U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

1 

69–112 

" ! SENATE 110TH CONGRESS

2d Session 

TREATY DOC. 

2008

110–18 

TAX CONVENTION WITH BULGARIA WITH PROPOSED 

PROTOCOL OF AMENDMENT 

MESSAGE 

FROM

THE PRESIDENT OF THE UNITED STATES 

TRANSMITTING

CONVENTION BETWEEN THE GOVERNMENT OF THE UNITED 

STATES OF AMERICA AND THE GOVERNMENT OF THE REPUBLIC 

OF BULGARIA FOR THE AVOIDANCE OF DOUBLE TAXATION AND 

THE PREVENTION OF FISCAL EVASION WITH RESPECT TO 

TAXES ON INCOME, WITH ACCOMPANYING PROTOCOL, SIGNED 

AT WASHINGTON ON FEBRUARY 23, 2007 (THE ‘‘PROPOSED TREATY’’), AS WELL AS THE PROTOCOL AMENDING THE CONVENTION 

BETWEEN THE GOVERNMENT OF THE UNITED STATES OF 

AMERICA AND THE GOVERNMENT OF THE REPUBLIC OF BULGARIA FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE 

PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON 

INCOME, SIGNED AT SOFIA ON FEBRUARY 26, 2008 

JUNE 4, 2008.—Treaty was read the first time, and together with the 

accompanying papers, referred to the Committee on Foreign Relations 

and ordered to be printed for the use of the Senate. 


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(III)

LETTER OF TRANSMITTAL 

THE WHITE HOUSE, June 4, 2008. 

To the Senate of the United States: 

I transmit herewith, for Senate advice and consent to ratification, the Convention Between the Government of the United States 

of America and the Government of the Republic of Bulgaria for the 

Avoidance of Double Taxation and the Prevention of Fiscal Evasion 

With Respect to Taxes on Income, with accompanying Protocol, 

signed at Washington on February 23, 2007 (the ‘‘Proposed Treaty’’), as well as the Protocol Amending the Convention Between the 

Government of the United States of America and the Government 

of the Republic of Bulgaria for the Avoidance of Double Taxation 

and the Prevention of Fiscal Evasion With Respect to Taxes on Income, signed at Sofia on February 26, 2008 (the ‘‘Proposed Protocol 

of Amendment’’). The Proposed Treaty and Proposed Protocol of 

Amendment are consistent with U.S. tax treaty policy. Also transmitted for the information of the Senate is the report of the Department of State with respect to the Proposed Treaty and Proposed Protocol of Amendment. 

The Proposed Treaty generally reduces the withholding tax on 

cross-border dividend, interest, and royalty payments. Importantly, 

the Proposed Treaty generally eliminates withholding tax on crossborder dividend payments to pension funds and cross-border interest payments made to financial institutions. The Proposed Treaty 

also contains provisions, consistent with current U.S. tax treaty 

policy, that are designed to prevent so-called treaty shopping. The 

Proposed Protocol of Amendment further strengthens these treaty 

shopping provisions. 

I recommend that the Senate give early and favorable consideration to the Proposed Treaty and give its advice and consent to 

ratification to both the Proposed Treaty and the Proposed Protocol 

of Amendment. 

GEORGE W. BUSH. 


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(V)

LETTER OF SUBMITTAL 

DEPARTMENT OF STATE, 

Washington, May 7, 2008. 

THE PRESIDENT, The White House. 

THE PRESIDENT: I have the honor to submit to you, with a view 

to their transmission to the Senate for advice and consent to ratification, the Convention Between the Government of the United 

States of America and the Government of the Republic of Bulgaria 

for the Avoidance of Double Taxation and the Prevention of Fiscal 

Evasion with Respect to Taxes on Income, with accompanying Protocol, signed at Washington on February 23, 2007 (the ‘‘Proposed 

Treaty’’), and the Protocol Amending the Convention Between the 

Government of the United States of America and the Government 

of the Republic of Bulgaria for the Avoidance of Double Taxation 

and the Prevention of Fiscal Evasion with Respect to Taxes on Income, signed at Sofia on February 26, 2008 (the ‘‘Proposed Protocol 

of Amendment’’). The Proposed Treaty is the first income tax treaty 

between our two countries. 

The Proposed Treaty generally reduces the rate of withholding 

tax on cross-border dividends, interest, and royalties. Importantly, 

however, the Proposed Treaty generally eliminates withholding tax 

on cross-border dividend payments to pension funds and cross-border interest payments made to financial institutions. The Proposed 

Treaty also contains provisions, consistent with current U.S. taxtreaty policy, that are designed to prevent so-called treaty shopping. The Proposed Protocol of Amendment further strengthens 

these treaty shopping provisions. 

