Ministry of Finance :: Personal Income Taxes

Personal Income Taxes

Personal Income Taxes

The regime of taxation of the income of natural persons, including sole traders, is governed by the provisions of the Personal Income Tax Act (PITA).

Object of taxation

The income of resident natural persons from sources in the Republic of Bulgaria and abroad and the income of non-resident natural persons from sources in the Republic of Bulgaria.

Taxable persons:

the resident and non-resident natural persons, bearers of the obligation to pay taxes according to the law;
the resident and non-resident persons obliged to withhold and remit taxes according to the law;
legal representatives of the named persons.

А resident natural person, irrespective of citizenship, is a person:

1. who has a permanent address in Bulgaria, or
2. who resides on the territory of Bulgaria for more than 183 days in each 12-month period, or
3. whose center of vital interests is located in Bulgaria;
a person with a permanent address in Bulgaria is not a resident natural person if his center of vital interests is not located in the country.

A non-resident natural person is a person who is not designated as a resident.

Tax period

The tax period for personal income taxation is the calendar year, with the exception of income taxed subject to a final tax.

Taxable income

Income from all sources acquired by the taxable person during the tax year, except for income which is not taxable by law. In determining the amount of taxable income from the relevant source, the expenses provided for bylaw shall be deducted, in cases where the law has provided for the deduction of expenses.

Non-taxable income

When not acquired in the source of business activity as a trader within the meaning of the Commercial Law or of an activity taxed as a sole trader’s (ST) business activity, the following shall be considered non-taxable:

the income acquired during the tax year from the sale or exchange of:
- one immovable residential property, if more than three years have passed between the date of acquisition and the date of sale or exchange;
- up to two immovable properties, as well as agricultural and forestry properties, irrespective of their number, if more than 5 years have passed between the date of acquisition and the date of sale or exchange.
income from the sale or exchange of movable property, with the exception of:
- road, aircraft and water vehicles, if the period between the date of acquisition and the date of sale or exchange is less than one year;
- works of art, collectibles and antiques;
- stocks, shares, compensatory instruments, investment bonds and other financial assets, as well as income from foreign currency trading;
income from disposal of financial instruments;
profit or other source of equity capital in commercial companies distributed in the form of new stocks and shares, as well as profit or other source of equity capital distributed in the form of increases in the nominal value of existing stocks and shares;
the income of the persons compensated in accordance with the legal act from the sale or exchange of compensatory instruments and investment bonds received as compensation;
income from compulsory insurance in Bulgaria or abroad;
income from supplementary voluntary insurance received after acquiring the right to an additional pension; income from investments of technical reserves received under insurance contracts; the income from investments of the assets of the supplementary pension insurance funds, allocated to individual accounts of the insured persons;
interest income on deposits established in a member state of the European Union or in another state party to the Agreement on the European Economic Area:
- banks;
- bank branches.
interest and discounts on Bulgarian state, municipal and corporate bonds, as well as on similar bonds issued under the legislation of another member state of the European Union, or of a state party to the Agreement on the European Economic Area;
interest on non-taxable claims and awards of legal costs;
compensations and other payments in case of moderate and grievous bodily injury, occupational disease or death;
compensations for compulsory expropriation of property for state and municipal needs;
compensations for pecuniary and non-pecuniary damages, excluding compensations for lost profits;
the insurance compensations when an insured event has occurred;
social assistance benefits and supplements received on the basis of the Persons with Disabilities Act, the Child Protection Act, the Family Allowances for Children Act or another legal act, as well as allowances and unemployment benefits received on the basis of a legal act;
aid from organizations with social activity, established by law, and from non-profit legal entities registered to carry out socially beneficial activity;
amounts received under the Family Child Allowances Act, as well as maintenance amounts received by persons entitled under the provisions of the Family Code;
the scholarships received by individuals for their studies at home and abroad;
sums of money and gifts received on the basis of a legal act from donors of blood, blood components and biological products for humanitarian purposes;
monetary and material winnings obtained from participation in gambling games organized with a license issued under the Gambling Act or under the legislation of another Member state of the European Union or a party to the Agreement on the European Economic Area;
the prizes given in the form of an additional game or a material profit of insignificant value from entertainment machines within the meaning of the Gambling Act under the legislation of another Member state of the European Union or a state party to the Agreement on the European Economic Area, as well as the subject winnings of insignificant value from other games of chance, other than those specified in item 20;
the state and national awards granted to artists in the field of culture and sportsmen, the awards to laureates of competitions for projects and programs financed in whole or in part by the National Fund "Culture", the state monetary awards granted for special services to the Bulgarian state and nation, as well as and the awards given to students with outstanding gifts for participation in national and international Olympiads, competitions and contests;
the sums received for business travel and accommodation allowances under legal relations other than employment, when they are at the expense of the contracting authority and are documented in accordance with the current legislation, as well as daily business travel money, but not more than twice the amount determined for the persons under labor relations;
the income received from rent, lease or other remunerative provision for the use of agricultural land;
the remuneration of: members of the staff of diplomatic missions according to the Vienna Convention on Diplomatic Relations; the members of the consulates according to the Vienna Convention on Consular Relations; the employees of interstate and intergovernmental organizations according to the international agreement concluded with the relevant organization, and the family members of the listed persons, insofar as this is provided for in the relevant international agreement;
the income from the sale or exchange of property acquired by inheritance and will, as well as property restituted in accordance with a legal act;
consumer dividends from cooperatives established under the Cooperatives Act;
the funds received under the "Erasmus +" program of the European Union in the field of education, training, youth and sports;
the income from the activity of taxi transport of passengers, carried out by natural persons - drivers, on behalf of a registered carrier, but at their expense, if tax on taxi transport of passengers has been paid for the vehicle with which the activity is carried out in accordance with the Local taxes and fees Act;
the property received by inheritance, will and donation, as well as the property received with restored ownership rights under a legal act;
others specified in the Law.

