Changes to tax on employee benefits expenses
2022 Changes to tax on employee benefits expenses
After discussing various alternatives for changing or even abolishing the tax on expenses related to the private use of company assets by employees, often referred to as “weekend tax”, the Bulgarian Parliament has finally settled on reducing the tax pursuant to an amendment published in State Gazette No. 17/01.03.2022.
Expenses related to the private use of company assets
The reduced tax rate concerns only in-kind expenses related to the private use of owned or rented company assets by its employees, directors and shareholders who work in the company. The in-kind expenses subject to tax are the accounting expenses corresponding to the private use of mixed-use assets that are exploited both in the business activities of the employer and for the private use of the employees against no consideration. Such
assets normally comprise company cars, immovable property mobile phones, laptops, etc.
The taxable base for the final tax on expenses remains unchanged and continues to refer to the portion of the expenses related to the mixed-use assets that can be allocated to the private use by the personnel. The method of calculating the taxable portion in proportion to e.g. the hours of personal use, the mileage for personal use, or as a fixed percentage also remains the same.
The tax on expenses is levied as a final tax on an annual basis.
New tax rate of 3%
The new tax rate on private use expenses is 3% which is a significant reduction from the previous rate of 10%.
Entry into force of the reduced tax rate
The reduced 3% tax rate on in-kind expenses related to the private use of company assets applies as of 1 January 2022.
Changes related to distribution of food vouchers
The amendments published on 01.03.2022 also concern the distribution of food vouchers to employees which was hampered by the shortage of vouchers after the tax-exempt maximum monthly value of vouchers was increased to BGN 80 per employee. In order to ensure that employees will receive the entire amount of food vouchers that they are entitled to, the law has been changed so that in 2022 vouchers for previous periods may
be distributed to the employees during any of the following months provided that the maximum non-taxable value for any given month is not exceeded.
This Tax Alert has been prepared by DELCHEV & PARTNERS for information purposes only and does not constitute legal advice. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Readers should not act upon this without seeking professional counsel.