In Focus

Additional amendments to the Corporate Income Taxation Act, the Individuals’Income Taxes Act and the Local Taxes and Charges Act for year 2022

March 8, 2022

Additional  amendments to the Corporate Income Taxation Act, the Individuals’Income Taxes Act and the Local Taxes and Charges Act for year 2022, including amendments adopted with the Law on the State Budget of the Republic of Bulgaria for year 2022

 

In the State Gazette, issue 17 dated 1 March 2022 the Law on Amendment and Supplementation of the Corporate Income Taxation Act (LASCITA) was promulgated by means of which additional amendments to the tax law were adopted. With the Transitional and Conclusive Provisions of the LASCITA are amended some of the provisions of the Individuals’ Income Taxes Act (IITA), the Local Taxes and Charges Act (LTCA), the Law on the Amendment and Supplementation of the Tax and Social Security Proceedings Code and other laws. The amendments are effective retroactively from 1 January 2022 with some exceptions commented below.

 

In the State Gazette, issue 18 dated 4 March 2022 the Law on the State Budget of the Republic of Bulgaria for year 2022 (LSBRB for year 2022) was promulgated in which provisions are included regulating the order for application of some of the provisions of CITA, IITA and LTCA, and we have included some comments on the most significant of them below.

 

The amendments in the tax laws are related mainly to the reduction of the tax and administrative burdens of the tax liable persons under CITA and LTCA, to changes in the conditions for the application of the tax relieves for children under IITA and with the introduction of free use of municipal kindergartens and nurseries according to the amended LTCA.

 

The main amendments to the legal provisions could be summarized as follows:

I. Amendments to CITA

1.1. Reduced tax rate of the one-off tax due on expenses in kind

 

By means of the amendment of Art. 216 of CITA a reduced tax rate is introduced for taxation of the expenses made in kind and related to the simultaneous use of companies’ assets for business and personal needs. Until now these expenses were subject to 10% one-off annual tax when the tax liable persons have chosen the application of this tax regime (the alternative opportunity is preserved for a choice to be made the mentioned expenses to be treated as individuals’ taxable income subject to income tax under IITA). Since 1 January 2022 the applicable one-off tax rate becomes 3%.

 

1.2. Food vouchers

 

A new provision is added to the Transitional and Conclusive Provisions of CITA regulating that in 2022 employers will be able to provide food vouchers determined for a definite month in any next month of 2022 and this will not lead to arising liability for one-off tax on the respective expenses, under the condition that the total amount of the provided vouchers in the respective month is up to the tax exempt limit established by CITA, as well as this limit shall not be exceeded in any of the months of year 2022 for which vouchers were provided per hired individual. For example, vouchers for February 2022 could be provided physically in April this year but the value of the vouchers shall not exceed BGN 200 per employee for any of the months of 2022. The amendment becomes effective retroactively as of 1 January 2022.

 

In § 1, subparagraphs 2 – 8 of the Transitional and Conclusive Provisions of the LSBRB for year 2022, special provisions regarding food vouchers are included, the most important of which are:

 

• In 2022 tax exempt from taxation with one-off tax on expenditures due under CITA, will be expenses on social benefits made by employers when providing food vouchers to hired individuals at amount up to BGN 200 per month per individual (by obeying the conditions of Art. 209, para 1, items 1-3 of CITA). In case the so determined monthly limit is exceeded, the excess amounts will be subject to taxation by annual one-off tax on expenditures.

 

• Food vouchers provided in 2022 (including the one issued by operators under individual quotas and provided in 2022 before the promulgation of the LSBRB in State Gazette) can be used for the payment also of domestic supplies of electricity, heat energy, gas and water, as well as for activities performed by cultural organizations under the Law on the Protection and Development of Culture and for showing films under the Law on the Film Industry. Operators of vouchers shall provide to employers and users lists of the commercial sites in which the issued vouchers will be accepted.

II. Amendments to IITA

 

2.1. Interest income on deposits opened in banks and in the branches of banks established in EU Member State or in a country of the European Economic Area Agreement (EEA)

 

Since 1 April 2022 tax exempt is interest income derived by individuals on deposits opened in banks and in the branches of banks established in EU Member State or in another country of the EEA Agreement (new item 8 of Art. 13, para 1 of IITA). Until now the received interest income by tax resident individuals was subject to taxation by one-off tax at the rate of 8% under Art. 38, para 13 of IITA.

 

In connection with the adopted amendment were repealed Art. 38, para 13, Art. 11, para 5, Art. 46, para 4 of IITA and other legal provisions related to the no longer applicable tax regime for taxation of interest income.

 

The payers of interest income will be obliged to submit data to NRA regarding the paid incomes under Art. 73 of IITA, in the cases in which the annual amount of the paid income to an individual exceeds BGN 5,000 (according to the amended Art. 73, para 1, item 4 of IITA).

 

A new definition for “deposit” is introduced in IITA which refers to the definition provided in § 1, item 1 of the Law on the Guaranteed Bank Deposits (amended item 58 of the Additional Provisions of IITA).

 

2.2. Tax relieves for children

Amended and supplemented are the provisions of Art. 22c, para 7 and Art. 22d, para 5 of IITA, regulating the tax relieves for children and children with disabilities, whereas the new moment is that the tax relieves could be applied including in the year in which the child has passed away.

 

The amendment is effective from 1 January 2022 but according to the adopted transitory provision of LASCITA it will be applicable also when declaring taxable incomes by individuals for year 2021.

 

 

In § 1 of the LSBRB for year 2022 is regulated that the increased amounts of the tax relieves for children and for children with disabilities which were applicable for year 2021, could be utilized also in 2022, namely from the annual aggregate taxable base on which income tax is due could be deducted:

• BGN 4,500 – for 1 child under the age of 18;
• BGN 9,000 – for 2 children under the age of 18;
• BGN 13,500 – for 3 and more children under the age of 18.

 

In year 2022 the tax relief of BGN 9,000 for children with disabilities could also be applied.

 

III. Amendments to LTCA

 

3.1. The charges for kindergartens and nurseries are repealed

 

From 1 April 2022 the charges collected by municipalities from parents and guardians of children are no more due for:

• The use of kindergartens and nurseries (amended Art. 6, para 1, letter “c” and repealed 81 LTCA) and
• The activities related to the provision of food to children in the obligatory pre-school education which are not financed by the country (repealed Art. 6, para 1, letter “d” of LCTA).

 

In connection with the above amendment, respectively are amended some provisions of the Law on the Pre-school and School Education and the Law on Health, which also become effective from 1 April 2022.

 

3.2. Reduced tax on passenger taxi transport for year 2022

 

In Art. 107 of the LSBRB for year 2022 is stipulated that the tax due on passenger taxi transport for 2022 is reduced, as the tax liable persons shall pay for this year annual tax determined by the respective municipality and decreased by the difference between the annual tax due on passenger taxi transport determined for 2021 and the minimum annual amount of the tax due as per LTCA (equal to BGN 300), but the tax payable shall not be less than BGN 300.

 

 

This material is not exhaustive, it is only of general nature and does not represent a specific advice or consultation. Should any additional questions arise, please do not hesitate to contact us at tel.: 02/943 37 00, fax: 02/943 37 07, е-mail: office@afa.bg or at: 38, Oborishte Str., Sofia 1504.

Go to In Brief: All