Bulgaria-UK Double Tax Treaty: Practical Guide for British Expats (2026)

More British nationals are moving to Bulgaria than ever before. The reasons are straightforward: a 10% flat income tax, a combined corporate-plus-dividend rate of just 15%, low cost of living, and EU membership. But relocating without understanding the tax treaty between the two countries can mean paying tax twice on the same income — or missing reliefs you are entitled to.

This guide covers the Bulgaria-UK Double Taxation Convention signed on 26 March 2015, which replaced the older 1987 treaty. We explain every income type, the actual treaty rates, post-Brexit residence requirements, the HMRC departure process, and what happens to your UK state pension, ISA, and National Insurance when you move.

The Treaty at a Glance

The current Bulgaria-UK Double Taxation Convention was signed on 26 March 2015 and entered into force on 15 December 2015. It is a bilateral treaty between two sovereign states — not an EU instrument — so Brexit had no effect on it. The convention follows the OECD Model Tax Convention structure and covers taxes on income and capital gains.

Here are the key rates under the treaty:

Post-Brexit Reality: UK Citizens Are Non-EU

This is the single most important change for British nationals considering Bulgaria. Since 1 January 2021, UK citizens are treated as third-country (non-EU) nationals under Bulgarian immigration law. This means:

• You cannot use the EU Citizens Act to obtain residence. That law applies only to citizens of EU/EEA member states and Switzerland.
• You need a Type D long-stay visa before you can apply for a Bulgarian residence permit. This must be obtained from a Bulgarian embassy or consulate in the UK (or wherever you are legally resident) before entering Bulgaria for the purpose of long-term stay.
• Residence is governed by the Foreigners in the Republic of Bulgaria Act (Zakon za Chuzhdentsite v Republika Bulgaria). Under this act, there are 21 legal grounds for obtaining a D visa and subsequent residence permit.
• The Migration Directorate at the Ministry of Interior handles residence permit applications. Not the police, not GRAO.

Common Residence Grounds for UK Citizens

• Trade representative office (TRO): Registering a trade representative office for a foreign (UK) company is one of the most straightforward grounds. No capital requirement.
• Company ownership: Owning a Bulgarian company (EOOD or OOD) can support a D visa application, though additional conditions apply.
• Pension/self-support: Retirees with sufficient income and health insurance can apply under the self-support ground.
• Real estate investment: Property ownership above a certain threshold (currently EUR 312,000) qualifies.
• Freelancer/self-employed: Operating as a freelancer registered in Bulgaria provides another pathway.

Dividend Taxation Under the Treaty

Dividends are where Bulgaria's tax advantage is most visible. Here is how it works under the treaty:

Bulgarian Company Paying Dividends to UK Resident

Bulgaria imposes a 5% withholding tax on dividends paid to non-resident individuals (Article 194 of the Bulgarian Corporate Income Tax Act). Under the treaty, the maximum WHT is also 5%, so the domestic rate already matches the treaty ceiling. No treaty claim is needed to reduce the rate — it is already at the treaty maximum.

UK Company Paying Dividends to Bulgarian Resident

The UK does not impose withholding tax on dividends paid to non-residents. This is a domestic UK rule, not a treaty provision. If you are a Bulgarian tax resident receiving UK dividends, you simply declare them in Bulgaria and pay the 5% Bulgarian dividend tax. No double taxation occurs because the UK source-state tax is zero.

The Corporate Route: 15% Combined Rate

Many UK entrepreneurs moving to Bulgaria set up a Bulgarian EOOD (single-member limited company). The combined tax burden is:

• 10% corporate income tax (CIT) on profits
• 5% dividend withholding tax on distributions
• Total: 15% — compared to the UK's 25% corporation tax plus personal dividend tax

For EUR 100,000 in profit: Bulgarian CIT = EUR 10,000 (10%). After-tax profit = EUR 90,000. Dividend tax = EUR 4,500 (5%). You receive EUR 85,500. Combined rate: 15% (10% CIT + 5% dividend).

Pension Taxation Under the Treaty

Pensions are the most common cross-border income for British retirees in Bulgaria. The treaty draws a clear line between private and government pensions:

UK State Pension

The UK state pension is classified as a government pension under the treaty. Article 18 provides that government service pensions are taxable only in the paying state — the UK. As a Bulgarian tax resident, you must still declare the UK state pension in your annual Bulgarian tax return, but Bulgaria grants a tax credit or exemption for the UK tax paid, effectively eliminating double taxation.

In practice, the UK state pension falls below the UK personal allowance for most people, so no UK tax is actually due either. The result: you may pay no income tax on your UK state pension in either country, depending on your total UK-source income.

