The deadline for taxation of income generated in 2020 is April 30th, 2021. All income from cryptocurrency should be declared within this term.
Most often income from cryptocurrency is generated by:
- sales;
- exchange;
- “mining” and “staking”.
For taxation purposes cryptocurrency is referred to as “other financial assets”. They are taxable as soon as the cryptocurrency has been exchanged for conventional money and the person acquires a legal tender (non-digital currency).
Declaration of “occasional” cryptocurrency transactions
If a person performs up to three transactions of cryptocurrency per year, then the income from these transactions:
- is taxed at a rate of 10 %;
- should be declared in the Annual tax declaration in Appendix No 5, Table 2, under code 508.
Declaration for cryptocurrency transactions “by occupation”
If a person performs more than three cryptocurrency transactions within a calendar year, the income from these transactions:
- are subject to final tax at a rate of 15 %;
- are declared in Appendix No 2 of the Annual tax declaration.
In such cases the person has the right to deduct:
- losses from previous years;
- operational costs (e.g.: expenses for electricity, Internet, purchased computer equipment and software, etc.).
Mining and staking of cryptocurrency
If a person “mines” cryptocurrency, the income from this activity is taxed as an activity “by occupation” – with final tax at the rate of 15 %.
Origin of funds from cryptocurrency
Evidence for the origin of the funds is usually required when carrying out transactions of significant amounts. In order to prevent money laundering, each bank independently determines the threshold of cash turnover on customer accounts, where the exceeding of this threshold leads to origin checks.
In these situations, evidence for the origin of amounts acquired from cryptocurrency transactions should be presented, e.g.:
- invoices;
- hashes of transactions for paid remunerations from mines or hashes for transactions executed by exchanges;
- statement with payment history in applications of fintech e-money providers (Revolut, Transferwise, etc.);
- a reference from the exchange, where the price of the cryptocurrency upon the moment of its acquisition should be available;
- confirmation emails for the purchase.
Mandatory VAT registration
You should register for VAT if:
- you perform transactions with cryptocurrency on the Bulgarian stock exchange or on the territory of Bulgaria;
and
- your revenues from cryptocurrency transactions exceed BGN 50,000 for 12 consecutive months. VAT registration should be performed within 7 days as of expiration of this period;
or
- the income of BGN 50,000 has been reached for a period of up to 2 months. VAT registration should be performed within 7 days as of the moment when your income has reached this threshold.
