Donations to certain organisations are deductible up to the defined limits (i.e. the total amount of donations may not exceed 65% of the total annual taxable base of the individual).
Social security contributions
Mandatory social security contributions in Bulgaria or another EU/EEA country borne by individuals are tax deductible in full (in the presence of supporting documentation).
Health and life insurance contributions
Voluntary pension and unemployment contributions, as well as certain health insurance and life insurance contributions, are deductible up to certain limits.
Mortgage interest expenses
Young married couples (including foreign individual tax residents of an EU/EEA member state) may deduct from their annual taxable income the interest on mortgage loans for the first BGN 100,000 of the loan, under certain conditions.
Children and disabled children
Tax incentives can be utilised both by local and EU/EEA established individuals. The tax incentives for children provide for reduction of the total annual tax base calculated under the PITA of the parent in the following amounts:
- BGN 4,500 in case of one child.
- BGN 9,000 in case of two children.
- BGN 13,500 in case of three and more children.
The conditions for this tax relief require that the child is underage, not placed in a specialised care institution as at 31 December of the fiscal year, and is a resident of an EU/EEA member state as at the same date. This relief can be used by a parent who is not deprived of parental rights, a guardian, a family member or close relative where the child is placed, or a foster parent. Only one parent (or foster parent or close relative) may benefit from this new tax relief. If a double benefit is determined after а review, the amount of the relief has to be returned to the authorities.
Tax incentives for disabled children are also introduced and are applicable under certain specific conditions.
Tax relief for individuals who use non-cash methods for payment of their expenses
The requirements for tax relief for individuals who use non-cash methods for payment of their expenses are that the individual has received taxable income during the tax year, 100% of the taxable income to be received is by bank transfers, at least 80% of the expenses of the individual are to be paid by non-cash methods, and the individual must have no outstanding public liabilities at the date of filing of the annual tax return. The tax relief is 1% from the total tax liability in Bulgaria for the tax year, but capped to BGN 500.
All tax reliefs above may be used only in case the individual has no outstanding public liabilities at the date of filing of the annual tax return.
Tax relief for improvements and/or repairs made to a real estate property located in Bulgaria
A new tax relief for improvements and/or repairs made to a real estate property in Bulgaria is introduced. Both local and EU/EEA established individuals can benefit. The tax relief provides for reduction of the total annual tax base calculated under the PITA with the payments made during the year for work done in relation to improvements and/or repair of a real estate up to BGN 2,000.
The tax relief is applicable under certain specific conditions.
Individuals earning certain types of income can deduct pre-estimated statutory expenses in calculating their taxable income:
- Freelancers, civil contractors, notary officers, physicians, dentists, or other private practitioners may deduct 25% from their gross income. VAT registration may be required after achieving certain turnover.
- Royalties are subject to 40% statutory deductions.
- Rental income is subject to 10% statutory deductions.
- Income of agricultural producers (including tobacco producers) is subject to 60% statutory deductions.