Article 19 of the US – Bulgaria Tax Treaty provides rules for US taxation of visiting students, business trainees, teachers and researchers. Persons who meet the tests of the Article will be exempt from tax in the USA with respect to designated classes of income.
Paragraph 1 addresses payments received by a student or business trainee, while paragraph 2 addresses teachers and researchers temporarily present in the USA.

Paragraph 1 Subparagraph (a) addresses the situation where a student or business trainee that is a resident of a Bulgaria receives designated classes of payments while present in the USA .

Several conditions must be satisfied for such an individual to be entitled to the benefits of paragraph 1.

First, the student or business trainee must have been, either at the time of his arrival in the USA or immediately before, a resident of Bulgaria.

Second, the purpose of the visit must be the full-time education (at a college, university, or other recognized educational institution of a similar nature) or full-time training of the visitor.

Thus, if the visitor comes principally to work in the USA but also is a part-time student, he would not be entitled to the benefits of paragraph 1, even with respect to any payments he may receive from abroad for his maintenance or education, and regardless of whether or not he is in a degree program. Whether a student is to be considered full-time will be determined by the rules of the educational institution at which he is studying.

The IRS exemption in paragraph 1 applies to payments received by the student or business trainee for the purpose of his maintenance, education or training that arise outside the United States. A payment will be considered to arise outside the United States if the payor is located outside the United States.

Thus, if an employer from Bulgaria sends an employee to the USA for training, the payments the trainee receives from abroad from his employer for his maintenance or training while he is present in the USA be exempt from tax in the USA.

Paragraph 1 also provides a limited exemption for remuneration from personal services rendered in the USA with a view to supplementing the resources available to him for such purposes to the extent of $9,000 United States dollars (or its equivalent in the currency of Bulgaria) per taxable year.

The competent authorities are instructed to adjust this amount every five years, if appropriate.

In the case of a business trainee, the benefits of paragraph 1 will extend only for a period of two years from the time that the visitor first arrives in the USA for the purpose of training. If, however, a trainee remains in the USA for a third year, thus losing the benefits of paragraph 1, he would not retroactively lose the benefits of the paragraph 1 for the first two years.

The term “business trainee” is defined as a person who is in the USA temporarily either for the purpose of securing training that is necessary to qualify to pursue a profession or professional specialty, or as an employee of, or under contract with, a resident of USA , for the primary purpose of acquiring technical, professional, or business experience, from someone who is not his employer or related to his employer.

Thus, a business trainee might include a lawyer employed by a law firm in Bulgaria who works for one year as a stagiare in an unrelated law firm in the USA . However, the term would not include a manager who normally is employed by a parent company in Bulgaria who is sent to the USA to run a factory owned by a subsidiary of the parent company.

Paragraph 2 provides a limited exemption from US taxation for certain teachers and researchers temporarily present in the USA for the purpose of teaching or carrying on research at a school, college, university or other recognized educational or research institution.

The teacher or researcher must be a resident of Bulgaria at the beginning of his visit to the USA. The income eligible for exemption is the person’s remuneration received in consideration of teaching or carrying on research. The IRS exemption will extend to payments received by a teacher or researcher only for a period of two years from the time that the visitor first arrives in the USA.

A teacher or researcher remaining in the USA for more than 2 years becomes subject to tax on remuneration with respect to teaching and researching, but does not retroactively lose the benefits of paragraph 2 for the first two years.

Paragraph 2 does not apply to exempt income in consideration of carrying on research if the research is primarily for the private benefit of a specific person or persons rather than in the public interest.