Hello from USA

I go the answer to my question. And it is yes.
there is agreement between USA and Bulgaria to avoid double taxation.

https://www.treasury.gov/resource-cente … 3-2007.pdf

Welcome to Bulgaria!

So do we have to pay taxes only in USA?
Not necessarily. I'll clarify below.

And can we have investments in USA?
Yes. There's nothing about a Bulgarian residence that stops you holding international investments.

Bulgaria is a typical jurisdiction that taxes its residents on their world-wide income. While the USA is famous as the country which taxes its citizens on their worldwide income, even when they are no longer resident there. Therefore Americans can be liable for taxes in 2 countries, where as citizens of most other countries are more commonly only liable in one.

The document you posted is a double taxation agreement, and it's good that there is one between USA and Bulgaria. This avoids you paying taxes twice on the same income, by enabling you to claim a credit for tax paid in country/tax return A, against tax due in country/tax return B.

But that doesn't mean you only need to file your taxes in one country, and it doesn't necessarily mean that you'll only pay tax in one country (although it might do).

Until you and/or your wife renounce your US citizenship, you're obligated to file a US tax return.

However, I suspect you will also need to file a Bulgarian tax return.

But... I'm no expert on Americans in Bulgaria. Luckily we have one here on the board who is. So hopefully @JOHNAVANN will pop in later and give you the full scoop!

So... the headline tax rate in Bulgaria is only 10%, while the USA tax rates are higher.

Effectively, this means you can file a Bulgarian tax return, and pay your 10% income tax here. And then that can be used as a credit on your USA tax return.

Here's some guidance:

"US Taxation of Foreign Income

The United States may be one of two countries to enforce citizen-based taxation, however, most countries already tax foreign income.

The US tax laws for citizens living abroad is essentially the same as for those living in America. Expats can file the same Form 1040 and are subject to the same US federal income tax rates.

In addition, the IRS provides a couple of options to prevent the double taxation of expats. Expats can either:

- exclude their foreign earned income from US taxation
- use foreign income tax paid as a tax credit against US taxes owed
- exclude other income types from US taxation using a valid tax treaty"

we do not plan to work in Bulgaria- therefore no income, no tax.
will pay only Us taxes

If you get involved in the Bulgarian tax system you cannot have US investments- it is way too complicated. And if you do investment in Bulgaria is nightmare for taxes in USA per  US tax lawyer
whom I consulted today:)

Bulgaria taxes residents on their worldwide income. Not their Bulgaria-source income.

Therefore, if you USA investments which generate an income, or make a profit, this is taxable in Bulgaria. If you have a pension from the USA, you have income, and it's taxable in Bulgaria.

Sorry to disappoint you.

But it doesn't matter, as there's a double-taxation treaty, so you don't pay tax twice.

You pay the IRS what is due on your income, less the tax you paid in Bulgaria.

see other message

Bulgaria
Individual - Residence
Last reviewed - 21 July 2021

Irrespective of their citizenship, an individual is considered a Bulgarian tax resident if they fulfil one or more of the following criteria:

    They have a permanent address in Bulgaria (but only if their centre of vital interests is also in Bulgaria, please see below).
    They reside in Bulgaria more than 183 days in any 12-month period. In this case, the individual becomes a Bulgarian tax resident in the calendar year in which the 183rd day was exceeded.
    They have been assigned abroad by a Bulgarian company or the State.
    Their centre of vital interests is in Bulgaria (determined with regard to the individual’s personal and economic ties to the country).

If a double tax treaty (DTT) is in place, the tax residency status is determined in accordance with the provisions of the DTT, which prevail over domestic legislation.

A foreign tax resident is any individual who is not a Bulgarian tax resident.

So if all your income is from USA and live in Bulgaria only 183 days of the year- no Bulgarian involvement or taxes. You pay only US taxes.
Even if you live all the year there- Bulgaria does not tax pensions.

SEE OTHER

If you've taken advice from an appropriate professional, then I'm sure he and you are both better informed than I am!

However, even so, I have  a couple of comments:

1. Divesting yourself of all USA investment (in case of a BG filing) or Bulgarian investments (in case of a US filing) seems a very dramatic solution. Sure, there's obviously less bureaucracy involved. But I find it hard to believe that doing a BG tax return in addition to your USA filing (which you can't avoid without giving up your citizenship) is going to be such a huge headache. Especially as your BG tax payment will be allowed in credit against your US taxes.

2. You are absolutely correct, that it's a different story if you restrict yourself to 182 days or less per year in Bulgaria. But if you want to retire here, that seems like also a quite drastic (and expensive if you then keep a home in California) option, just to avoid the BG tax return.

3. I have not managed to find the Bulgarian tax guidance that says that pensions do not count as taxable income. But perhaps if they are paid to you with tax deducted at source (in the US) then they certainly wouldn't be taxed further.

4. My favorite American is @Johnavann who seems very expert on all kinds of banking, finance and business issues. I don't personally know him, but from his postings it seems to me that he has not relinquished his American citizenship (so files in USA), and he lives mostly in Bulgaria (so he also files in Bulgaria), and he has all sorts of business/financial interests both in Bulgaria and abroad (including, I presume, USA). If he doesn't post to give his take on the tax situation for Americans, I recommend you send him a personal message to introduce yourself (he lives on the Black Sea too, I believe) and perhaps he'll give you some guidance based on his experience here.