UK Private / Occupational Pensions

Private pensions (including occupational pensions and SIPP drawdowns) are taxable only in the country of residence — Bulgaria — under Article 17 of the treaty. Once you establish Bulgarian tax residency and notify HMRC with the appropriate documentation (NRA certificate of tax residence plus HMRC form DT-Individual), the UK should stop withholding tax on private pension payments. You then declare the pension in Bulgaria at the 10% flat rate.

Employment and Self-Employment Income

Employment Income: Where Is It Taxed?

Under the treaty, employment income is generally taxed in the country where the work is physically performed. If you live in Bulgaria and work remotely for a UK employer, the income is taxable in Bulgaria at 10% — not in the UK.

The treaty's 183-day exemption (Article 14) provides that employment income remains taxable only in the residence state (Bulgaria) if all three conditions are met:

1. You are present in the UK for fewer than 183 days in any 12-month period beginning or ending in the fiscal year.
2. The remuneration is paid by an employer who is not resident in the UK.
3. The remuneration is not borne by a permanent establishment that the employer has in the UK.

All three conditions must be satisfied. If you travel to the UK for business meetings and exceed 183 days, or if your employer is a UK company, the exemption will not apply and the UK may tax the income attributable to days worked on UK soil.

Self-Employment and Business Profits

If you are self-employed or run a business through a Bulgarian EOOD, your business profits are taxable only in Bulgaria — unless you have a permanent establishment in the UK (an office, branch, or dependent agent habitually concluding contracts there). Simply having UK clients does not create a permanent establishment.

Leaving the UK: The HMRC Process

Moving to Bulgaria requires notifying HMRC and winding down your UK tax obligations. Here is the process:

HMRC Form P85

If you are leaving the UK permanently or for a full tax year, you should complete HMRC Form P85. This notifies HMRC of your departure and may trigger a tax refund if you have overpaid through PAYE.

You do not need to file a P85 if: you are already in Self Assessment — in that case, file your Self Assessment return for the departure year, report your leaving date, and claim split-year treatment if eligible under the Statutory Residence Test (SRT).

Self-Assessment for the Departure Year

In the tax year you leave the UK, you may qualify for split-year treatment. This means you are only taxed as a UK resident for the part of the year before your departure. The SRT has specific conditions for each split-year case — the most common being Case 4 (starting full-time work overseas).

National Insurance Contributions

When you leave the UK, you stop paying mandatory National Insurance contributions. However, you may want to continue paying voluntary contributions to protect your UK state pension entitlement (you need 35 qualifying years for the full new state pension).

ISA and Pension Wrappers

UK tax wrappers — ISAs and SIPPs — are a common concern for people leaving the UK:

• ISAs: You cannot make new contributions once you become a non-UK resident. However, you can keep existing ISAs open. The investments remain free from UK tax on interest, dividends, and capital gains. The critical issue is that Bulgaria does not recognise the ISA wrapper — income and gains generated inside the ISA may be taxable in Bulgaria under domestic law.
• SIPPs / private pensions: Your SIPP can remain in place. Growth inside the SIPP is free from UK tax. When you draw down, the treaty determines which country taxes the withdrawal (Bulgaria, as your country of residence, for private pensions). The 25% tax-free lump sum (Pension Commencement Lump Sum) is tax-free in the UK, but its treatment in Bulgaria depends on how Bulgarian authorities classify the payment.

UK State Pension Abroad

A major concern for British retirees: will my state pension be frozen if I move to Bulgaria?

No. Bulgaria is an EU member state. Under the EU-UK Trade and Cooperation Agreement (TCA), UK state pensions continue to receive annual uprating — including the triple lock — for pensioners living in EU countries. This applies regardless of when you moved to Bulgaria (before or after Brexit).

For the 2026/27 tax year, the full new state pension rose to GBP 241.30 per week (GBP 12,547 per year), an increase of 4.8% under the triple lock. As a British retiree in Bulgaria, you receive the same increase as someone living in the UK.

How to Claim Your UK State Pension from Bulgaria

• Contact the International Pension Centre (IPC) at least 4 months before you reach state pension age.
• Your pension can be paid into a UK bank account or a Bulgarian bank account (paid in GBP or converted to BGN/EUR).
• Under the treaty, the UK state pension is taxable in the UK. If your total UK income is below the personal allowance (GBP 12,570 for 2026/27), no UK tax is due.
• Declare the pension in your Bulgarian annual tax return. Bulgaria exempts it from Bulgarian tax under the treaty credit method.

Frequently Asked Questions