How Are ETFs Taxed in Bulgaria? (And Why Investors Get the Most Important Part Wrong)

Disclaimer: This material is entirely educational and does not constitute financial, tax, legal or investment advice. The information is current as of 21 July 2026 and reflects the legislation in force on that date. Tax treatment depends on the specific circumstances of each investor — before taking any action, consult a tax adviser and check the current versions of the cited legal acts in the primary sources listed.

One of the most frequent questions every investor asks is: "Are ETFs exempt from tax?"

If you are expecting a "yes" or "no", you will probably be disappointed. The truth is that the mere presence of the letters "ETF" in an instrument's name does not automatically make it tax-exempt in Bulgaria. Hundreds of products trade on exchanges that look absolutely identical from the outside but are, purely legally, radically different things. And for the NRA and the law, the only thing that matters is the legal classification of the asset, not its commercial name.

This is exactly where the biggest tax mistake hides. Before you start calculating the tax due, your first and most important task is to understand what exactly you have bought.

ETF, ETN or ETC — why does it matter so much?

When you open the Interactive Brokers, Trading 212 or even Revolut platform, you see a list of assets. They all have an ISIN code, an exchange ticker (for example VUAA, SGLN) and are bought in exactly the same way. Underneath, however, hide different legal structures.

Here is what the notorious "alphabet soup" means (often summarised under the term ETP — Exchange Traded Products):

ETF (Exchange Traded Fund)

This is a genuine exchange-traded investment fund. Legally speaking, it is a collective investment scheme (CIS), most often organised as a European UCITS fund, or an alternative investment fund (AIF). The ETF pools the money of many investors and invests it in a basket of real assets — shares, bonds and money market instruments. When you buy an ETF, you acquire a unit in the fund, not the underlying shares directly.

An important caveat for Bulgarian tax treatment: the UCITS/AIF distinction is not merely technical. As we will see below, the exemption under the PITA targets units of collective investment schemes — a concept which under Bulgarian law (ZDKISDPKI) corresponds to UCITS funds. A foreign ETF structured as an AIF may fall outside the exemption even where the trade takes place on a regulated market, and requires individual analysis.

ETN (Exchange Traded Note)

Although it trades on the same exchange, an ETN is not a fund at all. It is a debt security issued by a financial institution. By buying an ETN you are de facto lending to the issuer. Your return depends on its promise to pay you, which means you also carry credit risk towards the issuer itself.

ETC (Exchange Traded Commodity)

These instruments most often give you exposure to commodities — gold, silver, oil and so on. Like an ETN, in the typical case an ETC is not a collective investment scheme but a specially constructed debt product (often backed by the physical commodity, but still a debt instrument).

What is the tax difference for individuals?

Here comes the essential point. The Bulgarian Personal Income Taxes Act (PITA / ZDDFL) (opens in a new tab) provides a relief (Art. 13(1)(3), in conjunction with § 1, item 11 of the Supplementary Provisions) under which the gain from certain financial instruments is non-taxable if the transaction was concluded on a regulated market in Bulgaria or in another EU/EEA member state.

To fall within this exception, however, the product must be a unit or share in a collective investment scheme (a UCITS ETF) or a national investment fund, or be a classic share/right/government security (per the definition in § 1, item 11 of the Supplementary Provisions of the PITA).

Since ETNs and ETCs are not funds (i.e. not collective investment schemes), as a rule they do not fall within this particular exemption. The same generally applies to an ETF structured as an AIF, which is not a CIS within the meaning of the law. The realised gain from these is usually taxed at 10%, unless, after a very detailed review, it is established that they fall within another specific statutory exception. It is important not to be misled: ETNs and ETCs are not necessarily taxable merely because they are not funds, but they must be checked individually against the legal definition.

Accumulating vs. Distributing ETFs

Even if you are clear on the legal form of the instrument, what it does with its dividends also matters.

• Accumulating: The fund automatically reinvests the dividends it receives. You do not receive money into your account, so in Bulgaria you generally do not owe tax on this internal process and do not declare it annually. The tax consequences (if any) are deferred until the moment you sell your units.
• Distributing: Here the fund pays the dividend out to you in cash. That already generates an event for you. You must check whether withholding tax was deducted, how the double tax treaty (DTT) applies, whether you have additional tax to pay in Bulgaria, and declare it correctly in your annual tax return. Note: the taxation of dividends is an entirely separate regime from the taxation of capital gains on sale.

