1. Personal Tax and Social Security in cross-border situations Bulgaria 2010 Nevena van Kuyk

2. 13 April 2010Personal income taxes and social security Page 2 Table of contents ► What should a Greek assignee to Bulgaria consider? ► What should a company having Greek assignees in Bulgaria consider? ► Recent developments in Greece and in Bulgaria ► EY recommendations

3. 13 April 2010Personal income taxes and social security Page 3 What should a Greek assignee to Bulgaria consider? ► Tax residence position ► Income tax liability ► Tax return filing and tax payment ► Social security ► Business immigration

4. 13 April 2010Personal income taxes and social security Page 4 What should a Greek assignee to Bulgaria consider? ► Tax residence position ► Under Bulgarian tax law ► Under Greece-Bulgaria tax treaty for avoidance of double taxation

5. 13 April 2010Personal income taxes and social security Page 5 What should a Greek assignee to Bulgaria consider? ► Income tax liability ► Scope of taxation ► Tax residents => worldwide income ► Tax nonresidents => Bulgarian source income ► Deductions ► Employment income taxation ► Under Bulgarian tax law ► Under Greece – Bulgaria tax treaty (183-days rule)

6. 13 April 2010Personal income taxes and social security Page 6 What should a Greek assignee to Bulgaria consider? ► Tax return filing and tax payment ► Annual tax return filing deadline: 30 April ► Tax payment (10% flat tax rate): 30 April ► 5% deduction on the final tax liability: by 10 February Note: Bulgarian tax non-residents with management income have different reporting obligations

7. 13 April 2010Personal income taxes and social security Page 7 What should a Greek assignee to Bulgaria consider? ► Social security ► Under Bulgarian Social Security Code ► Under current EC Regulation 1408/71 ► Under EC Regulation 883/2004 entering into force as of 1 May 2010 (important changes) ► Deductions of mandatory and voluntary social security contributions paid in Greece from the Bulgarian gross income

8. 13 April 2010Personal income taxes and social security Page 8 What should a Greek assignee to Bulgaria consider? ► Business immigration ► No work permit is required for Greek nationals ► Residence certificate is required for Greek nationals intending to reside in Bulgaria for more than 90 days within a 12-month period. Validity period of up to 5 years.

9. 13 April 2010Personal income taxes and social security Page 9 What should a company having Greek assignees in Bulgaria consider? ► Formal versus economic employer ► Tax withholding and reporting obligations ► Labor law

10. 13 April 2010Personal income taxes and social security Page 10 What should a company having Greek assignees in Bulgaria consider? ► Formal versus economic employer ► Broadened definition of employer as from 2008 under Bulgarian tax law including resident or non-resident companies carrying out activities through a PE or a fixed base in Bulgaria as well as any representative office, which are parties of cross-border assignment agreements ► Substance over form: the work of the assignees is performed for the benefit and under the instructions of the Bulgarian company

11. 13 April 2010Personal income taxes and social security Page 11 What should a company having Greek assignees in Bulgaria consider? ► Tax withholding and reporting obligations ► Advance 10% salary tax payment and reporting (Declarations 1 and 6) on a monthly basis ► Strict compliance with deadlines for transfer of tax and submission of the Declarations regardless of the place of salary payment and timing of cross-charge ► Correct allocation of taxable employment income regardless of the way of cross-charge

12. 13 April 2010Personal income taxes and social security Page 12 What should a company having Greek assignees in Bulgaria consider? ► Labor law ► No local employment contract is required in case of assignment structure ► Obligatory submission of a notification to the Employment Agency regarding the assignments ► Assignees are protected in case working conditions for local employees are more beneficial than the ones under their Greek employment contracts

13. 13 April 2010Personal income taxes and social security Page 13 Recent developments in Bulgaria and Greece ► In Greece ► Submission of a new tax bill to the Greek Parliament for voting seeking to bring fundamental changes to Greek tax frame ► In Bulgaria ► No change in the 10% flat tax rate is expected ► Stricter review of income declared by taxpayers ► Collection of fines

14. 13 April 2010Personal income taxes and social security Page 14 Closing remarks ► Ernst & Young recommends: ► Review of the tax position of your assignees working in Bulgaria to identify exposures and avoid undue group employment costs (double tax and social security) ► Advice on future assignments to identify planning opportunities for decrease in overall tax and social security burden ► Review and redrafting of the group assignment policies in view of optimization of tax liability and company obligations

15. 13 April 2010Personal income taxes and social security Page 15 Key contacts ► Trevor Link (Partner Tax & Legal) trevor.link@bg.ey.com ► Nevena van Kuyk (Manager Human Capital) nevena.an.kuyk@bg.ey.com Main tel: +359 2 81 77 100 Fax: +359 2 81 77 111

16. 13 April 2010Personal income taxes and social security Page 16 Thank you for your attention!