Personal Tax and Social Security in cross-border situations Bulgaria 2010

1. Personal Tax and Social Security in cross-border situationsBulgaria 2010 Nevena van Kuyk

2. Table of contents • What should a Greek assignee to Bulgaria consider? • What should a company having Greek assignees in Bulgaria consider? • Recent developments in Greece and in Bulgaria • EY recommendations

3. What should a Greek assignee to Bulgaria consider? • Tax residence position • Income tax liability • Tax return filing and tax payment • Social security • Business immigration

4. What should a Greek assignee to Bulgaria consider? • Tax residence position • Under Bulgarian tax law • Under Greece-Bulgaria tax treaty for avoidance of double taxation

5. What should a Greek assignee to Bulgaria consider? • Income tax liability • Scope of taxation • Tax residents => worldwide income • Tax nonresidents => Bulgarian source income • Deductions • Employment income taxation • Under Bulgarian tax law • Under Greece – Bulgaria tax treaty (183-days rule)

6. What should a Greek assignee to Bulgaria consider? • Tax return filing and tax payment • Annual tax return filing deadline: 30 April • Tax payment (10% flat tax rate): 30 April • 5% deduction on the final tax liability: by 10 February Note: Bulgarian tax non-residents with management income have different reporting obligations

7. What should a Greek assignee to Bulgaria consider? • Social security • Under Bulgarian Social Security Code • Under current EC Regulation 1408/71 • Under EC Regulation 883/2004 entering into force as of 1 May 2010 (important changes) • Deductions of mandatory and voluntary social security contributions paid in Greece from the Bulgarian gross income

8. What should a Greek assignee to Bulgaria consider? • Business immigration • No work permit is required for Greek nationals • Residence certificate is required for Greek nationals intending to reside in Bulgaria for more than 90 days within a 12-month period. Validity period of up to 5 years.

9. What should a company having Greek assignees in Bulgaria consider? • Formal versus economic employer • Tax withholding and reporting obligations • Labor law

10. What should a company having Greek assignees in Bulgaria consider? • Formal versus economic employer • Broadened definition of employer as from 2008 under Bulgarian tax law including resident or non-resident companies carrying out activities through a PE or a fixed base in Bulgaria as well as any representative office, which are parties of cross-border assignment agreements • Substance over form: the work of the assignees is performed for the benefit and under the instructions of the Bulgarian company

11. What should a company having Greek assignees in Bulgaria consider? • Tax withholding and reporting obligations • Advance 10% salary tax payment and reporting (Declarations 1 and 6) on a monthly basis • Strict compliance with deadlines for transfer of tax and submission of the Declarations regardless of the place of salary payment and timing of cross-charge • Correct allocation of taxable employment income regardless of the way of cross-charge

12. What should a company having Greek assignees in Bulgaria consider? • Labor law • No local employment contract is required in case of assignment structure • Obligatory submission of a notification to the Employment Agency regarding the assignments • Assignees are protected in case working conditions for local employees are more beneficial than the ones under their Greek employment contracts

13. Recent developments in Bulgaria and Greece • In Greece • Submission of a new tax bill to the Greek Parliament for voting seeking to bring fundamental changes to Greek tax frame • In Bulgaria • No change in the 10% flat tax rate is expected • Stricter review of income declared by taxpayers • Collection of fines

14. Closing remarks • Ernst & Young recommends: • Review of the tax position of your assignees working in Bulgaria to identify exposures and avoid undue group employment costs (double tax and social security) • Advice on future assignments to identify planning opportunities for decrease in overall tax and social security burden • Review and redrafting of the group assignment policies in view of optimization of tax liability and company obligations

15. Key contacts • Trevor Link (Partner Tax & Legal) trevor.link@bg.ey.com • Nevena van Kuyk (Manager Human Capital) nevena.an.kuyk@bg.ey.com Main tel: +359 2 81 77 100 Fax: +359 2 81 77 111

16. Thank you for your attention!