Bulgaria

Personal deductions

Charitable contributions

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 6,000 in case of one child.
• BGN 12,000 in case of two children.
• BGN 18,000 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 of BGN 12,000 per a disabled child are also introduced and are applicable under certain specific conditions.

A new opportunity is introduced with regards to the tax relief for children. Individuals may use the tax relief for children in advance by reducing the monthly taxable base for July and October with certain amounts by BGN 500 per month per child (BGN 1,000 per month per disabled child) for employment income, as follows:

• For the month of July, the monthly taxable base may be reduced by the sum of the amounts for the months January to June.
• For the month of October, the monthly taxable base may be reduced by the sum of the amounts for the months of July to September.
• For the months of October to December, the tax relief is used in calculating the annual tax base.

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

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.

Business deductions

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.
• As of 1 January 2023, the statutory expenses (deductible from the taxable base) for lawyers will be increased from 25% to 40% (i.e. 60% of their gross income will be subject to taxation).
• 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.