Recently as a notable player in the world of cryptocurrency, Bulgaria has seen a community of investors and entrepreneurs attracted to the potential of digital assets. However, as the number of Bulgarians who enter the crypto market increases, it’s becoming essential for people who often trade or own Bitcoin USD to understand the tax implications of buying and selling cryptocurrency. 

If you aren’t familiar with the lingo, Bitcoin USD (BTC/USD) is a fancy way of saying that you’re looking at the value of Bitcoin in U.S. dollars, one of the main trading pairs for investors who want to measure Bitcoin’s performance on a global scale. This is an important trading pair to watch Bitcoin's market movement and also for Bulgarian investors to follow up the price of their holdings against USD.

Since tax regulations on cryptocurrency are changing so rapidly, this article explores the fundamentals of cryptocurrency tax in Bulgaria, specifically for BTC/USD investors, and provides tips on how to handle your taxes properly.

Bulgarian Cryptocurrency as Financial Assets

In Bulgaria, Bitcoin and cryptocurrencies, in general, are legally defined as financial assets. According to an official statement from Bulgaria’s National Revenue Agency (NRA), all profits made from trading cryptocurrencies are taxable. In contrast to some countries where crypto could be regarded as currency or another form of asset class, crypto is treated in Bulgaria like any other investment asset.

This classification has specific tax implications: Cryptocurrency is taxed on capital gains made by buying, selling or trading the digital currency, and the government has brought regulations to have transparency in crypto transactions. Bulgaria has made life more straightforward for its investors by treating cryptocurrencies as financial assets and setting up a straightforward tax regime.

BTC/USD Investors to Pay Capital Gains Tax

Investors of BTC/USD in Bulgaria are obliged to pay capital gain tax. If you’re an individual investor, you’ll have to pay a 10% capital gains tax rate on Bitcoin or other cryptocurrencies you sell, which can quickly eat into any potential profit. So, for instance, if an investor bought say a Bitcoin at a lower price and sold it for a profit in BTC/USD, the investor would now be required to declare such a gain in the NIRA and pay a 10% tax on the amount earned.

Investors must, therefore, track the purchase price, selling price, and the additional costs involved with the transaction, including exchange fees, in order to accurately calculate the taxable gains. It is important to keep detailed records of each transaction, in order to correctly report for tax purposes and not fall foul of the penalties.

Frequent BTC/USD Traders have Tax Obligations

If you are actively trading Bitcoin and swapping between BTC/USD constantly, the taxes become a little more complicated. You may be required to report more frequently if you’re a frequent trader, especially if you do short term trading, or margin trading. As capital gains tax is charged on the sale of a currency pair, traders need to document every trade, including conversion rates, amounts, and dates, to make sure they report all their transactions or face being slapped with a tax penalty.

In Bulgaria, trading on a regular basis can, on occasion, render an individual a self employed trader liable for extra tax payments. However, social security contributions and extra taxes are paid by self employed traders depending on trading volume. If you’re a frequent trader of BTC/USD you should consult a tax pro with crypto expertise to ensure compliance and avoid unpleasant tax surprises.

Income Tax for Bitcoin Miners

Bulgaria also taxes Bitcoin miners — the people who earn cryptocurrency by mining activities. Mining is the generation of new coins rather than buying and selling, therefore, income produced on mining is taxed as regular income. The earnings from mining need to be declared as income and the miner pays the right tax rate, which can differ between individuals, depending on the total income for that individual in any given year.

The income is calculated by the BTC / USD value on receipt, so miners should keep a record of the Bitcoin received and its equivalent in USD. The income tax on mining earnings is set at a standard rate, like capital gains tax, but mining can also add to the complexity of tax reporting, so if you’re a miner it’s important to stay well organized and informed.

The Requirement to Record and Report

Crypto earnings held from mining or capital gains must be reported in annual tax returns, according to Bulgaria’s NRA. Not reporting these earnings can carry penalties and interest on unpaid taxes. As Bitcoin and other cryptocurrencies remain volatile, it is of critical to keep a thorough and organized record of all the transactions, including BTC/USD conversion.

There are different examples where you need to keep track of the date of each transaction, the asset type, the purchase price, the sale price, and the costs associated with it. Using specialized crypto tax software can be very helpful for many investors, as the software can generate very accurate records automatically to report taxes.

Bulgaria’s Crypto tax system is a Benefit and Challenges

With a 10 percent capital gains tax, Bulgaria is considered an attractive place for crypto investors. Moreover, this simple rate ensures that investment taxes are disclosed to investors openly; at the same time, it allows investors (casual or professional) to keep the tax burden within a reasonable level. Consistent tax policy on Bitcoin, much like other financial assets, serves to eliminate ambiguity for investors and clarifies what is expected of them from policymakers.

However, this sort of detailed record keeping is not so simple, especially for active traders or miners. Trading BTC/USD often can take time to ultimately gain an accurate gain and income figure due to Bitcoin’s price volatility. For Bulgarian investors, it’s worth considering consulting with crypto tax professionals who know the intricacies of cryptocurrency taxation and who can advise investors about deductions to take, how to report, and tax saving strategies.