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February 23, 2007 HP-277 U.S., Bulgaria Sign Income Tax Treaty, Strengthen Economic Relationship Washington, DC –Treasury Deputy Secretary Robert M. Kimmitt and Bulgarian Finance Minister Plamen Oresharski signed an income tax treaty and protocol today, strengthening the two countries' economic relationship.
"This treaty is the first of its kind between the United States and Bulgaria," said Deputy Secretary Kimmitt. "It is designed to provide for a better exchange of information, to foster the continued growth of American businesses, and to encourage investment in the emerging Bulgarian marketplace."
The treaty is consistent with the U.S. model income tax treaty and with treaties that the United States has with other countries. The treaty generally reduces, but does not eliminate, the rates of taxation on cross-border dividend, interest and royalty payments. However, the treaty generally eliminates withholding when cross-border dividends are paid to pension funds, and when cross-border interest is paid to the government of the other country or a financial institution resident in the other country.
In addition, the treaty contains provisions preventing so-called treaty shopping, which is the inappropriate use of a tax treaty by third-country residents. The treaty also contains provisions for the exchange of information between the two countries, including bank information.
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