Income is deemed to be earned on the date of:

payment - in case of payment in cash;
the verification of the account of the recipient of the income or receipt of the check - in case of non-cash payment;
receiving the benefit - for non-monetary income;
the transfer of rights or property - for income from the sale, exchange or other transfer of rights or property for consideration;
any other event specified by law.

Types of taxes

Tax on the total annual tax base

Object of taxation

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

Taxable income by types of income depending on the source:

income from employment relationships - the remuneration and all other payments in money and/or in kind from the employer or at the expense of the employer, with the exception of the income specified in the law;
income from other business activity - the acquired income, reduced by costs of the activity as follows:

with 60 percent - for income from the activities of natural persons registered as farmers, for the production of unprocessed agricultural products, with the exception of income from the production of decorative vegetation;
with 40 percent for: income from the activity of natural persons for the production of processed or unprocessed products from agriculture, forestry, hunting and fishing; copyright and licence royalties; income from the exercise of a craft that is not subject to patent tax under the Local Taxes and Fees Act; income from exercising a free profession as a lawyer;
with 25 percent for income from exercising a free profession, with the exception of income from exercising a free profession as a lawyer, or remuneration from non-employment legal relationships;

income from rent or other remunerative provision for the use of rights or property - the acquired income, reduced by 10 percent of the costs of the activity;
income from the transfer of rights or property - a different approach for individual property/rights, for example, for income from the sale or exchange of immovable property, including limited real rights on such property, the taxable income is determined as the positive difference between the sale price and the price the acquisition of the property is reduced by 10 percent of costs;
income from other sources (under Art. 35) - the gross amount of the acquired income.

Annual tax base

The annual tax base is determined for each source of income separately and represents the taxable income from the relevant source, reduced by the insurance contributions specified in the law.

Total annual tax base

The total annual tax base shall be the sum of the annual tax bases for income from employment relationships, income from other business activities, income from rent or from other consideration for the use of rights or property, income from the transfer of rights or property and income from other sources, reduced by the tax reliefs provided for in the law.

Tax benefits

Tax relief for persons with reduced working capacity
Tax relief for personal contributions for voluntary social security and insurance
Tax relief for personal contributions for retirement insurance
Tax relief for donations
Tax relief for young families
Tax relief for children
Tax relief for disabled children
Tax relief for non-cash payments
Tax relief for improvements and/or repairs to immovable residential property
Tax reliefs for natural persons registered as farmers which applies only after January 1 of the year in which the European Commission has decided that the measure is not State aid or is compatible State aid. If the European Commission rules by April 30, 2024, the tax relief may also apply for 2023.

