulgaria
In terms of taxation, cryptocurrencies in Bulgaria are treated the same way as income from the sale of financial assets. The applied tax rate is 10% from the annual basis of assessment. The Bulgarian National Revenue Agency does not differentiate between either transactions from cryptocurrencies to fiat currency or from cryptocurrency to cryptocurrency. Hence, both cases are considered taxable events and have to be included in the annual tax return. The return has to be handed in by 30th April of the year following the year of the profit’s realization.
For the determination of the taxable income, the amount of profits made during the year (from each transaction) can be reduced by the amount of the losses realized during the year. Profits and losses are calculated by the difference of the sale price and the cost of the financial asset.
Cryptocurrency regulations for businesses in Bulgaria
Regarding the usage of cryptocurrencies, in particular trading, as a professional activity, the tax base for corporate income tax is applied. The tax rate therefore is 15%. As stated by the Bulgarian National Bank as well as the Commission for Financial Supervision in Bulgaria, cryptocurrencies are not treated neither as financial instruments, nor electronic money. Concluding in the fact that no licence is required for corporates dealing with cryptocurrencies. Yet, if a company wants to trade financial products with underlying cryptocurrency assets, a licence has to be obtained.
As for VAT (value added tax) purposes, mining activities are considered to be taxable but only if the service is directly related to the remuneration received. Cases in which virtual currencies are defined as payment instruments are exempt from VAT taxes as they are considered to be financial services. This treatment derives from the EU Court of Justice.
Government statements on cryptocurrencies in Bulgaria
The Bulgarian National Revenue Agency issued a statement in 2014 where it to a certain extent clarifies the fiscal treatment of cryptocurrencies for private individuals and legal entities. The statements are closely reflects the policy of the European Union.
Other national institutions like banks have taken their stance towards cryptocurrencies in December 2017. By that time only a few banks were involved with cryptocurrencies and allowed people as well as companies (exchanges) who held or operated with those to open bank accounts. Yet, at the beginning of December 2017 even they shut down several accounts. Especially local exchanges such as Cryptobank.bg faced troubles as they were given notice only one day before. As stated from news sites, the shut down mainly was due to international banks, for example Morgan Chase and Commerzbank, too taking a step away from virtual currencies. The decision thus is said to stem from the banks themselves and not from state regulations.
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Disclaimer
The information provided in this blog post is for general information purposes only. The information was completed to the best of our knowledge and does not claim either correctness or accuracy. For detailed information on crypto regulations we recommend contacting a certified legal advisor in the specific country.
As this blog post refers to international crypto laws, the content will only be available in English. If you have any questions, please feel free to contact us on one of our social media channels.
Sources
Legal framework for cryptocurrencies in Bulgaria
Tax treatment of Bitcoin
Banks terminate accounts of cryptocurrency exchanges
Taxation of cryptocurrencies
