Doing tax planning as we do at VR and Partners does not just mean becoming an accountant by measuring from time to time time give and take. Of course, it is undeniable that if you don't want to take risks you have to rely on serious professionals, but sometimes you have to go beyond professionalism, studying the matter in detail, and in this case tax matters, in order to be able to advise your clients the best solutions ever while remaining firmly within the confines of the law. It is precisely from our passion for the in-depth study of tax issues, and specifically from the analysis of separate taxation between Bulgaria and Italy, that we came across article 14 of the Convention between Italy and Bulgaria which establishes a very interesting principle to consider in one's tax planning.
Let's analyze it in detail by looking at a practical example. The starting point is to be citizens registered and fiscally resident in Italy, and let's assume open a company in Bulgaria regardless of the area in which this company operates. Let's also assume that the person in question is appointed director of this company (we specify that the company is tax resident in Bulgaria). As is normal, it is easy to foresee that there should be compensation for the director (the same can also be applied to the members of the board of auditors). Well, article 14 of the convention between Italy and Bulgaria tells us that these fees are taxable only in Bulgaria even if the citizen in question is resident in Italy.
It seems like a detail but instead it is a very powerful aspect from a fiscal point of view. Because if we assume that for this director there is a compensation of, for example, 100 thousand euros per year, since they are taxed in Bulgaria, in the end they will only have to pay the Bulgarian personal income tax which has a single bracket of 10% while in Italy with increasing IRPEF brackets would have ended up paying almost 50% in taxes. And all this without even having to migrate your personal tax residence to Italy!
If you are interested in learning more about how to move your company's tax residence to Bulgaria to enjoy tax benefits like this, contact us without obligation.
