Taxes in Bulgaria for Americans

Bulgaria’s Tax Structure at a Glance

10%Personal Income TaxFlat rate — no brackets

10%Corporate TaxOne of EU’s lowest

20%VAT (Sales Tax)Standard rate

Bulgaria applies a flat 10% personal income tax rate, and resident individuals are generally taxed under Bulgarian rules at that rate on taxable income. It is one of the lowest income tax rates in the European Union — comparable to what some U.S. states charge alone, before federal tax.

The Critical U.S. Rule: Worldwide Income Reporting

The United States taxes its citizens on worldwide income regardless of where they live. This means that even as a Bulgarian resident, you are still legally required to file a U.S. federal tax return each year and report all income — from any country.

This Does Not Mean You’ll Be Double-Taxed

The U.S. has mechanisms to reduce or eliminate double taxation for most Americans abroad — specifically the Foreign Earned Income Exclusion (FEIE) and the Foreign Tax Credit (FTC). However, these require proper annual filing. Failure to file carries significant penalties.

Foreign Earned Income Exclusion (FEIE)

The FEIE (IRS Form 2555) allows qualifying Americans abroad to exclude a significant amount of foreign earned income from U.S. taxation. For tax year 2025, the exclusion amount is $130,000 per qualifying person.

To qualify, you must meet either the Physical Presence Test (330 full days outside the U.S. in a 12-month period) or the Bona Fide Residence Test (established residency in a foreign country for a full tax year).

Important: FEIE Applies to Earned Income Only

The FEIE only applies to earned income — wages, self-employment income, and freelance earnings. It does NOT apply to Social Security, pensions, investment income, rental income, or IRA/401k distributions. These income types require different treatment.

Social Security & Pension Income

Social Security benefits paid to U.S. citizens living abroad may still be taxable at the U.S. federal level depending on your overall income and filing situation. The Bulgarian tax treatment of foreign pension or Social Security-type income should be confirmed with a qualified local tax adviser before relying on it.

There is currently no U.S.–Bulgaria totalization agreement, which means Social Security contributions do not transfer between systems. This is an important planning consideration for Americans who are still working.

Foreign Bank Account Reporting (FBAR & FATCA)

U.S. citizens with foreign bank accounts must comply with two additional reporting requirements — separate from income tax filing:

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FBAR (FinCEN 114): Required if total foreign account balances exceed $10,000 at any point during the year. Filed annually with the Treasury, not the IRS.
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FATCA (Form 8938): Required if foreign financial assets exceed $200,000 at year-end (or $300,000 at any point) for single filers living abroad. Filed with your tax return.

These are reporting requirements — not additional taxes — but the penalties for non-compliance are substantial.

What This Means Practically

For most American retirees in Bulgaria living on Social Security, pension income, or investment withdrawals, the tax situation is manageable but requires proper annual filing. Working with a U.S. tax professional who specializes in expatriate taxation is strongly recommended.

The good news: Bulgaria’s flat 10% personal income tax, relatively low cost of living, and generally favorable tax structure make it one of the more tax-efficient retirement destinations in Europe for many Americans. However, estate, local, and transaction-related taxes should always be reviewed case by case.

Taxes for Americans Living in Bulgaria