The “remote” long-term residence permit trap: What do EU citizens risk when opening a business in Bulgaria?

The most popular scenario looks simple: an EU citizen arrives in Sofia or Varna, registers a company (EOOD (single-member LLC)/OOD), obtains a personal long-term residence permit card (Удостоверение за продължително пребиваване) to make opening a commercial bank account easier, and then leaves and continues running the business from the country where they live.

It is precisely at this stage, however, that a legal and tax trap lies hidden, one that can lead to additional tax assessments and the cancellation of your immigration status.

What is the main danger of this approach?

Many entrepreneurs mistakenly believe that simply holding a personal card and having a registered company automatically makes them Bulgarian tax residents. That is not the case:

• Double taxation and claims from your “home” country: The tax authorities of the country where you actually live (Germany, France, Spain and others) apply the rules of the Double Taxation Avoidance Agreements (DTAAs). If the tax authority establishes that you in fact live on its territory, your Bulgarian company may be deemed to be managed from abroad (place of effective management). As a result, the company’s income or your personal dividends will be re-taxed at the rates of your country of residence (where taxes can reach 30–50%).
• Risk of automatically losing your long-term residence permit in Bulgaria: Under the Act on the Entry, Residence and Departure of the Republic of Bulgaria of EU Citizens (ЗВПРБГЕС), the long-term residence status of EU citizens is tied to the reality of their stay. If you are absent from Bulgaria for more than 6 months within one year, the long-term residence permit status is subject to cancellation.

How do the migration police and the National Revenue Agency (NAP) prove absence?

It used to be thought that, with no land borders inside the Schengen area, absence could not be proven. Today this is a dangerous myth:

• The Schengen system (EES / SIS II) and air travel: Bulgaria’s accession to Schengen means that all flights and crossings of external borders are recorded in unified databases.
• Centre of vital interests (Center of Vital Interests): During a NAP (National Revenue Agency) audit you will be asked to prove your actual presence. A certificate from the migration service or the long-term residence permit card alone is not automatic proof.
• No “everyday footprint”: NAP will request evidence of everyday spending in Bulgaria (rent payments, utility bills, bank transactions with your personal card in Bulgarian supermarkets, health insurance, etc.). If the account shows only purchases in Germany or France, your tax resident status will be cancelled.

In which cases is an absence of more than 6 months allowed WITHOUT losing long-term residence permit status?

Bulgarian legislation and Directive 2004/38/EC provide for exceptions where an EU citizen may be absent for more than 6 months in a year and retain the right to a long-term residence permit:

• Compulsory military service (задължителна военна служба): Performing military service.
• Official business trip: A business assignment in another country on behalf of a Bulgarian or international company (for a period of no more than 12 consecutive months).
• Valid reasons (up to 12 consecutive months): Serious illness or the need for prolonged medical treatment; pregnancy and childbirth; study or professional training at a foreign university.

Please note: These exceptions save your immigration status (the long-term residence permit), but they do NOT guarantee that your tax residency is automatically retained if the centre of your vital interests has shifted to another country.

How to properly obtain and keep Bulgarian tax resident status?

For NAP to issue you an official Удостоверение за местно данъчно лице (Tax Residency Certificate) and for you to be able to pay taxes in Bulgaria lawfully, you must meet at least one of the key conditions of the Personal Income Tax Act (ЗДДФЛ):

• The 183-day rule: Be physically present on Bulgarian territory for at least 183 days within any 12-month period.
• Centre of vital interests in Bulgaria: Even if you have spent less than 183 days in the country, you may be recognised as a tax resident if you prove that your centre of interests is in Bulgaria (owned/long-term housing, relocation of your family, genuine operational activity of the company from an office in Bulgaria, regular personal expenses inside the country).

Checklist for an EU citizen: How to safeguard your business properly and lawfully

Conclusion

Opening a company and getting the long-term residence permit “plastic” in Bulgaria is only 20% of success. If you want to pay the lawful 10% in taxes and avoid million-scale claims from the tax authorities of your country of residence, you need to create real economic presence (substance) and comply with the tax residency rules!