Bulgaria's Council of Ministers Approves Draft Tax Treaty with Andorra

Bulgarian Cabinet Greenlights Andorra Tax Treaty

The Bulgarian Council of Ministers officially approved a draft treaty with the Principality of Andorra on Wednesday, October 29, 2025. The proposed agreement focuses on the avoidance of double taxation and the prevention of fiscal evasion with respect to income taxes. This move signifies a new chapter in economic relations between the two countries, as Bulgaria and Andorra have not previously had a bilateral tax treaty in place.

Aims and International Standards

The primary objective of the draft treaty is to create a more predictable and favorable tax environment for businesses and individuals operating across both jurisdictions. By eliminating double taxation, the agreement is expected to:

• Provide a better competitive position for Bulgarian traders
• Promote business and investment
• Create opportunities for the development of new economic sectors

The draft treaty incorporates the latest international standards and developments in the tax system, particularly those initiated by the G-20 countries and the Organisation for Economic Co-operation and Development (OECD) through its Base Erosion and Profit Shifting (BEPS) project.

Next Steps and Broader Implications

Following the Council of Ministers' approval, the next phase involves the Finance Minister conducting negotiations and signing the document. The treaty will then require ratification by the National Assembly before it can enter into force.

This initiative also serves a broader strategic purpose for Bulgaria. It helps the nation fulfill its obligation to terminate bilateral investment agreements with European Union Member States and the United Kingdom, thereby avoiding potential infringement procedures by the European Commission.

Historical Context of Relations

While this is the first comprehensive tax treaty, Bulgaria and Andorra have previously cooperated on tax information exchange through various international legal documents. The Principality of Andorra has actively sought to expand its network of tax treaties in recent years and expressed interest in concluding one with Bulgaria. Notably, Bulgaria removed Andorra from its list of low tax countries in 2017, a decision that followed bilateral discussions between the then-head of the Government of Andorra, Antoni Martí Petit, and the President of Bulgaria, Rumen Radev.