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 Act (PITA).

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 Act;
  • any resident and non-resident persons, who are obligated to withhold and remit taxes under this Act;
  • legal representatives of the above persons.

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 from any sources acquired by a taxable person during the tax year, with the exception of exempt income. Allowable expenses are deducted 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 non-taxable:

  • any income acquired during the tax year from the sale or exchange of:
  • one residential immovable property, provided that more than three years have elapsed between the date of acquisition and the date of sale or exchange;
  • up to two immovable properties, as well as any number of agricultural and forest properties, provided that more than five years have elapsed between the date of acquisition and the date of sale or exchange;
  • any income accruing from the sale or exchange of movable property, with the exception of:
  • means of transport by road, air and water, provided that the period from the date of acquisition to the date of sale or exchange is less than one year;
  • works of art, collectors' items and antiques;
  • shares, interests, compensation instruments, investment vouchers and other financial assets, as well as the income accruing from trade in foreign exchange;
  • movable property delivered to persons who have the right to carry out collection, transport, recovery or disposal of waste in accordance with the Waste Management Act;
  • any income accruing from disposition of financial instruments;
  • any profit or another source of owners' equity distributed in the form of new interests and shares in commercial corporations, as well as any profit or another source of owners' equity distributed in the form of an increase of the nominal value of the previously issued interests and shares;
  • any income accruing to persons indemnified according to the procedure of a statutory instrument from the sale or exchange of compensation instruments and investment vouchers received as indemnity;
  • any income accruing from compulsory social insurance in Bulgaria or abroad;
  • any income accruing from supplementary voluntary social insurance received after attainment of entitlement to supplementary pension; any income accruing from investment of the technical provisions received under contracts of insurance; and income accruing from investments of the assets of the supplementary retirement insurance funds, apportioned to the individual accounts of the insured persons;
  • any interest payments and discounts made on Bulgarian government, municipal and corporate bonds; as well as on similar bonds issued according to the legislation of another Member State of the European Union or of a State which is a Contracting Party to the Agreement on the European Economic Area;
  • any interest on claims established by a court of law, which are not subject to taxation, and any indemnities awarded for court costs;
  • any compensations and other such payments awarded for medium and grievous bodily harm, occupational disease or death;
  • any compensations for property taken by eminent domain for state and municipal needs;
  • any compensations for damage to property and personal injury, with the exception of the compensations for lost profit;
  • any insurance benefits, when an insured event has incurred;
  • any social assistance allowances and benefits received in pursuance of the Persons with Disabilities Act, the Child Protection Act, the Family Allowances Act or of another statutory instrument, as well as any unemployment benefits and allowances received in pursuance of a statutory instrument;
  • any assistance from organisations with social activity, established by a law, and from not-for-profit legal entities registered for pursuit of public benefit activities;
  • any amounts received in pursuance of the Family Allowances Act, as well as any alimony and child support payments received by entities according to the provisions of the Family Code;
  • any scholarships in favour of natural persons for the study thereof in Bulgaria and abroad;
  • any sums of money and merchandise awards received in pursuance of a statutory instrument by donors of blood, blood components and biological products for human purposes;
  • any winnings and merchandise awards received through participation in games of chance organised under a licence issued according to the procedure established by the Gambling Act or according to the legislation of another Member State of the European Union, or of a State which is a Contracting Party to the Agreement on the European Economic Area;
  • any prizes given in the form of an additional gaze or a merchandise award of insignificant value, given by amusement arcade machines within the meaning given by the Gambling Act or according to the legislation of another Member State of the European Union, or of a State which is a Contracting Party to the Agreement on the European Economic Area, as well as any merchandise awards of insignificant value from other games of chance, other than those referred to in Item 20;
  • any State and national awards bestowed on creative artists in the field of culture and to athletes, any prizes of laureates of competitions under projects and programmes financed in whole or in part by the Culture National Fund, as well as any State cash prizes bestowed for special services to the Bulgarian State and the nation, as well as any awards bestowed on pupils of prominent talent for participation in national and international Olympiads, competitions and contests;
  • any sums received for travel and accommodation expenses under legal relationships other than employment relationships, where for the account of the commissioning entity and where documented according to the procedure established by effective legislation, as well as the per diem expenses, but not more than their double amount fixed for persons under employment relationships;
  • any income derived from ground rent, rent charge or from other onerous provision for use of agricultural land;
  • any remunerations drawn by: the members of the staff of diplomatic missions in accordance with the Vienna Convention on Diplomatic Relations; the members of consulates in accordance with the Vienna Convention on Consular Relations; the employees of inter-state and inter-governmental organisations according to the international treaty concluded with the respective organisation, and the members of the family of any such persons, insofar as this is provided for in the relevant international treaty;
  • any income accruing from the sale or exchange of any property acquired by legal or testamentary succession, as well as of any property restituted according to the procedure established by a statutory instrument;
  • any consumer dividends distributed by cooperatives established under the Cooperatives Act;
  • any resources received under ‘Erasmus+, the European Union programme for education, training, youth and sport;
  • income from passenger taxi transportation activities, performed by individuals - drivers, in the name of a registered carrier, but for their own account, if the tax on passenger taxi transportation would have been paid according to the procedure established by the Local Taxes and Fees Act for the automobile used to provide the service;
  • property devolved by legal or testamentary succession or acquired by donation, as well as any property received with a restored right of ownership according to the procedure established by a statutory instrument;
  • any other income as provided for in the Act.

