We know that many Italian pensioners, increasingly considering the updated data, decide to enjoy their retirement in Bulgaria. We know why they do it: they live well, the cost of living is less than half that of Italy and then, a non-negligible fact, in Bulgaria they pay on average less than half the taxes they pay in Italy. In money (not in pennies) this means monthly on a check whose value is doubled and less taxed.
However, in order to enjoy the tax advantages, it is necessary to carry out some steps. Yes, because the risk is that both Italian and Bulgarian taxes will be applied to the pensioner mentioned above, according to what is called "double taxation".
With double taxation, in practice Italian citizens residing in Bulgaria end up not only continuing to pay taxes in Italy, but at the same time they also start paying them in Bulgaria. A fiscal Waterloo that is absolutely to be avoided and which we at VR and Partners manage for the clients who entrust us with both the transfer phase in Bulgaria and subsequent tax management.
But what should an Italian pensioner who decides to enjoy his old age in Bulgaria do to avoid double taxation? As our tax consultants never tire of repeating, the key to everything is in the tax "agreements" active between Italy and Bulgaria. Thanks to these agreements, pensioners who transfer their tax residence to Bulgaria can stop paying taxes in Italy and start paying them only in their new country of residence.
To do this it is necessary to send a simple official communication to the INPS of the place where you had Italian residence before moving to Bulgaria. In this communication which is called "Form EP-I", in practice the Bulgarian tax authorities certify the new residence, thus putting an end to double taxation.
Why, if a simple form is enough, do we recommend relying on tax experts like those of the VR and Partners team to avoid double taxation? Because unfortunately, as always happens when it comes to bureaucracy, things don't always go smoothly. In fact, sometimes the Bulgarian tax authorities are not available to fill out the aforementioned form, and could instead issue 2 alternatively:
- certificate certifying the status of "tax resident", pursuant to the convention for the avoidance of double taxation in force between the Republic of Bulgaria and a foreign country;
- certificate certifying the status of "tax resident", pursuant to Article 4 of the Bulgarian internal law on personal income.
And this is where the matter gets complicated because, not everyone knows this and thus ends up in double taxation, the INPS only accepts the first document and not the second. An important element to pay attention to if you decide to move here to Bulgaria. One element among others. This is why we strongly advise against do-it-yourself when it comes to these procedures, and instead recommend seeking advice from industry experts like us at VR and Partners.
