DT4171 - DT: Bulgaria: double taxation agreement, Article 22: Elimination of double taxation

Subject to the provisions of the law of the United Kingdom regarding the allowance as a credit against United Kingdom tax of tax payable in a territory outside the United Kingdom (which shall not affect the general principle hereof):

Bulgarian tax payable under the laws of Bulgaria and in accordance with this Convention, whether directly or by deduction, on profits, income or chargeable gains from sources within Bulgaria (excluding in the case of a dividend, tax payable in respect of the profits out of which the dividend is paid) shall be allowed as a credit against any United Kingdom tax computed by reference to the same profits, income or chargeable gains by reference to which the Bulgarian tax is computed;
in the case of a dividend paid by a company which is a resident of Bulgaria to a company which is a resident of the United Kingdom and which owns directly or indirectly at least 10 per cent of the capital in the company paying the dividend, the credit shall take into account (in addition to any Bulgarian tax for which credit may be allowed under the provisions of sub-paragraph (a) of this paragraph) the Bulgarian tax payable by the company in respect of the profits out of which such dividend is paid.

In Bulgaria double taxation of income and capital gains shall be eliminated as follows:

where a resident of Bulgaria derives income or capital gains which in accordance with the provisions of this Convention may be taxed in the United Kingdom such income or capital gains shall be exempted from taxation in Bulgaria;
where a resident of Bulgaria derives dividends which in accordance with the provisions of Article 9 of this Convention may be taxed in the United Kingdom, Bulgaria shall allow as a deduction from the tax on-the income of that resident an amount equal to the tax paid on those dividends in the United Kingdom. The deduction however shall not exceed that part of the tax, as computed before the deduction is given, which is attributable to the dividends derived from the United Kingdom;
where in accordance with any provision of this Convention income and capital gains derived by a resident of Bulgaria is exempt from tax in Bulgaria, Bulgaria may nevertheless, in calculating the amount of tax on the remaining income and capital gains of such resident, take into account the exempted income and capital gains.

For the purposes of paragraph (1) of this Article, the term `Bulgarian tax payable` shall be deemed to include any amount which would have been payable under the laws of Bulgaria for any year but for an exemption or reduction of tax granted for that year or any part thereof under:

the provisions specified in paragraph (4) of this Article, so far as these provisions were in force on, and have not been modified since, the date of signature of this Convention, or have been modified only in minor respects so as not to affect their general character; or
any other provision which may subsequently be made granting an exemption or reduction of tax which is agreed by the competent authorities of the Contracting States to be of a substantially similar character to the provisions specified in paragraph (4) of this Article, if it has not been modified thereafter or has been modified only in minor respects so as not to affect its general character; Provided:
that relief from United Kingdom tax shall not be given by virtue of this paragraph unless the exemption or reduction of tax is certified by the competent authority of Bulgaria as being for the purpose of promoting development in Bulgaria;
that relief from United Kingdom tax shall not be given by virtue of this paragraph in respect of income from any source if the income arises in a period starting more than ten years after the exemption from, or reduction of, Bulgarian tax was first granted in respect of that source.

Decree No.535 of 1980. Article 38.

For the purposes of the preceding paragraphs of this Article, profits, income and capital gains owned by a resident of a Contracting State which may be taxed in the other Contracting State in accordance with this Convention shall be deemed to arise from sources in that other Contracting State.