Bulgaria is ranked 53rd in the world in terms of cryptocurrency ownership, with 6.1% of the population or 300,000 people owning a crypto asset. This ranks Bulgaria in a higher tier among other European countries.
As more Bulgarians enter the crypto market, it has become essential for the country to establish robust laws, regulations, and taxes for digital assets. Bitcoin and other cryptocurrencies are legally classified as financial assets in the country, and according to an official statement by the National Revenue Agency (NRA), all profits made from trading cryptocurrencies are taxable.
While in some countries crypto is regarded either as a currency or an asset class, in Bulgaria it is considered an investment asset. This classification also includes specific tax implications, where cryptocurrencies are taxed on capital gains made from buying, selling, or trading them. The government has also introduced regulations to increase transparency in crypto transactions.
Bulgaria’s straightforward tax regime is less complicated as it helps investors treat cryptocurrency as a financial asset and not a currency.
Let’s take a closer look at the various tax implications associated with cryptocurrencies in Bulgaria.
1. Crypto Investors to Pay Capital Gains Tax
Bulgarian residents who invest in Bitcoin and other cryptocurrencies are obliged to pay capital gains tax. Individual investors are required to pay a 10% capital gains tax rate on the cryptocurrency they sell.
For instance, if an investor purchased Bitcoin at a lower price and sold it for a profit, then they would be required to declare the gains made in the tax filings and pay a 10% tax on the amount they earned as profit.
Therefore, investors must keep track of the purchase price, selling price, and any additional costs involved with the transaction, including the exchange fees, to accurately calculate their taxable gains. It is crucial to maintain a detailed record of each transaction to correctly report for tax purposes and not fall foul of the penalties.
2. Frequent Crypto Traders Obliged to Pay Tax
Those who are involved in actively trading cryptocurrencies will be required to report their activity more frequently. This is crucial for frequent traders, especially if they are indulged in margin trading.
As capital gains tax is charged on the sale of a cryptocurrency, traders must document every trade, including conversion rates, amounts, and dates, to make sure that all transactions are reported, or else face hefty penalties.
Bulgarian law can occasionally render an individual a self-employed trader liable for extra tax payments. Social security contributions and additional taxes are paid off by self-employed traders based on their trading volume.
Those who are frequent crypto traders should consult a tax lawyer with crypto expertise to ensure compliance.
3. Income Tax for Crypto Miners
Those who are involved with crypto mining activities also fall under the tax bracket. Income produced from mining new cryptocurrencies is taxed as regular income. The earnings made from mining tokens need to be declared as income and the miner will pay the right tax, which can differ between individuals, depending on the total income earned by that individual in any given year.
The income is calculated by the value of the cryptocurrency on receipt, requiring miners to keep a record of the cryptocurrency they received from mining and its equivalent value in US dollars. The income tax on earnings from crypto mining is set at a standard rate, similar to the capital gains tax.
4. Record on Report Crypto Activity
Crypto earnings made from mining or trading tokens must be reported in the individual’s annual tax returns. Failure to report these earnings can result in penalties and interest on unpaid taxes.
Since cryptocurrencies are highly volatile, it is important for investors to keep an organized record of all transactions made, including currency conversions.
Investors must keep a record of the asset type, the purchase price, the sale price, and all costs associated with performing the transaction. It is recommended to use specialized crypto tax software that generates accurate records automatically, helping report to the government much faster.
Final Thoughts
With a 10% capital gains tax on cryptocurrency, Bulgaria ensures that tax policies are clearly explained to the investor. Meanwhile, it also allows investors, both casual and professional to keep the tax burden within a reasonable level.
Consistent crypto tax laws serve to eliminate ambiguity for investors while clarifying what is expected from policymakers
Despite the efforts, it is not easy to sort a detailed record of all crypto trading activities. Traders usually take a long time to ultimately gain an income figure due to Bitcoin or other cryptocurrencies facing price volatility.
For readers from Bulgaria, it is highly recommended that you consult with a crypto tax expert who is aware of the taxation laws and can advise investors about the deductions to take, how to report, and tax-saving strategies.
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