Tax on Expenses

The tax on expenses is regulated in Articles 204-217 of the Corporate Income Tax Act (CITA).

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 workers and employees 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 in paper form and on an electronic medium.

3. any expenses in kind associated with own assets, leased assets and/or assets provided for use, provided for personal use and/or associated with use of staff, by workers, employees and persons hired under management and control contracts (hired persons), as well as by persons performing work in person within the meaning given by item 26 (i) of § 1 of the Supplementary Provisions of the Income Taxes on Natural Persons Act.

"Expenses in kind" for the purposes of levying tax on expenses shall be the portion of the accounting expenses corresponding to the personal use of the assets and/or the staff which do not fall under items 1 and 2 of Article 204 (1) CITA and are associated with own assets, leased assets or assets and/or staff provided for use, used both for the activity and for personal use. Where the assets are tax depreciable assets, the tax depreciations shall be taken into account instead of the accounting expenses. Any expenses incurred to the benefit of natural persons, which constitute acquired income within the meaning given by Article 11 (3) of the Income Taxes on Natural Persons Act, are not expenses in kind.

Any expenses associated with the use of own assets, leased assets or assets provided for use, provided for personal use and/or associated with the use of staff, shall not be expenses in kind, where remuneration is due for their use.

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, i.e. where at the end of the month in which the expenses are charged, the liabilities have not been listed in the tax and social insurance account or are not listed as filed for coercive enforcement in the National Revenue Agency.
2. No tax shall be levied on any expenses on food vouchers in paper form and on an electronic medium not exceeding the amount of BGN 200 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 lower than the average monthly agreed basic remuneration of the said person for the previous three months;
• at the end of the month in which the food voucher expenses are charged, the taxable person does not have any coercively enforceable public obligations, i.e. the liabilities have not been listed in the tax and social insurance account or are not listed as filed for coercive enforcement in the National Revenue Agency;
• the vouchers are provided to the taxable person by a person who has obtained authorization to carry on business as an operator by the Minister of Finance.

In 2024, food vouchers in paper form and on an electronic medium can also be used for payment of household bills for electricity and heat, natural gas and water, activities carried out by cultural organizations under the Protection and Promotion of Culture Act and showing of films under the Film Industry Act.

Food vouchers in paper form operators can print and provide food vouchers in paper form until 30 June 2024.

For the period from 1 January 2024 to 30 June 2024, taxable persons (employers) may provide to employees for a specific month only food vouchers in paper form or only food vouchers on an electronic medium. As of 1 July 2024 only food vouchers on an electronic medium will be able to be provided.

      3. No tax shall be levied on any expenses on fringe benefits incurred on transportation of workers and employees 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 the workers and employees 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 Act.

Taxable Persons

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

Taxable persons in respect of the tax on any expenses on fringe benefits provided in kind to workers and employees 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 in kind associated with own assets, leased assets and/or assets provided for use are all employers or commissioning entities under management and control contracts or under legal relationships for performance of work in person within the meaning given by item 26 (i) of § 1 of the Supplementary Provisions of the Income Taxes on Natural Persons Act.

Taxable Amount

Taxable Amount for Tax on Entertainment Expenses

The taxable amount for the assessment of the tax on business 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 condition in Article 208 CITA for receiving the tax exemption is 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. The tax base for the assessment of the tax on expenses referred to in the previous two sentences shall be the sum of the tax bases for the months of the calendar year.

Taxable Amount for Tax on Fringe Benefit Expenses on Food Vouchers in Paper Form and on an Electronic Medium

The taxable amount for the assessment of the tax on these expenses shall be the excess of the said expenses over BGN 200 per month per hired person.  Where the conditions for exemptions from tax under Article 209 and 209a 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. The tax base for the assessment of the tax on expenses referred to in the previous two sentences shall be the sum of the tax bases for the months of the calendar year.

Taxable Amount for Tax on Expenses in Kind

The tax base for the assessment of the tax on expenses shall be the sum of the expenses in kind associated with own assets, leased assets and/or assets provided for use, provided for personal use and/or associated with use of staff, for the calendar year.

Upon determination of the tax base for the expenses in kind associated with means of transport, the expenses shall be charged to the personal use by multiplying the total amount of all expenses associated with the means of transport by:

1. the proportion:

between the kilometres driven for personal use and the total kilometres driven by the means of transport concerned;

between the hours of personal use of the means of transport and the total hours of use of the means of transport, or

50 per cent.

Upon determination of the tax base for the expenses in kind associated with immovable property which cannot be allocated by measurement, the expenses shall be charged to the personal use by multiplying the total amount of all expenses associated with the immovable property by the proportion:

1. between the surface area used for personal use and the total surface area of the immovable property concerned, or
2. between the hours of personal use of the immovable property concerned and the total hours of use of the immovable property.

Upon determination of the tax base in respect of the expenses in kind associated with any assets other than those specified above, the tax base shall be 20 per cent of the total amount of all expenses associated with the asset concerned, unless the taxable person supports by documents another amount of the tax base.

Tax rate

The tax rate on business entertainment expenses and expenses on fringe benefits provided in kind shall be 10 per cent.

The tax rate on the expenses in kind associated with own assets, leased assets and/or assets provided for use, provided for personal use and/or associated with use of staff, by factory workers, office workers and persons hired under management and control contracts (hired persons), as well as by persons performing work in person is 3 per cent.

Declaring the tax

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

The taxable persons shall declare their choice regarding levy of tax on expenses in kind under Article 24 (3) of the Income Taxes on Natural Persons Act for the current year in the annual tax return submitted for the preceding year. Any newly incorporated taxable persons shall declare their choice for the year of incorporation with the annual tax return submitted for the same year. Any persons, who were not taxable for the preceding year and did not submit an annual tax return, shall declare their choice with the annual tax return for the current year.

Upon expungement/dissolution of the taxable person, the tax on expenses shall be declared by the persons representing the taxable person within the time limit and according to the procedure for submission of the tax return for the last tax period.

Tax Remittance

The tax on expenses shall be remitted on or before the 30 June the following year.

The tax for the last tax period of a taxable person, subject to bankruptcy proceedings or placed in liquidation, shall be paid within the deadlines for its declaration.

Sanctions

In accordance with Article 9 of the Corporate Income Tax Act, interest according to the Interest on Taxes, Fees and Other State Receivables Act 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 Act, any taxable person, who fails to submit a tax return under this Act, who fails to submit any such return when due, or who 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 Act, 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.