How can I get my taxes back from abroad?

How can I get my taxes back from abroad?

How can I get my taxes back from abroad?

Very often different people ask me the following question: how can I get my taxes back from abroad? To the counter question: Which taxes usually answer “Well, I worked in Spain, Germany, France and now I want to get my taxes back”.  Upon further conversation, I understand that the person does not distinguish between taxes and insurance, and also between different types of taxes. Since there is a gap in Bulgarian education in terms of knowledge about basic economic processes from living life, I will try, without any pretensions of comprehensiveness, to explain what is the difference between taxes and insurance, what the types of taxes and insurance and why too rarely we can get our taxes and insurance back.

Social security

“Insurance” – the word itself indicates that it is insurance against some risk. Is it the risk of getting sick the risk of being out of work for some other reason or the risk of being a victim of an accident at work? In all these cases, you pay a sum when you don’t have problems, so that in case of a problem, usually the state, can pay you some sum to help you.

What types of insurance are there?

In Bulgaria, these are the State Social Insurance (DOO), the supplementary compulsory pension insurance (DZPO), the health insurance (ZO), the insurance for occupational accidents and against unemployment.

LLC includes pension insurance as well as insurance for sick and maternity, only if a percentage is paid for this risk. These insurances go into the national social security budget and pay for our pensions, sickness and maternity benefits.

DZPO is the second pension insurance that goes directly to our account in a pension insurance company.

ZO is an insurance that provides us with health care under the Health Insurance Fund. I will make a digression here. Many people who are not insured for work and only have health insurance, as uninsured on other grounds, consider themselves to be self-insured. This is not so. A self-insured person works on his own and receives remuneration for this, and this should be taken into account by persons who perform services under civil contracts, for which the contracting authority politely asks them to fill in a declaration of whether they are insured. In this case, they must answer that they are not insured. For questions about insurance in Bulgaria, we can help you through our contact forms.

Taxes

What are taxes? They are sums that go into the budget and are used to pay for roads, free education etc. This money will not go directly back to us in any way. They are spent by the state for the common good. Taxes are income tax, profit tax, value-added tax and others. While insurance is not always directly related to income and sometimes, as in the case of self-insured persons, we may pay insurance on a minimum insurance income, although we may have received less than this income, there is a direct relationship with taxes – the more we earn, more tax we will pay. For questions about taxation in Bulgaria, we can help you through our contact forms.

Now comes the question of which taxes are most often paid abroad. These are VAT and income tax.

Foreign income tax

Usually, people asking how to get their taxes back ask about income tax. The general principle is that when a person works on an employment contract somewhere, income tax is paid where the employer is registered and where the work is done. That is why the relevant employer withholds tax from those working abroad.

The question is whether this tax can be returned when the relevant person returns to Bulgaria. In my opinion, in the general case, when the tax is calculated correctly when the person has not failed to take advantage of his tax relief under the law of the country he is in, this cannot happen. Already if the person has not submitted an annual tax return in the respective country and for this reason has omitted to deduct any reliefs or there is a non-taxable minimum in the country and because he has only worked for a few months, his income falls within this minimum, as happens with seasonal workers then this person can recover part of his taxes paid abroad by doing so in the country that the income paid.

VAT from abroad

The other tax that could be refunded under certain conditions is VAT for goods purchased in the relevant foreign country, which are subsequently transported, in the frequent case to Bulgaria. This tax is also refundable according to the rules of the respective foreign country, accordingly, some specialists assist with this.

Avoiding double taxation for foreign taxes

Here, perhaps, I should also mention the Double Taxation Agreements for taxes from abroad, which, as the name suggests, help to avoid taxing the same income twice. I will not go into the details of how this is done, as this is a very long topic, but certainly, the SIDDOs also do not help to return tax abroad, but only to ensure that it is not paid twice.

As for the insurance, when they were due, if it is an EU country or one with which Bulgaria has a social security agreement, then the person can exercise rights under these paid insurances according to the EU regulations or according to these agreements. If you need advice on these matters, contact the companies that are insurance specialists, as this matter is specific and requires more serious than general knowledge.

I hope this attempt to explain things in practice has been useful to someone. I say again that I am only setting out general principles in it without any pretensions of comprehensiveness. We are available to discuss specific issues.

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