Determining the center of vital interest
Determining the center of vital interest
Question:
Hello!
In 2020 I opened a sole proprietorship in Bulgaria, and since 2017 I have been a student in Germany. In the near future, I intend to close the company and pay myself the accumulated profits as a dividend. I am not sure if it would be legal to pay dividend tax in Bulgaria and transfer the dividend to my German account without paying dividend tax in Germany. From 2020 until now I am a student in Germany and spend more time there than in Bulgaria (although I would say that the center of my life interests is still in Bulgaria.) With the dividend income I would like to buy stocks/ETFs as an individual with a long investment window (5-10 years), but I am not sure whether to do this in Bulgaria or in Germany. If I invest in Germany, the taxes are significantly higher (over 26%) and are automatically withheld by the broker/intermediary bank when the profit is paid out, that is, if after completing my studies I return to live in Bulgaria, when selling the shares will be withheld German taxes, although in this scenario at this stage I will permanently live in Bulgaria. If I invest in Bulgaria, the taxes are lower, but if I stay in Germany after graduation, I don't know if it would be legal to pay tax on share income in Bulgaria and transfer it to my German account without paying German taxes (having given that in this scenario I will be living and working permanently in Germany at this stage.) Could you please help me with these questions? In both scenarios, would taxation only in Bulgaria be legal? And if this is not possible, how should the law of both countries be respected and double taxation avoided?
Thanks in advance!
Answer:
Hello,
As you spend more time in Germany and your vital interest is there, it is appropriate to declare your income in Germany and accordingly pay the taxes due again in Germany.
Declaring the income you described in Bulgaria without having a reason for it will not cause problems in Bulgaria, but it would cause problems in Germany if their revenue authorities found that you received income on which you should have paid taxes in Germany, not in Bulgaria.
We hope we have been helpful!
Greetings!