Investing as an individual or through a company?

Investors often wonder whether it is better to trade through their own company (a Bulgarian EOOD/OOD). The answer depends on your goals, but one major misconception should be dispelled: that companies always owe tax on capital gains.

In fact, the Corporate Income Tax Act (CITA / ZKPO) (opens in a new tab) provides an exemption that is entirely analogous to the one for individuals. Under Art. 44, in conjunction with the definition in § 1, item 21 of the Supplementary Provisions of the CITA, the accounting profit from the disposal of financial instruments on a regulated market in the EU/EEA is deducted when determining the tax financial result (correspondingly, the accounting loss is not recognised for tax purposes). In other words, if your EOOD sells a UCITS ETF on a European regulated exchange, it owes no corporate tax on that capital gain.

Dividends get even more interesting. When a Bulgarian company pays dividends to a company that is tax resident in an EU/EEA state, no withholding tax is deducted — the exemption is under Art. 194(3)(3) of the CITA. The provision was introduced in connection with Directive 2011/96/EU on parent companies and subsidiaries (opens in a new tab), but the Bulgarian legislator went further than the directive: unlike the directive (which sets a minimum 10% shareholding threshold), Bulgarian law requires no minimum participation threshold or holding period whatsoever.

However, when your Bulgarian company receives dividends from a European ETF, the question of whether the foreign state will withhold tax at source is decided by its own domestic legislation (and any applicable DTT). One clarification is important here: the Parent-Subsidiary Directive is in principle not the applicable instrument for dividends from investment funds — it targets companies subject to corporate taxation, whereas UCITS funds are usually tax-exempt structures, and a 10% stake in a single ETF is practically unattainable for an ordinary investor. What is decisive, therefore, is the fund's local tax regime. In Bulgaria, the received dividend from an EU/EEA entity is as a rule not subject to corporate tax (Art. 27(1)(1) of the CITA), but the specific tax treatment of a dividend from a foreign fund must always be checked individually.

Specifics of Irish UCITS funds

Since Ireland is the largest hub for ETF registration, their local regime is worth noting. Under Irish tax legislation (source: Irish Revenue Commissioners — Investment Undertakings (opens in a new tab), Taxes Consolidation Act 1997 (opens in a new tab), Part 27 — Gross Roll-Up Regime, current as of 21 July 2026), investment funds enjoy tax-neutral status. When an Irish UCITS ETF pays a dividend to an investor who is not Irish resident, Ireland withholds no tax at source at all (0%). This rule applies both to individuals and to foreign companies (including Bulgarian companies), with no minimum participation threshold required. The condition is that the fund holds a declaration that the investor is not Irish resident (which is usually administered automatically by international brokers). Consequently, in the typical case a Bulgarian legal entity will receive the dividend from an Irish UCITS ETF in full, with no Irish withholding tax deducted.

The advantages of a company

You can reinvest the exempt capital gains received in full, without them being taxed at company level. Personal dividend tax (5%) to the Bulgarian state will only become due when you decide to take the money out of the company to yourself as an individual.

But perhaps the most hidden advantage is inheritance. If your children or spouse inherit your shares in the Bulgarian EOOD, the transfer of those shares is entirely exempt from inheritance tax. Under Art. 31 of the Local Taxes and Fees Act (LTFA / ZMDT) (opens in a new tab), the surviving spouse and heirs in the direct line are not liable persons for inheritance tax at all, in combination with the Inheritance Act.

Let us compare the two scenarios:

• If you hold an Irish ETF directly as an individual: No Irish inheritance tax will be due (0%), but your heirs will have to communicate with foreign brokers, translate and legalise death certificates, and possibly go through complex administrative procedures for proving inheritance in Ireland (probate).
• If the ETF is owned by your Bulgarian company: Your heirs simply inherit the shares in your Bulgarian company under entirely domestic rules, sparing themselves the whole international administrative burden.

The drawback

A company comes with the full accounting, tax and administrative burden (including the need for an LEI code). This choice requires individual analysis, not simply copying someone else's practice.

Irish ETFs and the inheritance tax myth

One of the main reasons European investors buy Irish ETFs (instead of their US equivalents) is the fear of US estate tax (US Estate Tax — IRS (opens in a new tab)). On direct ownership of US shares or a US-domiciled ETF (such as SPY or QQQ), the general exemption for foreigners is a mere USD 60,000, after which the rate can reach 40%. Irish UCITS ETFs are generally not treated as US assets, even if they track the S&P 500 in full, which saves you from this risk.

