How are seafarers taxed in Bulgaria
In many countries, seafarers enjoy preferential tax treatment, compared to those who work on-shore. Bulgaria is no exception. Since 01.01.2010 the Bulgarian legislation foresees different tax regime to seafarers for their income from employment relations. So let’s dig into the legal details below.
Who is considered to be a “seafarer” in Bulgaria?
Point 54 of § 1 from the additional provisions of the Bulgarian law for taxation of private individuals gives us the legal definition of who is considered to be seafarer in Bulgaria.
“Seafarer” is a natural person holding a post as a crew member of a seagoing ship inscribed in the register of vessels of a Member State of the European Union, either on shore or on board of a vessel, holding a license and a certificate for additional and / or special training, obtained in accordance with the ordinance under Art. 87, para. 1 of the Merchant Shipping Code.
It is important to know who is considered to be a crew member of a ship and also what are the required licenses and certificates so the person can fit into the legal definition of “seafarer”.
The crew of the ship consists of the captain, the other members of the command staff and the ship’s crew entered on the crew list. The crew of the vessels sailing under Bulgarian flag shall be filled with the required number of qualified seafarers possessing the relevant qualification, in accordance with the Regulation on Seafarers in the Republic of Bulgaria, issued by the Minister of Transport, Information Technology and Communications.
Licenses and certificates
The ordinance under Art. 87, para. 1 of the (Bulgarian) Merchant Shipping Code sets the rules of how the seafarers can obtain the required licenses and certificated in Bulgaria. It also sets the conditions and procedures for the recognition of seafarers’ licenses and certificates acquired in a Member State of the European Union and of the European Economic Area, in Switzerland and in third countries.
Tax base for seafarers in Bulgaria
The tax base for seafarers for income received from labor contracts by Bulgarian law is set to be only 10% from the tax base that is applied to on-shore workers.
Tax rate applied to seafarers in Bulgaria
Tax rate on income from labor contracts by Bulgarian law
For on-shore workers, the amount of the advance tax (the tax that is levied on the monthly salary) is 10% on the received remunerations, after deduction of the social security and insurance contributions. In contrast, the tax levied for seafarers is only 1%.
Tax rate on income from other sources
The amount of tax that is levied on income from other sources (not from labor contracts under Bulgarian law) is 10%.
Paying taxes as seafarer in Bulgaria provides clear advantages if compared to those working on-shore. It is important to realize however, that the tax reliefs only apply for money received in form of a salary. The tax reduction doesn’t apply to income from other sources.
Thank you very much. This makes the situation clearer. Allow me to complicate things a little bit. I sail on a variety of vessels, some flagged in the EU and some flagged outside. Even though NOT ALL of my vessels are flagged in the EU would I still be considered a seafarer for tax purposes? The law doesn’t state how much I have to sail on EU flagged vessels… What do you think?
The preferential tax treatment will be applied only for your income, which is received as a seafarer (as per the definition of “seafarer” by Bulgarian law). This means that you will not receive preferential tax treatment for your income obtained from work on non-EU vessels. This is because your “seafarer tax status” applies only to your labor income as seafarer (under EU flag).
Please note however that there is very little case law on the subject and we would strongly recommend you to apply for advance ruling from the Bulgarian tax office.