Bulgarian Tax Authority to Inspect Crypto Exchanges and Traders

[Ozark]

The National Revenue Agency of Bulgaria is preparing to conduct inspections on cryptocurrency trading platforms and their customers. The authority wants to make sure that both are fulfilling their obligations under the country’s tax and social security laws.

In Bulgaria, profits from crypto trading are treated as income from the sale of financial assets. Private individuals are expected to declare these revenues on their annual tax returns. A flat income tax rate of 10 percent is applied to the positive balance from these transactions in fiat currency.

Profits earned by businesses are subject to taxation under the Corporate Income Tax Act, with the same tax rate. Bulgarian residents are obliged to file their tax declarations and pay their taxes for the previous year by April 30. Annual corporate tax returns should be submitted by March 31, 2019.

Awaiting European Regulations

Bulgaria has not yet adopted a dedicated legislation on the taxation of income from crypto-related activities such as trading and mining. The applicable rules are based on a clarification notice issued by the NRA several years ago. Currently, digital coins are taxed like other financial instruments and Bulgarian authorities reference the general EU regulations and the European practice in the field.

However, the treatment of cryptocurrency profits varies significantly between EU member states. Tax rates can be anywhere between 0 and 50 percent. Interpretations regarding the legal status of digital assets are also quite diverse. Cryptocurrencies and the industry built around them remain largely unregulated in most EU countries. Recognizing that as a major problem, many officials have urged for unified rules across the European Union. Two regulatory agencies recently called for the adoption of common EU regulations.

European regulation may be needed to level the playing field, the European Banking Authority (EBA) said in a report. EBA advised the European Commission to conduct a comprehensive analysis and determine what action is required at the EU level to address the issues regarding the opportunities and risks presented by cryptocurrencies and related technologies. In another report to the Commission, the Council and the Euro Parliament, the European Securities and Markets Authority (ESMA) stated that crypto assets need an EU-wide approach to ensure investor protection.

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