Crypto Tax Legislation & Law in Bulgaria

In general, there is no specific legislation regulating the taxation of crypto-assets in Bulgaria and national tax law principles apply. There is no definition of crypto-assets under Bulgarian law. Pursuant to the instructions of the Bulgarian tax authority, it is established that cryptocurrencies are equalised to financial assets for the purposes of taxation of income from such assets.

In Bulgaria there are different tax regimes for individuals and legal entities. Individuals owe tax on their income, which depends on its source; whereas legal entities owe corporate tax, which is based on the income and expenses related to the activity of the company. With respect to individuals, the exchange of crypto-assets for FIAT currency is considered a taxable event under the Personal Income Tax Act. It is considered income from the sale of a financial asset and must be declared pursuant to the Personal Income Tax Act. For legal entities, the general rules on corporate income tax apply in case of dealing with crypto-assets.

The law prescribes that income from the sale and exchange of financial assets is taxable. Therefore, this presupposes that the law does not differentiate between the exchange of a crypto-asset for FIAT currency and an exchange for other crypto-assets.

The definition of a natural person as a trader is not conditional solely on the existence or otherwise of registration pursuant to the Bulgarian Commerce Act. When an individual carries out commercial transactions, it is irrelevant whether or not he/she manifests his/her participation in them as a sole trader. Rather the transactions the individual enters into define them as such, and not vice versa. The objective criterion here is the acts performed, and not who performs them and in what capacity.

Generally, the National Revenue Agency (“NRA”) assesses professional activity in the context of crypto assets in the following way:

• a professional activity is an activity that is carried out in the context of one’s trade
• something is carried on as a professional activity when it is done systematically
• systematic is any event that occurs three or more times in a year.

In case the transactions qualify as professional activity, the tax payable is calculated on the basis of the profits of the business (i.e. the tax base is the annual profit). It is calculated on the basis of the difference between income and expenses that are related to the business. The tax rate is currently 15%.

All transactions in financial assets that take place during the year are taken in aggregate. To the extent that transactions are carried out in the period 1 January to 31 December, they are taken as the final result and tax is due on them. Losses from previous years are not carried forward to profits in the current year.

Losses can be utilised only in the year in which they are realised, i.e. no carry forward is possible.

The NRA, which is the responsible body for regulating such assets, does not distinguish between fungible and non-fungible tokens. All such assets are considered financial assets for the purposes of tax regulation.

Income from the mining of virtual currencies is considered income from a professional activity and is therefore taxable with a 15% tax rate. The NRA categorises the activity of mining as such on the basis that it involves the exploitation of special equipment which is purchased expressly for that purpose. The exploitation is for the purpose of obtaining some economic benefit – the tokens concerned.

There is no difference between the validator and the delegator as such. In general, the tax law principles described above apply. There is a view that individuals should only be taxed when they dispose of tokens acquired from staking. The actual staking should not be considered a taxable event, but for the purposes of future ones, the acquisition cost of the tokens will be zero. With respect to legal entities, they should record them as an asset (tangible stock or intangible asset). This leads to an immediate increase in the financial result and, respectively, in the annual corporation tax.

The general tax principles described above apply to those events/models.

Income from crypto-assets has to be declared to the tax authorities after the end of the respective tax year (subject to general rules).

Not at the moment.