Tax rate - the tax on the total annual tax base is determined by multiplying the total annual tax base by a tax rate of 10 percent.

Submission deadlines

In advance:
- Monthly - until the 25th of the month following the month in which the tax was withheld or in which the partial payments were made- for income from employment relationships for which the employer is obliged to withhold and pay the tax;
- Quarterly - until the end of the month following the quarter in which the tax was withheld by the payer of the income, an enterprise or a self-insured person, as well as until the end of the month following the quarter of acquisition of the income by the individual, when the payer of the income has no withholding obligation and depositing the tax.

For income, other than income from employment relationships, acquired in the fourth quarter of the tax year, as well as for income from other sources (according to Art. 35), no advance tax shall be paid, except when the person acquiring the income wishes to withhold tax.

Annually:
- until February 25 of the year following the year of acquisition of the income - for tax withheld by an employer under the main employment relationship in connection with the annual equalization of the tax;
- until April 30 of the year following the year of acquisition of the income - in all other cases for tax on the general annual tax base.

Tax on the annual tax base for business activity as a sole trader (ST)

Object of taxation

The income from the business activity of a ST, the income from the business activity of an individual who is a trader within the meaning of the Commercial Law, but is not registered as a ST and the income from the business activity of individuals who are registered as farmers are taxed. Natural persons registered as farmers can choose, by submitting a form tax return, to have their business income taxed on the annual tax base for business income as an ST.

Taxable income

The taxable income is the taxable profit formed under the Corporate Income Tax Act, including the financial result of the transfer of the enterprise to the sole trader without deleting the sole trader from the commercial register. It does not include the accounting financial result generated by activities that are subject to alternative taxes under the Corporate Income Tax Act, which are subject to patent tax under the Local Taxes and Fees Act and tax on passenger taxi transport under the Local taxes and fees Act.

Annual tax base from business activity as a ST

It is determined by reducing the taxable income for the tax year by the contributions that the self-insured person is obliged to make for the tax year at his own expense in accordance with the Social Security Code and the Health Insurance Act, as well as by the mandatory insurance contributions paid abroad contributions that are at the expense of the individual. It is reduced by the tax allowances specified in the law.

Tax rate - 15 percent.

Submission deadlines

In advance - under the terms and the conditions of the Corporate Income Tax Act provided for corporate income tax;
Annually – from March 1 to June 30 of the year following the year of income acquisition.

Tax reliefs when determining the amount of tax on the total annual tax base and the tax on the annual tax base for income from business activity as a ST for:

persons with reduced working capacity of 50 and over 50 percent;
personal contributions for voluntary social security and insurance;
personal contributions for retirement insurance;
donations made;
young families;
children – absolute amount depending on the number of children;
children with 50 and over 50 percent type and degree of disability;
non-cash payments.

According to the introduced sequence for the use of tax reliefs, they are used first from the sum of the annual tax bases (when determining the tax on the total annual tax base) and then from the annual tax base for income from business activity as an ST.

Final Taxes

Object of taxation and tax rate

certain incomes of non-resident persons from a source in Bulgaria, which are not earned through a fixed base in the country - income from the use or disposal of movable and immovable property, copyright and licence royalties, fees for technical services, interest, etc. Tax rate - 10 percent;
income of resident and non-resident persons from supplementary voluntary insurance, voluntary health insurance and from "Life" insurances, as well as some others specified in art. 38 of the income law - 10 or 7 percent;
income from dividends and liquidation shares in favor of resident and non-resident individuals - 5 percent;
the gross amount of acquired taxable monetary and material prizes from games, competitions and contests that are not provided by an employer or contractor. Tax rate – 10 percent;
the gross amount of taxable income acquired by natural persons, not registered as farmers, received in the form of state aid, subsidies and other support from the European Agricultural Guarantee Fund, from the European Rural Development Fund and from the state budget. Tax rate – 10 percent.