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 Act.

Types of taxes

  1. Tax on the total annual tax base

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 its 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 income specified in the Act.
  • income from other economic activity - netting the income acquired against operating expenses as follows:
    • by 60 per cent for any income accruing from the production of unprocessed agricultural products to natural persons registered as agricultural producers, with the exception of any income accruing from growing 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; 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 Act;
    • 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 (Article 35) - the gross sum of the taxable income acquired.

Annual Tax Base

The annual tax base shall be determined for each source of income separately and shall be the taxable income from the relevant source net of the compulsory social insurance contributions.

Total Annual Tax Base

The total annual tax base shall be the total of the annual tax bases for income from employment, 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 Act.

Tax Rate - the tax rate is 10 per cent on the total annual tax base.

Deadlines 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.

A prepayment shall not be made in respect of any income other than income from employment relationships acquired during the fourth quarter of the tax year, including in respect of income from other sources (Article 35), unless the holder of the income opts to the contrary.

  • On an annual basis:
    • until the 25 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;
    • until the 30 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.
  1. 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 as agricultural producers. Any natural persons registered as agricultural producers may opt 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 by submitting a declaration completed in a standard form.

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 Act including the financial result from the transfer of the sole trader's enterprise without removal of the sole trader from the Commercial Register. Excluded shall be the accounting financial result formed by activities on which alternative taxes are levied under the Corporate Income Tax Act and on which a licence tax and a tax on the transportation of passengers as a taxi are levied pursuant to the Local Taxes and Fees Act.

Annual Tax Base of a Sole Trader

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 Act tax reliefs.

Tax Rate - 15 per cent.

Deadlines for Tax Remittance

  • Tax prepayments pursuant to the Corporate Income Tax Act;
  • on an annual basis - until the 30 April of the year next succeeding the year of acquisition of the income.

Tax reliefs apply 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 in respect of:

  • 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;
  • children – an absolute figure based on the number of children;
  • children with a 50 per cent disability rate or higher;
  • non-cash payments;

Tax reliefs shall be obtained in the following order: first from the 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.

  1. Definitive 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;
  • income from interest on bank accounts. Tax rate - 8 per cent;
  • the gross sum of any cash prizes and merchandise awards awarded at competitions and contests which are not provided by an employer or a commissioning entity. Tax rate – 10 per cent;
  • the gross sum of the taxable income acquired by natural persons not registered as farmers, received in the form of State aids, subsidies and other support from the European Agricultural Guarantee Fund, the European Fund for Rural Development and from the State budget. Tax rate – 10 per cent.

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 Act.

Deadlines 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 bank 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 definitive tax.
  1. Licence tax

The conditions for determining and applying the tax are provided for in the Local Taxes and Fees Act.

Declaring and Provision of Other Information

  • Continuously:
    • by tax return under Article 55 of the Act - by the enterprises and the self-insured persons who are payers of income and are obligated to withhold and remit taxes under the provisions of the Act, or by the person who has acquired the income where the payer of the income is not obligated to withhold and remit the tax;
  • On an annual basis:
    • by statement under Article 73(1) of the Act - by the enterprises and the self-insured persons who are payers of income, for income paid/accrued to natural persons during the tax year, except for income from employment relationships and some other income.
    • by statement under Article 73(6) of the Act - by employers for income from employment relationships, including information related to the determination of the annual taxable amount and the annual tax of the persons whose employer is the employer under the main employment relationship at 31 December of the tax year.
    • 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, between 10 January and 30 April of the year following the year of acquisition of the income.

Annual tax return is also submitted for income taxed under a licence tax regime, income from the transportation of passengers as a taxi pursuant to the Local Taxes and Fees Act, loans extended/received over a certain amount, and shares and participating interests held in foreign corporations, a permanent establishment, a fixed base and immovable property – if located abroad. A tax return is not submitted for non-taxable income, income on which a definitive tax is levied and income from employment.

Tax Convention or Another International Treaty

In the event of a conflict between the provisions of any tax convention or another international treaty entered into by the Republic of Bulgaria 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 or an authorised official of the National Revenue Agency.

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.

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