Tax on Expenses

Tax on expenses is regulated in Articles 204-217 of the Corporate Income Tax Law (CITL).

Scope of taxation

A tax on expenses shall be levied on the following expenses supported by documents:

1. any business entertainment expenses;

2. any expenses on fringe benefits provided in kind to factory and office workers and to persons hired under a management and control contracts (hired persons); the expenses on fringe benefits provided in kind shall furthermore include:

- the expenses on contributions (premiums) for supplementary voluntary social insurance and for voluntary health insurance and for life assurances;

- the expenses on food vouchers;

3. the expenses related to operation of means of transport where used to service management operations.

Exemptions

1. No tax shall be levied on any expenses on contributions and premiums for supplementary social insurance and life assurance not exceeding the amount of BGN 60 per month per hired person, where the taxable persons do not incur any coercively enforceable public obligations at the time of incurrence of the expenses.

2. No tax shall be levied on any expenses on food vouchers not exceeding the amount of BGN 60 per month, provided in the form of food vouchers to each hired person, where the following conditions are simultaneously fulfilled:

  • the agreed basic monthly remuneration of the person in the month of provision of the vouchers is not lesser than the average monthly agreed basic remuneration of the said person for the last preceding three months;
  • the taxable person does not incur any coercively enforceable public obligations at the time of provision of the vouchers;
  • the vouchers are provided to the taxable person by a person which has obtained authorization to carry on operator business from the Minister of Finance on the basis of a competitive procedure;

3. No tax shall be levied on any expenses on fringe benefits incurred on transportation of factory and office workers and of persons hired under a management and control contract from the place of residence to the place of work and back.

The exemption shall not apply where any such transportation is carried out by passenger car or by extra bus services except where the transportation of factory and office workers is carried out by passenger car to inaccessible and remote areas and the taxable person cannot ensure the implementation of the activity thereof without incurrence of the expense.

Any expenses on fringe benefits, which are not provided in kind and which constitute income of a natural person, shall be taxed under the terms and according to the procedure established by the Income Taxes on the Income of Natural Persons Law.

Taxable Persons

Taxable persons in respect of the tax on any business entertainment expenses shall be the persons which are subject to levy of corporation tax.

Taxable persons in respect of the tax on any expenses on fringe benefits provided in kind to factory and office workers and to persons hired under a management and control contracts shall be all employers or commissioning entities under management and control contracts. 

Taxable persons in respect of the tax on the expenses related to operation of means of transport where used to service management operations shall be the persons which are subject to levy of corporation tax.

Taxable Amount

Taxable Amount for Tax on Entertainment Expenses

The taxable amount for assessment of the tax on entertainment expenses shall be the expenses charged for the calendar year.

Taxable Amount for Tax on Fringe Benefit Expenses Provided in Kind

The taxable amount for assessment of the tax on these expenses shall be the expenses on fringe benefits provided in kind debited with the income related to the said expenses for the calendar year.

Taxable Amount for Tax on Fringe Benefit Expenses on Contributions (Premiums) for Supplementary Social Insurance and Life Assurance

The taxable amount for assessment of the tax on these expenses shall be the excess of the said expenses over BGN 60 per month per hired person. Where the taxable persons incur any coercively enforceable public obligations at the time of charging of the expenses, the taxable amount for assessment of the tax on expenses shall be the full amount of the expenses charged for the calendar month.

Taxable Amount for Tax on Fringe Benefit Expenses on Food Vouchers

The taxable amount for assessment of the tax on these expenses shall be the excess of the said expenses over BGN 60 per month per hired person.  Where the conditions for exemptions from tax under Article 209 herein are not fulfilled, the taxable amount for assessment of the tax on expenses shall be the full amount of the expenses charged for the calendar month.

Taxable Amount for Tax on Expenses Related to Maintenance, Repair and Operation of Means of Transport

The taxable amount for assessment of the tax on these expenses shall be the expenses on maintenance, repair and operation of means of transport, charged during the calendar year, debited with the income charged from insurance benefits associated with the means of transport, up to the amount of the expenses on repair incurred whereto the benefit applies. 

Rate of tax

The rate of the tax on expenses shall be 10 per cent.

Declaring the tax

Pursuant to Article 217(1) of CITL the tax on expenses shall be declared by the annual tax return submitted by the taxable person.

Tax Remittance

The tax on expenses shall be remitted on or before the 31 March the following year.

Sanctions

In accordance with Article 9 of the Corporate Income Tax Law, interest according to the Interest on Taxes, Fees and Other State Receivables Law shall be due on any taxes which are not remitted when due.

In accordance with the provisions of Article 261 of the Corporate Income Tax Law, any taxable person, which fails to submit a tax return under this Law, which fails to submit any such return when due, or which fails to state or misstates any particulars or circumstances leading to underassessment of the tax due or to undue reduction, retention of or exemption from tax, shall be liable to a pecuniary penalty varying between BGN 500 and BGN 3,000. Any repeated violation shall be punishable by a pecuniary penalty varying between BGN 1,000 and BGN 6,000.

In accordance with the provisions of Article 278 of the Corporate Income Tax Law, the written statements ascertaining the violations shall be drawn up by the authorities of the National Revenue Agency, and the penalty decrees shall be issued by the Executive Director of the National Revenue Agency or by an official authorized thereby. The ascertainment of violations, the issuing, appeal against and enforcement of the penalty decrees follows the procedure established by the Administrative Violations and Sanctions Act.

For further information: http://www.nap.bg/