At the same time, some worry about Irish inheritance tax (Capital Acquisitions Tax — CAT), whose standard rate is 33%. Here there is excellent news: Irish legislation contains an express exception (Section 75 of the Capital Acquisitions Tax Consolidation Act 2003 (opens in a new tab)). Under it, units in investment funds (such as UCITS ETFs) are entirely exempt from this tax (0%), provided that both the deceased and the heir are not Irish residents. Since in the typical case Bulgarian investors and their children are Bulgarian residents, Irish inheritance tax on direct ETF ownership is not due. What remains is only the administrative burden of proving the inheritance to the foreign broker.

Where and what do you declare?

Besides the NRA (opens in a new tab) (in the appendix for income from the transfer of financial assets for sales, and separately for dividends or the mere holding of foreign assets), investors often forget the BNB.

Under the Currency Act (opens in a new tab) and Ordinance No. 27 of the BNB (opens in a new tab), at certain levels of investment abroad an obligation may arise to file statistical declarations with the BNB (SPB forms). This is a purely informational obligation, but the fines for missing it can be serious.

How to check what you actually own (a practical algorithm)

Do not rely on the ticker alone. The same fund may be registered as CSPX on one exchange and SXR8 on another. Never apply the rule: "it has ETF in the name, so it is tax-free." The correct path you must follow looks like this:

ISIN code ➡️ Legal form (from the prospectus) ➡️ Type of instrument ➡️ UCITS/AIF status ➡️ Place of execution (the specific exchange and MIC code) ➡️ Market segment ➡️ Comparison with the PITA ➡️ Conclusion.

Gather your annual statement and your trade report, and be sure to review the KID (Key Information Document) or the fund's prospectus.

A practical reference: popular instruments among Bulgarian investors

The following table is indicative. It does not remove the need to check your specific trade, since the place of execution of the order (for example, whether the broker executed it on a regulated market or over the counter) is critical to the final tax outcome.

Product (example ticker)	Legal form	UCITS/CIS status	Usual tax analysis for individuals
Vanguard S&P 500 (VUAA)	ETF, Irish fund	Yes	The gain may be non-taxable (where Art. 13 PITA is satisfied)
Vanguard FTSE All-World (VWCE)	ETF, Irish fund	Yes	Non-taxable regime possible on a qualifying exchange trade
iShares Core S&P 500 (CSPX / SXR8)	ETF, Irish fund	Yes	Non-taxable regime possible
iShares Core MSCI World (IWDA / EUNL)	ETF, Irish fund	Yes	Non-taxable regime possible
Invesco EQQQ NASDAQ-100 (EQQQ)	ETF, Irish fund	Yes	Non-taxable regime possible (for the capital gain only)
iShares Physical Gold (SGLN / IGLN)	Secured debt security (ETC)	No	Requires checking. Not a fund, does not automatically benefit from the exception.
Xetra-Gold (4GLD)	Secured debt security	No	Individual analysis. A special construction, not a UCITS.
21Shares Bitcoin ETP (ABTC)	Crypto ETP (debt security)	No	What is sold is a financial instrument, not crypto directly. Usually taxable.
SPDR S&P 500 ETF Trust (SPY)	US trust	Not UCITS	Not treated as a European fund. US estate tax risk must also be checked.

In summary

The legal form of the product and the place where the trade was executed are the only things that carry weight before the law. Take the time to check the ISIN code and the prospectus of your instruments before you file your tax return. This small step is the difference between legally keeping your gain and entering an unnecessary (and expensive) dispute with the tax administration.

Finally, if you invest through your own Bulgarian company, remember one very important fact about inheritance: legally speaking, when you pass away, as far as the ETF itself is concerned the owner never changes. The owner continues to be your Bulgarian company. Under the hood, no transfer of assets to a new person takes place (in legal terms: there is no translative succession of the securities). The only thing that changes is who manages and owns the Bulgarian company — something recorded by a simple entry in the domestic Commercial Register. For your heirs this means they do not have to fight foreign institutions to transfer the shares to themselves; they simply take over the "keys" to the company, in whose account the ETF quietly awaits them.

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Masterclass: VAT and financial assets (ETFs)

As you enter the world of corporate investing, the VAT question often causes panic. "Do I have to register for VAT if I sell ETFs for more than EUR 51,130?" The answer lies in a detailed reading of European and national legislation. An important clarification right at the start: the Value Added Tax Act (VATA / ZDDS) (opens in a new tab) applies equally to legal and natural persons when they carry out independent economic activity.

