At the end of 2017 the following important changes were introduced into the Bulgarian tax legislation:

I. Corporate Income Tax Act (CITA)

1. Economically inactive undertakings shall no longer have the obligation to declare corporate tax (Art. 92, Para. 4 CITA)

- By Act for Amendment and Supplement to the Tax Insurance Procedure Code (AASTIPC), promulgated in SG, issue 92 of November 17, 2017 (§ 13 of the Transitional and Final Provisions of the Act):

It provides for the non-performing taxable persons in 2017 within the meaning of the Accountancy Act not to submit an annual tax return. Such are the undertakings pursuant to item 30 of §1 of the Additional Provisions of the Accountancy Act for which the following conditions are simultaneously present:

a) no transactions under Art. 1, Para. 1 of the Commercial Act were made during the reporting period;

b) no conditions arose during the reporting period to acknowledge income pursuant to the Accountancy Act and the applicable accounting standards;

c) did not perform activity connected to investments, production and/or sales;

d) did not purchase goods and services for the purpose of gaining income and profit.

It is explicitly provided that the abolishment of the obligation to declare corporate tax for non-performing persons also applies to filing the annual tax return and the annual activity report for 2017.

2. Editorial amendment regarding the regime of unacknowledged expenses from shortages and wastage (Art. 28, Para. 4 CITA)

- By Act for Amendment and Supplement to the Value Added Tax Act (AASVATA), promulgated in SG, issue 97 of December 5, 2017 (§ 44 of the Transitional and Final Provisions of the Act):

The amendment is aimed at coordinating the provisions of CITA with the changes introduced in VATA upon tax credit adjustment from the beginning of 2017. Referring to Art. 79, Para. 1 of VATA, but not to Art. 79, Para. 3 in connection with transformation with unacknowledged expense for VAT in case of wastage and shortage of assets, the editorial amendment is in force as of January 1, 2018. Yet, it should be noted that non-acknowledgement of expense for VAT, in case of unacknowledged wastage and shortages of assets is valid for 2017 as well on the grounds of the general provision of Art. 26, item 3 of CITA.

3. Change in connection with the official establishment of jurisdiction of persons representing operators of food vouchers (Art. 209, Para. 2, item 5, letter “a” of CITA)

- By Act for Supplement to the Act Restricting Administrative Regulation and Administrative Control over Economic Activity (ASARARACEA), promulgated in SG, issue 103 of 28.12.2017, in force as of 01.01.2018 (§ 40 of the Transitional and Final Provisions of the Act).

The change refers to the provision regarding the scope of persons that are entitled to perform activity as operators of food vouchers. The supplemented provision regulates that the circumstance regarding the jurisdiction of persons representing operators of food vouchers is established sua ponte. However, it shall apply only to persons who are Bulgarian citizens.

II. Income Taxes on Natural Persons Act (ITNPA)

The changes are introduced by Act for Amendment and Supplement of the Value Added Tax Act (AASVATA), promulgated in SG, issue 97 of December 5, 2017 (§ 45 of the Transitional and Final Provisions of the Act) and may be divided into three main groups:

1. Changes related to the obligation for submission of annual tax returns

- The regime for proving the payment of tax abroad is relieved

The amendment to the provision of Art. 50, Para. 5 of ITNPA is aimed at helping local natural persons who have income from sources abroad. The Act provides for natural persons to provide evidence, without specifying the type of such evidence. That expands the range of documents certifying the amount of the tax and mandatory social security contributions paid abroad, as hitherto only certificates issued by the competent authorities of another state were accepted.

The change affects:

- local natural persons receiving income from sources abroad and for their taxation, pursuant to the applicable treaty for the avoidance of double taxation, the tax credit methods shall apply, or a tax credit shall be used on the grounds of Art. 76 of ITNPA;

- persons who have paid abroad the mandatory social security contributions and are entitled to deduct them upon formation of the respective annual tax base pursuant to ITNPA.

For persons who have gained income from a source abroad and in their taxation, pursuant to the applicable tax treaty, the “progressive exemption” method for the avoidance of double taxation shall apply, local natural persons shall still not be obliged to present documentary evidence of the amount of tax paid abroad, as explicitly specified in Art. 50, Para. 6 of ITNPA.

- An option to declare non-taxable income

The new provision of Art. 50a of ITNPA shall apply only optionally to natural persons who wish to declare their non-taxable income in Appendix No. 13 to the annual tax return. If they choose to do it, the declaring is only informative, and they are not required to enclose any documentary evidence.