Taxable value

The value from which the final tax is determined varies t, depending on the specific source of income. As a rule, the tax is calculated from the gross amount of income. Non-resident natural persons who are residents for tax purposes of EU/EEA Member states may elect to recalculate the final tax for certain incomes by submitting an annual tax return under Art. 50 from PITA.

Submission deadlines

Quarterly - until the end of the month following the quarter of acquisition / accrual of income - for all other income taxes subject to final tax.

Alternative tax for income from collecting wild mushrooms and fruits

Object of taxation and tax amount

Income of natural persons who are not traders within the meaning of the Commercial Law, from the collection of wild mushrooms and fruits, except for those from medicinal plants, is subject to a one-off alternative tax in the amount of BGN 30 for each month during which the activity is carried out.

Submission deadlines

Tax shall be levied by the State-owned enterprises referred to in Article 163, para. 1 of the Forestry Act immediately prior to the issue of a permit for the activity of collecting wild mushrooms and fruits, except those from medicinal plants, for the relevant month and shall be paid by the State-owned enterprises referred to in Article 163 para. 1 of the Forestry Act by the 25th day of the month following the month of its withholding. The tax shall be paid into the state budget at the expense of the competent territorial directorate of the National Revenue Agency under Art. 8 of the Tax and Insurance Procedural Code.

Patent tax

The conditions and procedure for imposing this tax are detailed in the Local Taxes and Fees Act.

Submitting tax returns and other provision of information

Current:
with a tax return under Art. 55 of the PITA - by the enterprises and self-employed persons - payers of income, obliged to withhold and pay taxes according to the law or by the person who acquired the income, when the payer of the income is not obliged to withhold and pay the tax.
Annually:
with a reference under Art. 73, para. 1 of the PITA - from enterprises and self-insured persons - income payers, for paid/accrued income to natural persons during the tax year, excluding income from employment relationships and some other income;
with a reference under Art. 73, para. 6 of the PITA - from employers - for income from employment relationships, as well as information related to the determination of the annual tax base and the annual tax for income from employment relationships of persons whose employer is the employer under the main employment relationship as of December 31 of the tax year;
with an annual tax return under Art. 50 from PITA - from persons who have acquired income.

The annual tax return shall be submitted to the territorial directorate of the National Revenue Agency at the permanent address of the natural person, from January 10 to April 30 of the year following the year of acquisition of the income, with the exception of the cases for persons carrying out business activities as traders within the meaning of the Commercial Law, including a sole trader or natural persons registered as farmers, who chose to have the income from their business activity taxed on the annual tax base, the period for which is from March 1 to June 30 of the year following the year of acquisition of the income.

The annual tax return shall also declares the income subject to patent tax and/or tax on taxi transport of passengers in accordance with the Local Taxes and Fees Act; received and granted loans above a certain amount, as well as shares owned abroad, shareholdings in companies, place of business, a certain base and immovable property. At the request of individuals, non-taxable income and property received by inheritance, will and donation may be declared. An annual tax return is not submitted for income subject to final tax and income from employment relationships only, as well as for non-taxable income.

Tax treaty or other international agreement

In the case of an effective tax treaty or other international agreement to which the Republic of Bulgaria is a party and which contains provisions different from those established in national legislation, the provisions of the treaty/agreement shall apply.

Sanctions

A person who does not indicate or incorrectly indicates data in the tax return, leading to the determination of the tax in a smaller amount or to exemption from tax, shall be charged with a penalty or a pecuniary sanction in the amount of up to BGN 1,000. A person who does not submit in deadline for a tax return shall be charged with a penalty or a pecuniary sanction of up to BGN 500.

A fine or a pecuniary sanction is also imposed in case of: failure to document income, failure to withhold or fail to pay tax on time, failure to provide information or providing it beyond the stipulated time.

In the event of repeated offense, the penalties shall be set in double amount.

According to the provision of Art. 85 of the PITA, offenses of the law are issued by an act of a revenue authority, and penal decrees are issued by the executive director of the National Revenue Agency or by an official authorized by him.

The drafting of the acts to impose an administrative penalty, the issuance, appeal and execution of the penalty decrees shall be carried out in accordance with the Administrative Violations offenses and Penalties Act.