The Proposed Treaty and Proposed Protocol of Amendment were 

concluded in recognition of the importance of the United States’ 

economic relations with Bulgaria. The Department of the Treasury 

and the Department of State cooperated in the negotiation of the 

Proposed Treaty and Proposed Protocol of Amendment. They have 

the full approval of both Departments. 

Respectfully submitted, 

CONDOLEEZZA RICE. 

Enclosure: Key Features of Proposed Treaty and Proposed Protocol of Amendment Between the United States and Bulgaria. 

KEY FEATURES OF PROPOSED TREATY AND PROPOSED PROTOCOL OF

AMENDMENT BETWEEN THE UNITED STATES AND BULGARIA

The Convention Between the Government of the United States of 

America and the Government of the Republic of Bulgaria for the 

Avoidance of Double Taxation and the Prevention of Fiscal Evasion 


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VI

with Respect to Taxes on Income, with accompanying Protocol, 

signed at Washington on February 23, 2007 (the ‘‘Proposed Treaty’’), and the Protocol Amending the Convention Between the Government of the United States of America and the Government of 

the Republic of Bulgaria for the Avoidance of Double Taxation and 

the Prevention of Fiscal Evasion with Respect to Taxes on Income, 

signed at Sofia on February 26, 2008 (the ‘‘Proposed Protocol of 

Amendment’’), were negotiated to further facilitate the cross-border 

economic activity between our countries. The Proposed Treaty and 

Proposed Protocol of Amendment are consistent with current U.S. 

tax treaty policy. There are, as with all bilateral tax treaties, some 

variations from these norms. In the Proposed Treaty and Proposed 

Protocol of Amendment, these differences reflect particular aspects 

of Bulgarian law and treaty policy, the interaction of U.S. and Bulgarian law, and U.S.-Bulgarian economic relations. 

The Proposed Treaty provides for a withholding rate of ten percent on cross-border portfolio dividend payments, and five percent 

on dividends when the beneficial owner of the dividend is a company that directly owns at least ten percent of the stock of the company paying the dividend. However, no withholding is permitted on 

dividends paid by a company resident in one of the countries to a 

pension fund that is a resident in the other country provided the 

dividend is not derived from the carrying on of a trade or business 

by such pension fund. 

Further, withholding taxes on cross-border interest payments 

may be imposed at a maximum rate of five percent. No withholding 

in the source state on a cross-border interest payment is generally 

permitted, however, when the interest is beneficially owned by the 

government of the other country (or a bank operated or controlled 

by that government), a pension fund resident in the other country, 

or a financial institution (including a bank or insurance company) 

resident in the other country. 

Cross-border royalty payments are generally sourced to the country of the payer of the royalty and may be subject to a maximum 

withholding tax rate of five percent in that source state. 

The Proposed Treaty also provides that the United States and 

Bulgaria will reconsider the permissible positive withholding rates 

with respect to interest and royalties when Bulgarian sourced interest and royalty payments made to other members of the European Union are required to be exempt from source state withholding taxes under certain EU Directives. 

The Proposed Treaty follows the standard rules for taxation by 

the source country of the business profits of a resident of the other 

country. The source country’s right to tax such profits is generally 

limited to cases in which the profits are attributable to a permanent establishment located in that country. The Proposed Treaty 

also includes a special rule for certain long-term services not otherwise considered to be provided through a permanent establishment. 

The Proposed Treaty includes the ‘‘Limitation on Benefits’’ Article, which is designed to deny ‘‘treaty-shoppers’’ the benefits of the 

Convention. The Proposed Protocol of Amendment further strengthens the Limitation on Benefits article of the Proposed Treaty. The 

Proposed Treaty also preserves the U.S. right to tax a former citizen or long-term resident of the United States for the period of ten 


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VII

years following the loss of such status, in accordance with the laws 

of the United States. 

The Proposed Treaty also provides for an exchange of information between our countries, which will facilitate the enforcement of 

U.S. domestic tax rules. Specifically, the Proposed Treaty allows 

the United States to obtain information (including bank information) from Bulgaria whether or not Bulgaria needs the information 

for its own tax purposes. The Proposed Treaty allows the General 

Accounting Office and the tax writing Committees of Congress to 

obtain access to certain tax information exchanged under the Convention for use in their oversight of the administration of U.S. tax 

laws and treaties. 

The Proposed Treaty will enter into force on the date of receipt 

of the later of the notifications exchanged between the parties indicating that their respective requirements for entry into force have 

been satisfied. It will have effect, with respect to taxes withheld at 

source, for amounts paid or credited on or after the first day of January next following the year in which the Proposed Treaty enters 

into force and, with respect to other taxes, for taxable years beginning on or after the first day of January next following the year 

in which the Proposed Treaty enters into force. The Proposed Protocol of Amendment will enter into force on the date of entry into 

force of the Proposed Treaty. 


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