Personal Income Taxes

The taxation of income accruing to natural persons, including income from activity in a sole-trader capacity, shall be regulated by the Personal Income Taxes Law (PITL).

Scope of taxation

Income accruing to resident acquired from sources inside and outside the Republic of Bulgaria and income accruing to non-resident natural persons acquired from sources inside the Republic of Bulgaria.

Taxable Persons

  • any resident and non-resident natural persons, who are liable to taxes under this Law;
  • any resident and non-resident persons, who are obligated to withhold and remit taxes under this Law;
  • legal representatives thereof.

"Resident natural person", regardless of nationality, shall be any person who has a permanent address in Bulgaria, or who is present within the territory of Bulgaria for a period exceeding 183 days in any twelve-month period, or whose centre of vital interests is situated in Bulgaria. Any person, who has a permanent address in Bulgaria but whose centre of vital interests is not situated in the country, shall not be a resident natural person.

"Non-resident natural person" shall be any person who is not a resident person.

Tax Period

The taxation period for natural persons shall be concurrent with the calendar year, with the exception of the taxes subject to final tax.

Taxable Income

Income derived from all sources acquired by a taxable person during the tax year, with the exception of the income which is non-taxable by virtue of a law. The expenses determined under this Law shall be taken into consideration upon determination of the taxable income from the relevant source.

Non-Taxable Income

Where the following types of income have not been acquired from economic activity in a merchant capacity within the meaning of the Commerce Law, including in a sole-trader capacity, they shall be deemed as non-taxable:

  • income from the sale or exchange of a limited number of residential immovable property under the circumstances laid down in this Law;
  • income from the sale or exchange of movable property, with some exceptions;
  • income from compulsory social insurance and from supplementary voluntary social insurance received after attainment of entitlement to supplementary pension;
  • income from social assistance allowances and benefits, scholarships for studying in Bulgaria and abroad;
  • income from winnings and merchandise awards received through participation in games of chance within the meaning given by the Gambling Law;
  • income derived from ground rent, rent charge or from other onerous provision for use of agricultural land;
  • any income accruing from the sale or exchange of any property acquired by legal or testamentary succession;
  • other.

The income shall be deemed to be acquired on the date of:

  • payment: in the case of cash payment;
  • crediting the account of the recipient of the income or receipt of the cheque: in the case of non-cash payment;
  • receipt of the consideration: in the case of non-cash income;
  • the transfer of rights or property in the cases of sale, exchange or other onerous transfer of rights or property;
  • any other cases provided for by this Law.

Income shall furthermore be deemed to be acquired by a natural person where the payment or consideration is received by a third party on the order of the said natural person or under an agreement between the said natural person and the payer.

TYPES OF TAXES

І. AGGREGATE ANNUAL TAXABLE AMOUNT

Scope of taxation

Income from employment relationships, income from other economic activity, income from rent or from other onerous provision for use of rights or property, income from transfer of rights or property and income from other sources.

Taxable income per type of income depending on source:

  • income from employment relationships - labour remuneration and all other payments in cash and/or in kind from an employer or for the account of an employer with the exception of the payments listed in the Law;
  • income from other economic activity - debiting the income acquired with operating expenses as follows:
  • by 60 per cent for any income accruing from the business of production of unprocessed agricultural products carried on by natural persons registered as agricultural producers (with the exception of the persons registered under the VAT Law and the persons selected a sole-trader capacity taxation regime), with the exception of any income accruing from growing of ornamental plants;
  • by 40 per cent for: any income accruing from the business of production of processed or unprocessed agricultural products, of processed or unprocessed forestry products, of processed or unprocessed products of hunting ground management, and of processed or unprocessed fisheries products, carried on by natural persons (with the exception of the persons registered under the VAT Law, the persons registered as agricultural producers and the persons selected a sole-trader capacity taxation regime); any copyright and licence royalties; any income from the practice of a skilled craft on which a licence tax is not levied according to the procedure established by the Local Taxes and Fees Law; ;
  • by 25 per cent for any income from the practice of a liberal profession or any remunerations under non-employment relationships;
  • income from rent or from other onerous provision for use of rights or property - debiting the income acquired by 10 per cent expenses;
  • income from transfer of rights or property - a different approach for the individual properties/rights, for instance, the income accruing from the sale or exchange of immovable property, including of limited rights in rem to any such property, shall be determined by debiting the positive difference between the selling price and the cost of acquisition of any such property with 10 per cent expenses;
  • income from other sources (pursuant to Article 35) - the gross sum total of the taxable income acquired.