1. What is "independent economic activity" (CJEU case law)

For a transaction to fall within the scope of VAT at all, it must be carried out by a taxable person within the framework of their "independent economic activity" (Art. 9 of Directive 2006/112/EC (opens in a new tab)).

The Court of Justice of the European Union (CJEU) has settled and categorical case law (e.g. Polysar (C-60/90) (opens in a new tab), EDM (C-77/01) (opens in a new tab), Harnas & Helm (C-80/95) (opens in a new tab), Wellcome Trust (C-155/94) (opens in a new tab)) that the mere acquisition, holding and sale of securities (managing one's own portfolio) does not constitute economic activity. The income (dividends or capital gains) is regarded simply as the result of owning the asset.

The different scenarios in practice:

• DCA (dollar-cost averaging), portfolio rebalancing, liquidation: These are classic acts of managing personal wealth. According to the CJEU, there is no economic activity here. Consequently, these acts fall outside the scope of VAT altogether.
• Trading (day trading and swing trading): If an individual or an ordinary holding company makes numerous trades with its own funds, the CJEU (Wellcome Trust) again holds that scale and frequency alone do not turn this into economic activity. HOWEVER, if the company was set up specifically as a proprietary trading firm (its main commercial activity is speculative trading aimed at regular profit) or acts as a professional securities dealer, then that activity does qualify as economic.

2. Accumulating turnover for mandatory VAT registration

If we assume that your company does not carry out economic activity with the ETFs (it simply invests surplus funds), then no VAT turnover accrues at all.

But what happens if your company does carry out economic activity?

With the introduction of the new regime (Art. 168c of the VATA, in force from 1 January 2026), the rules for forming the registration turnover have changed:

• Transactions in financial assets are exempt supplies under Art. 46 of the VATA.
• As a rule, under the new Art. 168c of the VATA, supplies of financial services are now included in forming the annual registration turnover (a threshold of EUR 51,130, Art. 96 of the VATA as amended, State Gazette issue 115 of 30.12.2025).
• The "ancillary supplies" exception: Financial services are NOT included in the turnover where they are ancillary supplies. Under the definition in § 1, item 105 of the Supplementary Provisions of the VATA, an ancillary supply is one that "is not connected with the person's usual economic activity and is of a secondary or incidental nature."
• The conclusion: If you have an IT company and you sell surplus liquidity through ETFs for EUR 200,000, this is an ancillary supply of a secondary nature and in theory you will not register for VAT on that ground. But if your company was set up specifically for trading (that is its main economic activity), then the sales of financial assets are not "ancillary" and do form turnover for mandatory registration (even though the transactions themselves are exempt from charging the tax).

The practical problem in Bulgaria:

Despite the clear rules, in the practice of the Bulgarian tax administration the question of whether turnover for mandatory VAT registration accrues from such transactions is often contentious. To spare themselves unnecessary stress, audits and disputes with the NRA, many companies here prefer to file for voluntary VAT registration.

As for individuals, if they file for mandatory VAT registration on the basis of financial assets sold, they most often receive a refusal decision from the administration (on the ground that they are not carrying out independent economic activity), although this is not an absolute and binding rule in every single case.

3. Exemption of supplies and place of supply (Art. 21 VATA)

Even if your trading company is VAT registered, that does not mean you will charge 20% VAT on the sale of an ETF. The supply remains exempt (Art. 46).

Moreover, if you sell your assets through international brokers (established outside Bulgaria), the place-of-supply rules under Art. 21 of the VATA apply. Where the recipient of the financial service is a taxable person (as the broker or financial institution is), the place of supply is where the recipient is established (Art. 21(2)), i.e. outside the territory of Bulgaria. The key consequence: under Art. 69(2) of the VATA, for supplies of financial services under Art. 46 a right to full input VAT credit arises for the related costs, but only where the recipient is established outside the European Union (for example a broker/counterparty in the US or the UK). If the recipient is established in another EU member state (for example an Irish broker), the supply has a place of supply outside Bulgaria, but a right to input VAT credit does not arise. The distinction is critical for tax planning.

