Tax Alert Act Amending and Complementing the Personal Income Tax Act



  • determination of the annual tax base

The annual tax base for income derived from sole trader economic activity is determined by decreasing the taxable income by the social security and health insurance contributions made at the person’s expenses, including those paid abroad.  The annual tax base determined this way shall be decreased by:

(1) the additional voluntary social security installments amounting to a total of 10% of the annual tax base as well as by additional health insurance and “Life” insurance contributions amounting to a total of 10% of the annual tax base;

(2) the difference between BGN 7920 and the amount of the tax relief for persons with reduced working capacity which has been used;

(3) the difference between the personal length of security contributions upon retirement made during the year and the amount of the tax relief for personal length of security contributions upon retirement which has been used.

III. FINAL TAX

  1. Extending the Scope of Income from Bulgarian source

The scope of income from Bulgarian source set forth in Art. 8, para. 6 of the Personal Income Tax Act has been extended to comprise the income from scholarships for studies in Bulgaria and abroad and the social security and insurance income.

  1. Calculation of Final Tax

The provisions regarding the tax base for calculation of the final tax have been specified.   The tax base for calculation of the final tax on the income from real estate transfer and from the installments received under a leasing agreement which expressly provides for transfer of ownership over real estate shall be the positive difference between the selling price and the documentarily evidenced acquisition price less 10% expenses.  The tax base for calculation of the final tax on the income from transfer of financial assets shall be the positive difference between the selling price and the documentarily evidenced acquisition price.

IV. TAX RATES

The progressive scale of employment income taxation has been replaced by proportional taxation (flat tax) under a common rate of 10% regardless of the income amount.

The tax rates on income from the different sources are summarized below:

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V. EXCLUSION OF THE PATENT TAXATION FROM THE PERSONAL INCOME TAX ACT SCOPE

The taxation of individuals and Sole Traders’ income from patent activities has been excluded from the Personal Income Tax Act scope and shall be from now on provided for under the Local Taxes and Fees Act.  As a result, when calculating the taxable income under the Personal Income Tax Act the income subject to patent tax, would not be included.

VI. TAX RETURN SUBMISSION

  1. Annual Tax Return Submission

(a) tax return submission by Bulgarian tax residents for income from dividends and liquidation proceeds from a foreign source

New!  Bulgarian tax residents shall be obliged to file an annual tax return if they have derived income from dividends and liquidation proceeds from a foreign source during the year.

(b) tax return submission by foreign tax residents

Foreign tax residents would file an annual tax return regarding income acquired during the year and subject to aggregate annual tax base tax and/or patent tax.