Explanatory note

The Convention with the People’s Republic of Bulgaria is set out in the Schedule to this Order.

The Convention provides for business profits not arising through a permanent establishment to be taxed only in the country of the taxpayer’s residence. Profits attributable to a permanent establishment may be taxed in the country in which the permanent establishment is situated (Articles 5 and 7). Profits arising from the operation of ships, aircraft or road vehicles in international traffic are to be taxed only in the country in which the place of effective management of the enterprise is situated (Article 8).

The rate of tax imposed in the country of source on dividends derived by a resident of the other country is not to exceed 10 per cent. of the gross amount of dividends (Article 9).

The country of source will exempt from tax interest and royalties paid to a resident of the other country (Articles 10 and 11).

Provision is made for income arising from immovable property and gains from the alienation of that property to be taxed in the country in which the property is situated (Articles 6 and 12).

The earnings of temporary business visitors and some other individuals are, subject to certain conditions, to be taxed only in the country of the taxpayer’s residence (Articles 13 and 14).

Income derived in respect of the personal activities of entertainers and athletes may normally be taxed in the country in which those activities are exercised (Article 16). The income of visiting teachers and researchers (Article 20) and certain payments made to visiting students and trainees (Article 19) are, subject to certain conditions, to be exempt from tax in the country visited.

Government service salaries and pensions are normally to be taxed by the paying Government only (Article 18) while other pensions are to be taxed only in the country of the taxpayer’s residence (Article 17).

Where income continues to be taxable in both countries relief from double taxation will be given, in effect, in accordance with the laws of each country. In the case of dividends, the United Kingdom will give credit for underlying tax paid in Bulgaria while the United Kingdom company receiving the dividend owns at least 10 per cent. of the capital in the Bulgarian company. The United Kingdom will also give credit for tax spared under certain provisions of Bulgarian law designed to promote development there (Article 22).

There are provisions safeguarding nationals and enterprises of one country against discriminatory taxation in the other country (Article 23) and for consultation (Article 24) and exchange of information (Article 25) between the taxation authorities of the two countries.

The Convention will enter into force when the legislative procedures in both countries have been completed and will have effect in the United Kingdom from April in the following calendar year (Article 27).