In Focus

Amendments to the Individuals’ Income Taxes Act

January 3, 2023

Amendments to the Individuals’ Income Taxes Act

In State Gazette, issue 102 of 23 December 2022 a Law on Amendment and Supplementation of the Individuals’ Income Taxes Act (IITA) was promulgated. The main amendments to the tax law are related to:

1. Tax relieves for children

The provisions of articles 22c and 22d of IITA regarding tax relieves for children and for children with disabilities are supplemented and it is expressly regulated that the tax relives can be applied also in cases when the eligible taxable persons (parent, foster parent, close individual or relative) have passed away in the tax year and under the condition that the other parent, foster parent, close individual or relative will not apply the same tax relief for the respective tax year. The tax relieves can be used through submission of annual tax return for the deceased individual by the statutory heirs, heirs under will or by their legal representatives. The reimbursed amounts as a result of the application of the tax relieves for children and children with disabilities shall not be subject to enforceable collection. The amendment is effective from 1 January 2023 whereas the tax relieves in the cases mentioned above can be used also for 2022.

A Transitional Provision has been adopted in the law, effective from 23 December 2022 by means of which the way for correct determination (by the employer or by the taxable person in his/her annual tax return under Art. 50 IITA) of the annual tax due on employment income has been regulated. The advance tax withheld and paid during the year shall be decreased by the amounts reimbursed by the employer pursuant to the applied tax relief for children for year 2022.

2. Scope of the incomes included in the income statements issued by employers under Art. 45, para 1 IITA and in the report under Art. 73, para 6 IITA

By means of the adopted amendments the scope of various income included in the income statements issued by the employers under Art. 45, para 1 IITA as per the request of employees for confirming the employment income paid and amounts of tax and statutory social security contributions withheld, has been extended. Employers shall also include in the income statements tax exempt income mentioned in art. 24, para 2 IITA with some exceptions of income provided in kind (such as free food, special working clothing, expenses on social benefits taxed under the Corporate Income Taxation Act, expenses on social benefits up to BGN 60 monthly per secured individual for voluntary social insurance, voluntary health insurance and/or Life insurance, etc.) The new legal requirements shall be applied by employers also for income paid in 2022.   

Accordingly, in the report under art. 73, para 6 IITA in which employers are obliged to provide information to NRA about employment income paid during the year to hired individuals and for the withheld tax and social security contributions, employers shall also include therein data about the paid tax exempt income to the individuals, except for the expressly mentioned income provided in kind. The amendment is applicable also for income paid in 2022.

3. Scope of the income included in the report under Art. 73, para 1 IITA

In the report under Art. 73, para 1 IITA in which payers of income – enterprises and self-ensured individuals shall provide information to NRA on various non-employment income paid to individuals during the year and withheld tax and social security contributions, shall be added also data about the paid tax exempt income, irrespective of their amount (for example, tax exempt income from sale of real estate or movable property, tax exempt sale of financial instruments, inherited property, etc.). The requirement is preserved for the payers of income to report gambling profits paid to individuals only if the annual amount paid to an individual exceeds BGN 5,000. The amendment is effective from 1 January 2023 and is not applicable in respect to income paid in 2022.

4. Opportunity for declaring income subject to one-off tax

By means of the amendment of Art. 50a IITA an opportunity is provided to tax residents to declare voluntarily in their annual tax return under art. 50 IITA not only tax exempt income but also income subject to one-off tax under art. 38 IITA which is generally not subject to compulsory declaring in the annual tax return (for example, income from dividends and liquidation proceeds from sources in Bulgaria, income from additional voluntary social security, voluntary health insurance and Life insurance, etc.). The amendment is effective from 1 January 2023.

This material is not exhaustive, but rather has general information nature and does not constitute specific advice or consultation. Should you have questions, do not hesitate to contact us at tel. + 359 2 9433700,
fax + 359 2 9433707, e-mail: office@afa.bg or at the following address: 1504 Sofia, 38, Oborishte Street.

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