4. The VAT SME regime and Ireland (Art. 168c VATA)

At EU level, the new special regime for small enterprises (SME), governed by Directive (EU) 2020/285 (opens in a new tab), has applied since 1 January 2025. In Bulgaria it is transposed in Art. 168c et seq. of the VATA and applies from 1 January 2026. The regime allows small businesses to use VAT exemption in other member states, provided their total EU turnover is below EUR 100,000 and their local turnover does not exceed the threshold in the relevant state.

An important clarification: Before you even get to the question of whether your company can take advantage of the SME regime's reliefs in Europe, the most basic question must first be answered — does your company carry out independent economic activity? As we have already discussed (per CJEU case law), if you are simply investing your company's surplus cash without acting as a genuine professional trader, then you are outside the scope of VAT for those transactions altogether. In that case you do not need the SME regime for them at all. If, however, your trading does qualify as economic activity, only then does it make sense to look at the SME rules.

Does the SME regime apply in Ireland?

Yes, Ireland is an EU member state and applies the new SME rules, as do all other members of the Union. The regime, however, does NOT apply to non-EU states (for example the US or the UK, where local VAT legislation is entirely separate).

Does an ETF create a fixed establishment?

An extremely important point here is Implementing Regulation (EU) No 282/2011 (opens in a new tab), which defines what a "fixed establishment" or resident person is for VAT purposes. Under it, to have a fixed establishment in a given state (for example in Ireland, where your ETF is registered), you must have a sufficient degree of permanence and a suitable structure of human and technical resources there (an office, employees, equipment).

The fact that your Bulgarian EOOD owns an Irish ETF or uses the platform of an Irish/international broker categorically does not create a fixed establishment for you in Ireland. You remain entirely a Bulgarian resident and all your VAT obligations are determined through the prism of the Bulgarian VATA (and accordingly you are entitled to apply the European SME regime through the Bulgarian system, if you meet the conditions).

5. The hidden traps of VAT registration

If you do end up VAT registered (whether voluntarily or mandatorily), you must be aware of two serious side effects that require careful tax planning:

For legal entities (companies):

Where a company combines heterogeneous economic activities — for example it has taxable supplies (selling software or goods) and at the same time makes exempt supplies (selling ETFs) — this may reduce its right to use input VAT credit on purchases. Under the partial input VAT credit rules (Art. 73 of the VATA), a significant volume of exempt sales lowers the coefficient by which the company can recover VAT on its general costs. That is why mixing heterogeneous economic activities within one company carries risks and demands serious attention for the purposes of tax optimisation.

For individuals:

If you are an individual with active income from other sources (for example income from a liberal profession, civil contracts, consultancy services or rents) — other than income from salaries, dividends and inheritances (which are outside the scope of VAT) — and you become VAT registered because of trading in financial assets, the trap springs. The potential VAT registration means that your other active income automatically falls within the scope of the law and you will have to charge 20% VAT on it. This can be an extremely unpleasant surprise if it has not been anticipated in advance.

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Primary sources for verification

• PITA (ZDDFL) — lex.bg (opens in a new tab) (Art. 13(1)(3); § 1, item 11 SP)
• CITA (ZKPO) — lex.bg (opens in a new tab) (Art. 27, Art. 44, Art. 194(3)(3); § 1, item 21 SP)
• VATA (ZDDS) — lex.bg (opens in a new tab) (Art. 21, 46, 69, 73, 96, 168c; § 1, item 105 SP)
• LTFA (ZMDT) — lex.bg (opens in a new tab) (Art. 31)
• Currency Act — lex.bg (opens in a new tab) and BNB (opens in a new tab) (Ordinance No. 27)
• Directive 2006/112/EC (VAT Directive) (opens in a new tab)
• Directive (EU) 2020/285 (SME regime) (opens in a new tab)
• Directive 2011/96/EU (parent-subsidiary) (opens in a new tab)
• Implementing Regulation (EU) No 282/2011 (opens in a new tab)
• CJEU case law: Polysar C-60/90 (opens in a new tab), Wellcome Trust C-155/94 (opens in a new tab), Harnas & Helm C-80/95 (opens in a new tab), EDM C-77/01 (opens in a new tab)
• Ireland: Revenue — Investment Undertakings (opens in a new tab), Taxes Consolidation Act 1997 (opens in a new tab), CATCA 2003, Section 75 (opens in a new tab)
• US: IRS — Estate Tax for Nonresidents (opens in a new tab)

This material is for educational purposes and does not constitute tax, financial or legal advice. The information is current as of 21 July 2026. For specific cases, consult a tax specialist.