Bulgaria Strengthens Tax Reporting on Crypto Assets in Compliance with EU Law: Withdrawals from Self-Custody Accounts Also Subject to Regulation

Bulgarian Government Strengthens Tax Reporting on Crypto Assets in Compliance with EU Law

The Bulgarian government has taken significant steps to align with the latest EU (European Union) standards by substantially enhancing tax reporting requirements related to crypto assets.

A proposed amendment to the Tax and Social Security Procedure Act received overwhelming support in the unicameral National Assembly and was subsequently published in the official gazette, paving the way for formal implementation. This move positions Bulgaria to follow in the footsteps of other EU member states that have already introduced similar measures.

The recent legal amendment aims to reflect the provisions of the latest EU DAC (Directive on Administrative Cooperation) known as "DAC8" into domestic law, with the goal of addressing the opacity in the crypto asset market and robustly advancing anti-money laundering efforts.

Strict Obligations and Scope for Crypto Asset Service Providers

Under the new regulations, all entities processing crypto asset transactions on behalf of taxpayers will be subject to strict compliance obligations. Specifically, CASPs (Crypto Asset Service Providers) will be required to register with the NRA (National Revenue Agency) and must share customer identification information and detailed transaction data with the authorities.

The scope of the information to be reported is extensive and includes detailed data such as:

User Identification Information:
Personal taxpayer identification numbers, names, dates of birth, addresses, and countries of tax residence.
Transaction Data:
Details categorized by the buying, selling, transferring, and exchanging of digital assets, as well as the number and total amount of transactions involving fiat currency.

All types of crypto asset transactions will be subject to reporting, covering not only exchanges with fiat currency (on-ramps/off-ramps) but also transactions between crypto assets. Withdrawals from accounts on platforms to personal self-custody wallets and external transfers will also be subject to recording and reporting obligations. However, companies and platforms are not required to track direct transfers of crypto assets between external private addresses.

The collected data must be compiled in electronic form and submitted by June 30 of the year following the reporting year. The initial period for the application of these new reporting rules will begin on January 1, 2026. According to local media reports, this series of regulations aimed at improving transparency does not directly increase the tax burden on investors or alter the methods for calculating existing tax standards.

Trends in MiCA Regulation and Delays in Implementation Across Europe

The legal reforms in Bulgaria are set against the backdrop of the full implementation of the MiCA (Markets in Crypto-Assets) regulation across Europe.

Under MiCA, only operators with formal authorization can provide crypto asset services within the EU. MiCA licenses within the country are issued by the Financial Supervision Commission (FSC), but only two licenses have been issued so far. Meanwhile, over 70 companies that have already obtained licenses from regulatory authorities in other EU member states have notified the supervisory body of their intention to operate across the EU.

Bulgaria's legal reform process has fallen behind the initial schedule and will not meet the EU member states' requirement to comply by the end of 2025. This misalignment is not limited to Bulgaria; for example, political disputes and vetoes regarding MiCA implementation have also occurred in other member states like Poland, leading to varying speeds of implementation across Europe.

Nonetheless, the framework for cross-border automatic tax reporting is steadily advancing, with the first information exchange among EU tax authorities scheduled for September 2027, targeting transactions from 2026. Additionally, the EU's anti-money laundering regulatory package concerning crypto assets is expected to come into effect by mid-2027, steadily establishing complete traceability of crypto asset transactions within the European region.

Future Outlook and Security Risks in Compliance

In Bulgaria, which ranks 19th in the EU in terms of crypto asset adoption, experts are divided on whether the new regulations will promote healthy market growth or impose excessive burdens that hinder growth.

Furthermore, the introduction of cross-border tax reporting systems and centralized data management carries potential security risks. The risk of data breaches in platforms and authority systems handling large volumes of customer data is serious. In fact, there have been reports abroad of crypto asset holders becoming targets of violent crimes, such as physical assaults or kidnappings, related to hacking of tax authorities.

As we approach 2027, global attention is focused on how tax and regulatory authorities in various countries will maintain an appropriate balance between compliance with laws aimed at preventing money laundering and tax evasion, and ensuring user privacy and physical safety.

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