AOW, pension and tax in Bulgaria: the Netherlands taxes, Bulgaria doesn't

With most destinations on this site the tax lesson is a puzzle: which part goes where, and what do you apply for. With Bulgaria the lesson is one sentence long. The Netherlands taxes, Bulgaria doesn't.

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. Paragraph 2 says the same about payments under social security legislation — 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.

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, and payments from supplementary voluntary insurance after acquiring the right to a supplementary pension too. 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 — and 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, so whoever keeps shares or property abroad must declare them — 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 AOW comes along in full

Apart from the tax: within the EU the AOW is paid without reduction. Report your move to the SVB in time, with the date, your Bulgarian address and your bank details — since 2026 an ordinary euro account. Your further accrual stops on the day of deregistration; whoever leaves before AOW age can continue it voluntarily.