Annual Taxable Amount

The annual taxable amount shall be determined for each source of income separately and shall be the debiting of the taxable income from the relevant source with the compulsory social insurance contributions.

Aggregate Annual Taxable Amount

The aggregate annual taxable amount shall be the sum total of the annual taxable amounts for income from employment relationships, income from other economic activity, income from rent or from other onerous provision for use of rights or property, income from transfer of rights or property and income from other sources net of the tax reliefs provided for in this Law.

Tax Rate - the amount of tax on the aggregate annual taxable amount shall be arrived at by multiplying the aggregate annual taxable amount by a tax rate of 10 per cent.

Time Limits for Tax Remittance

  • Prepayment
  • on a monthly basis - on or before the 25th day of the month next succeeding the month during which the tax was withheld or the partial payments have been made - for income from employment relationships where the employer is obligated to withhold and remit the tax;
  • on a quarterly basis - by the enterprise or the self-insured person which or who is a payer of the income not later than at the end of the month next succeeding the quarter in which the income was charged by the enterprise or in which the income was paid by the self-insured person, as well as not later than the month next succeeding the quarter of acquisition of the income where the payer of the income is not obligated to withhold and remit the tax.

Tax prepayment shall not be remitted in respect of any income other than income from employment relationships acquired during the fourth quarter of the tax year, as well as in respect of income from other sources (under Article 35.

  • Annually
  • on or before the 25th day of February of the year next succeeding the year of acquisition of the income - in respect of a tax withheld by an employer under a principal employment relationship in connection with the annual netting out of the tax;
  • on or before the 30th day of April of the year next succeeding the year of acquisition of the income - in respect of any other cases concerning taxes on the aggregate annual tax amount.

II. TAX ON THE ANNUAL TAXABLE AMOUNT FOR INCOME FROM ACTIVITY IN SOLE-TRADER (ST) CAPACITY

Scope of taxation

Taxed shall be any income from economic activity accruing to a natural person who is a merchant within the meaning given by the Commerce Law but is not registered as a sole trader and income from economic activity accruing to any natural persons registered under the Value Added Tax Law, who are registered as agricultural producers. Any natural persons registered as and agricultural producers, who are not registered under the Value Added Tax Law, may opt by submitting a declaration completed in a standard form for taxation of the income from economic activity on the annual taxable amount in respect of income from economic activity in a sole-trader capacity.

Taxable Income

The taxable income accruing from activity in a sole-trader capacity shall be the taxable profit formed according to the procedure established by the Corporate Income Tax Law including the financial result from the transfer of the sole trader's enterprise without expungement of the sole trader in the Commercial Register. Excluded shall be the accounting financial result formed by activities on which alternative taxes are levied under the Corporate Income Tax Law and on which a licence tax is levied according to the procedure established by the Local Taxes and Fees Law.

Annual Taxable Amount

The annual taxable amount in respect of income from economic activity in a sole-trader capacity shall be determined by debiting the taxable income for the tax year with the contributions which the self-insured person is obligated to make for the tax year for his or her own account according to the procedure established by the Social Insurance Code and of the Health Insurance Law, as well as with the compulsory social insurance contributions remitted abroad, which are for the account of the natural person. It shall debited with the provided for in the Law tax reliefs.

Tax Rate - 15 per cent.

Time Limits for Tax Remittance

  • Tax prepayments under the terms and according to the procedure established by the Corporate Income Tax Law (see document "Corporation Tax" - http://www.minfin.bg/bg/786);
  • on an annual basis - on or before the 30th day of April of the year next succeeding the year of acquisition of the income.

Tax reliefs when determining the tax on the aggregate annual taxable amount and the annual taxable amount in respect of income from economic activity in a sole-trader capacity, for:

  • persons who have lost 50 per cent and more than 50 per cent of the working capacity;
  • personal voluntary social and commercial insurance contributions;
  • personal contributions for contributory service upon retirement;
  • donations;
  • young married couples, non-residents inclusive (interest payments made during the year on mortgage loans intended for the purchase of a dwelling unit).
  • tax relief for income not exceeding the minimum wage - for persons who have acquired only income from employment relationships during the year.