It should be noted, however, that if the persons have only received income from labour relations and non-taxable income, on principle they do not have the obligation to submit an annual tax return under Art. 50 of ITNPA. If natural persons decide to use the new option under Art. 50a of ITNPA to declare their non-taxable income gained during the year in their annual tax returns, they shall also specify the income received throughout the year under labour relations, and respectively enclose an official note issued by the employer.

That is so, because upon filing an annual tax return for the respective year, they have to fill in all income gained throughout the year, as well as any other circumstances existing during that same year.

- Changes in the use of tax deduction for supplement payment under the annual tax return  

According to the new rules, the deduction of 5% on the tax for supplement payment under the annual tax return, but not more than 500 BGN, may be used by persons who fulfill all of the following conditions:

-submit by electronic means their annual tax returns by 31 January of the following year;

-have no public obligations subject to execution at the time of submitting the declaration;

-the tax for supplement payment is paid by 31 January.

2. Change in the rules for filing the tax return

According to the newly created Para. 2 in Art. 56 of ITNPA, undertakings – payers of income shall submit the declaration only by electronic means.

It shall be noted that pursuant to Art. 55, Para. 1 of ITNPA both undertakings and self-insuring persons – payers of income, that are required to deduct and pay taxes pursuant to this Act, shall submit the required declaration for the due taxes. The obligation for submission of the declaration only by electronic means, however, shall apply only to undertakings – payers of income. With respect to self-insuring persons, there is no change in the manner of submitting the declaration – it could be provided to NRA both by electronic means and on paper.

The declaration may be submitted by electronic means through NRA’s electronic service for remote access, which requires the use of а qualified electronic signature (QES). It is possible to submit the declaration as an attachment to an email sent to any of the official electronic addresses of TD/offices of NRA specified on its website: www.nap.bg. In these cases, it is mandatory for the email with the attached declaration to be signed with a QES.

3. Change in the deadline for submission of statements of income paid to natural persons throughout the year

Pursuant to the amendment introduced in Art. 73, Para. 4 of ITNPA the deadline for submission of statements of income paid to natural persons throughout the year changes from April 30 to March 15. These statements are issued by undertakings and self-insuring persons – payers of income and are submitted to the relevant TD of NRA depending on the place of registration of the payer of the income.

It is important to note that any statements of income paid during the tax year to more than 5 natural persons shall only be submitted as electronic files, the format and submission process thereof being specified in an order of the Executive Director of NRA. In such cases, statements may either be submitted online or at the relevant office of NRA, but mandatorily on electronic carriers. If income was paid to less than 5 natural persons during the year, it is admissible that the information be submitted on paper.

Any changes introduced by special transitional provisions shall also apply to taxation and declaring of the 2017 income.

III. Local Taxes and Fees Act (LTFA)

1. Changes introduced by Act for Amendment and Supplement to the Tax Insurance Procedure Code (AASTIPC), promulgated in SG, issue 92 of November 17, 2017 (§ 12 of the Transitional and Final Provisions of the Act):

- A new way to verify payment of the tax during annual roadworthiness tests of motor vehicles

A duly paid tax remains one of the requirements for a vehicle to be classified as roadworthy during regular roadworthiness tests. It is stipulated that, in addition to being verified upon presentation of a document either issued or certified by the relevant municipality, the payment of the due tax to be also subjected to an additional check in the automated data exchange system.

- Fee exemption for the purposes of the complex administrative servicing

Previous amendments made to the Tax Insurance Procedure Code stipulate that for the purposes of the complex administrative servicing the competent authorities and other authorized persons shall be entitled to request and receive online sua ponte by NRA, the Customs Agency and the municipalities information on the presence or absence of liabilities of persons. The newly-introduced Para. 2 of Art. 115 of LTFA explicitly reads that no fees shall be collected for the issuance of any certificates or the authentication of documents for the purposes of the complex administrative servicing.

2. Changes introduced by Act for Amendment and Supplement to the Value Added Tax Act (AASVATA), promulgated in SG, issue 97 of December 5, 2017 (§ 50 of the Transitional and Final Provisions of the Act)

- The payment of taxi taxes has been refined, thus securing absolute compliance between the Road Transport Act and LTFA.

- All types of trailers shall be levied only in conjunction with the relevant motor vehicles of the N category and the term “Specialized trailers for carriage of loads of abnormal weights or dimensions” is cancelled in Art. 55 of LTFA.

- Electric vehicles of the L5е, L6е and L7е categories as defined in Art. 4 of Regulation (EU) No 168/2013 shall be exempt from vehicle tax.

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