AOW, pension and tax in Bulgaria: the Netherlands taxes, Bulgaria doesn't
The treaty with Bulgaria from 2020 is a source-state treaty without threshold: the Netherlands may tax your occupational pension, your annuity and your AOW. And Bulgaria doesn't tax pensions — not its own, and expressly not those from compulsory insurance abroad either. So your Dutch rates are your rates, without wage tax exemption and without credit. What Bulgaria does tax, it taxes at a flat rate of ten percent.
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Written and checked by Auke on , against the sources at the bottom. Is something no longer right? Report it below and I'll fix it.
If you live in Bulgaria, the Netherlands taxes your AOW and your pension, and as a rule Bulgaria doesn't. With most destinations on this site the tax lesson is a puzzle; with Bulgaria it is one sentence long.
Three things to know up front:
- There is no threshold amount and no condition. The Netherlands taxes at the ordinary Dutch rates, and you keep filing a return on it as a non-resident taxpayer.
- A wage tax exemption, which would stop your pension fund from withholding anything, doesn't exist here. Whoever applies for it is rejected.
- Bulgaria doesn't tax pensions: not its own, and expressly not those from compulsory insurance abroad either. Whoever has only pension files no return there.
The treaty: source state, without threshold
The treaty with Bulgaria was concluded on 14 September 2020 and has applied since 31 July 2021. It replaced the old treaty from 1990 and is of the modern Dutch type. Article 17 paragraph 1: pensions and other similar remuneration, as well as annuities, arising in a contracting state may be taxed in that state. So the country the pension comes from, the source state, may tax. Paragraph 2 says the same about payments under social security legislation, such as your AOW. And paragraph 5 pulls a lump-sum commutation under the same rule.
There is no threshold amount and no condition. The Netherlands taxes your occupational pension, your annuity and your AOW, at the ordinary Dutch rates, and you keep filing a return on them as a non-resident taxpayer. A wage tax exemption as with Spain or Portugal doesn't exist here. Whoever applies for it is rejected.
The government pension follows article 18: the Netherlands taxes, unless you're a resident and a national of Bulgaria. In practice it makes no difference, because the rest is Dutch too.
| Income from the Netherlands | Treaty | Who taxes | And Bulgaria? |
|---|---|---|---|
| AOW | article 17(2) | the Netherlands | exempt: compulsory insurance abroad |
| occupational pension | article 17(1) | the Netherlands | exempt, if it comes from compulsory insurance |
| annuity | article 17(1) | the Netherlands | exempt or 10%, with credit for the Dutch tax (article 22(6)) |
| lump sum before the start date | article 17(5) | the Netherlands | idem |
| government pension | article 18 | the Netherlands, unless resident and national of Bulgaria | exempt |
| rent from your Dutch home | article 6 | the Netherlands | 10%, with credit |
What Bulgaria does with it: nothing
Here Bulgaria differs from Poland, which has the same kind of treaty. The Bulgarian Personal Income Tax Act exempts pensions in article 13. Income from compulsory insurance in Bulgaria and abroad is untaxed. So are payments from supplementary voluntary insurance, after acquiring the right to a supplementary pension. The revenue agency NRA writes it without fuss: whoever has only pension files no return.
Your AOW is a pension from compulsory insurance abroad. Your Dutch occupational pension from a mandatory industry-wide or company fund too. An annuity you built up voluntarily falls under the second category, or under the flat tax: the single fixed rate covered below. That is the only question you put to a tax adviser here. Because the Netherlands taxes it anyway and Bulgaria credits the Dutch tax, the answer is rarely more than a formality.
The treaty provides for a credit just in case: article 22 paragraph 6 lets Bulgaria deduct the tax paid in the Netherlands from the Bulgarian tax, up to at most the Bulgarian tax on that income. With pensions there is nothing to credit, because there is no Bulgarian tax.
What is still taxed then: ten percent
Bulgaria has one rate for income tax: 10% on the base, without brackets. That touches wages, profit and rent from a property in Bulgaria.
A resident is taxed on their worldwide income, meaning their income from all countries. Whoever keeps shares or property abroad must therefore declare them. That applies even if no tax follows, because the treaty leaves the rent from your Dutch home with the Netherlands and Bulgaria credits the Dutch tax.
The return goes in before 30 April on the previous year. If you live only on pension and AOW, you don't have to file it.
What this means for your choice
Fiscally Bulgaria is not a destination where you gain something on your pension: you pay exactly what you paid in the Netherlands. It is a destination where you gain on the cost of living, and where the tax gives you no surprises. Whoever is looking for a lower rate on their pension looks at Czechia, Hungary or Italy. Whoever is looking for simplicity is well placed here.
Your accrued AOW comes along in full
Apart from the tax: the SVB pays the AOW in Bulgaria too, in euros. In a SEPA country that happens around the 24th of the month. The SVB's bank costs are at most € 0.48 per payment. Report your move to the SVB in time, with the date, your Bulgarian address and your bank details.
Your further accrual, 2% per insured year, stops on the day of deregistration. Whoever leaves before AOW age can, according to the SVB, sometimes insure voluntarily.
In Vertrekklaar this is phase 1 of 5 of the journey, step 1.2: the same steps, but for your situation — in your order, tickable, and with the deadlines watched. See the whole journey to Bulgaria or go straight to step 1.2 in the open plan.
What this means for your numbers →
What this rests on
The facts in this article come from these official pages. Rules change. When in doubt, go by the source, not this article.
- Treaty Netherlands-Bulgaria for the avoidance of double taxation, 2020 — wetten.overheid.nl
- NRA — pensions from compulsory insurance in Bulgaria and abroad are untaxed — nra.bg
- NRA — the income tax of ten percent and the return before 30 April — nra.bg
- SVB — payment of the AOW outside the Netherlands (SEPA, euros, costs) — svb.nl
- SVB — how AOW accrual works (2% a year, voluntary insurance) — svb.nl
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