See for details - http://www.minfin.bg/bg/788

Under the introduced order of enjoyment of tax reliefs they shall be enjoyable in the following order: from the sum total of the annual taxable amounts (when determining the tax on the aggregate annual taxable amount) and then from the annual taxable amount in respect of income from economic activity in a sole-trader capacity.

ІІІ. FINAL TAXES

Scope of Taxation and Tax Rate

  • certain income of non-resident persons from a source inside Bulgaria, where not realized through a fixed base within the country - any income from use and disposal of movable or immovable property, any copyright and licence royalties, any technical assistance fees, any interest payments, etc. Tax rate -10 per cent;
  • income from supplementary voluntary social insurance, from voluntary health insurance and life assurances, as well as other income specified in Article 38 of the Act. Tax rate -10 or 7 per cent;
  • income from dividends and liquidation shares in favour of any resident or non-resident natural person. Tax rate -5 per cent.
  • incomes acquired resident natural persons from interest payments on deposit accounts with commercial banks:
    1. eight per cent: for any income acquired in 2014;
    2. six per cent: for any income acquired in 2015;
    3. four per cent: for any income acquired in 2016;
    4. zero per cent: for any income acquired in 2017 and the subsequent years.

Taxable Amount

The taxable amount differs depending on the source of income. As a rule a final tax shall be levied on the gross sum total of the income. Non-resident natural persons, who for tax purposes are resident persons of EU/EEA Member States, may opt to recalculate the final tax on certain income by submitting tax return under Article 50 of the Law.

Time Limits for Tax Remittance

  • On a monthly basis - not later than at the end of the month next succeeding the month during which the income was acquired - by commercial banks and foreign bank subsidiaries in the country obligated to withhold and remit final tax on interest earnings of resident persons from deposit accounts;
  • On a quarterly basis - not later than at the end of the month succeeding the quarter of acquisition/charging of the income - for all other taxes on income taxed with final tax.

ІV. LICENCE TAX

The licence tax is levied according to the procedure established by the Local Taxes and Fees Act - see document "Licence Tax" - http://www.minfin.bg/bg/785

Declaring and Provision of Other Information

  • continuously
  • by statement under the ordinance issued pursuant to Article 73(6) of the Act - by employers - for income from employment relationships.
  • by tax return under Article 55 of the Act - by the enterprises and the self-insured persons, which or who are payers of income obligated to withhold and remit taxes under the procedures of the Act, or by the person who has acquired the income where the payer of the income is not an enterprise or a self-insured person - for all other income;
  • Annually
  • by tax return under Article 50 of the Act - by the person who has acquired income.

The annual tax return shall be submitted to the National Revenue Agency territorial directorate exercising competence over the permanent address of the natural person, including the sole trader, who is liable for the tax, on or before the 30th day of April of the year next succeeding the year of acquisition of the income.

Annual tax return is also submitted for the loans of money as extended/received over a determined amount, and owned abroad:  shares and participating interests held in corporations, a permanent establishment, a fixed base and immovable property. Excused from declaration shall be non-taxable income, income on which a final tax is leviable and income from employment relationships.

  • by statement under Article 73 of the Act - by the enterprises and the self-insured persons, which or who are payers of income, for income paid/charged to natural persons during the tax year, income from employment relationships and some other income excluded.

Tax Convention or Another International Treaty

In the event of a conflict between the provisions of any tax convention or another international treaty, which has been ratified by the Republic of Bulgaria, has been promulgated and has entered into force, and any provisions of this Act, the provisions of the relevant tax convention or treaty shall prevail.

Sanctions

Any person, who fails to state or who misstates any particulars or circumstances in a tax return leading to underassessment of the tax or to exemption from tax, shall be liable to a fine or a pecuniary penalty not exceeding BGN 1,000. Any person, who submits any tax return past the due date, shall be liable to a fine or a pecuniary penalty not exceeding BGN 500.

A fine or a pecuniary penalty shall be also imposed in the case of: non-documenting of income, non-withholding or non-remittance of tax within the time limit, non-provision of information or provision of information beyond the time limit set.

Upon a repeated violation the sanctions shall be doubled.

Under the provisions of Article 85 the violations under this Act shall be ascertained by a written statement drawn up by a revenue authority and the penalty decrees shall be issued by the Executive Director of the National Revenue Agency or by an official thereby authorized.

The written statements ascertaining violations and the penalty decrees shall be drawn up, issued and appealed against according to the procedure established by the Administrative Violations and Sanctions Law.

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