December 2020 / Bulgaria

On 8 December 2020, Bulgaria officially implemented the new EU value added tax (VAT) rules concerning distance sales provided in Council Directive (EU) 2017/2455 of 5 December 2017 amending Directive 2006/112/EC and Directive 2009/132/EC regarding certain VAT obligations for supplies of services and distance sales of goods. The new rules for distance sales will be applied as from 1 July 2021. Below is an overview of the main amendments to the VAT Act.

Application of 9% reduced VAT rate for take-away food

Take-away food provided by restaurants will be subject to a reduced 9% VAT rate applicable temporarily for the period from 1 December 2020 until 31 December 2021. Currently, such supplies are subject to the standard 20% VAT rate.

Amendments to the VAT exemption for insurance and re-insurance services

Currently, in order to be eligible for an exemption from VAT, suppliers of insurance and re-insurance services must perform such transactions in accordance with the conditions of the Insurance Code. As from 1 January 2021, the nature of the transactions will be the only criterion for the exemption and, following the amendment, the VAT Act provides that the provision of insurance and re-insurance services, including related services provided by insurance brokers and agents, is exempt from VAT.

Tax relief for persons using approved software

Persons using approved software for the management of sales on commercial sites will benefit from faster VAT refunds. The official text of the amendments is available here (in Bulgarian only).

On 8 December 2020, Bulgaria officially extended the deadline for the payment of the personal income tax (PIT) due and the submission of the PIT returns of persons performing economic activity as traders, as well as registered agricultural producers, on a permanent basis. Consequently, as from the year 2021, the deadline for the submission of PIT returns and the payment of the PIT due will be permanently extended from 30 April to 30 June of the year the PIT returns and payments refer to.

The permanent extension of the PIT deadlines, as well as a number of other amendments to the PIT Act have been promulgated in the State Gazette. Below is a summary of the main changes.

New tax relief for improvements/repair of immovable property

As from 1 January 2021, a tax relief will be introduced for improvements/repairs of an immovable property. Expenses of up to BGN 2,000 (approximately EUR 1,000) for repairs and/or improvements of residential property will be deductible from the annual PIT base of individuals who are tax residents in an EU/EEA country, provided that the following conditions are met:

• the residential property is in Bulgaria;
• the taxable person is the owner or co-owner of the residential property;
• the improvements and/or repairs are performed by EU/EEA residents;
• the residential property is not included in the enterprise of a person who is performing economic activity as a trader under the Commercial Act;
• the taxable person possesses a document (with the required requisites under the Accountancy Act) for the paid labour in relation to the performed improvements and/or repairs of the residential property; and
• the taxable person and the person that performed the repair are not related parties.

Documentation simplifications

The documentation requirements provided in the PIT Act in certain cases of transactions between individuals will be simplified.

The amendments to the PIT Act are included in the additional provisions of the amendments to the Value Added Tax (VAT) Act. The document is available here (in Bulgarian only).

On 8 December 2020, Bulgaria officially extended the deadline for the submission of annual corporate income tax (CIT) returns and payment of the CIT due. Below is an overview of the main changes.

Extended deadline

The deadline for the submission of annual CIT returns and payment of the CIT due has been extended from 31 March to 30 June of the year following that in which the CIT returns refer to. The extension of the deadline was initially introduced as a temporary COVID-19 measure in 2020 regarding tax returns referring to year 2019. It will now be a permanent extension.

CIT and withholding tax (WHT) exemption for profits from transactions with shares performed at regulated markets outside the European Union

As from 1 January 2021, profits and losses from transactions with shares performed at markets equivalent to regulated markets outside the European Union (approved by the European Commission in accordance with Directive 2014/65/EC) will not be recognized for CIT purposes and will not be subject to WHT in Bulgaria. Currently, this exemption is applied only in the cases in which such transactions are performed on EU/EEA regulated markets.

Higher exemption threshold for one-off taxation of food vouchers

As from 1 January 2021, social expenses of eligible persons incurred?? for food vouchers of up to BGN 80 (currently, up to BGN 60) per hired person per month will be exempt from one-off taxation.

Amendments to the rules for advance CIT instalments

As from 2021, the deadline for submission of the declaration for the increase/decrease in the amount of advance CIT instalments will be 15 November of the year in which the instalments are due. Default interest will be due only if the amount of the annual CIT due exceeds the amounts of the advance CIT instalments paid by 25% (currently, by 20%).

Also, the advance monthly CIT instalments for December will be due no later than 1 December of the same year (currently, 15 December). The same deadline, i.e. 1 December instead of 15 December, will apply for the payment of CIT instalments for the third quarter (for persons obliged to pay quarterly CIT instalments).

The forecast advance CIT instalments for a year will have to be reported in a new declaration, which should be submitted to the National Revenue Agency between 1 March and 15 April of the year they refer to. Currently, this information is reported in the annual CIT return for the previous year. In addition, the obligation to pay the advance CIT instalments is currently determined based on the net sales revenue from the previous year, whereas, as from 2021, it will be determined based on the net sales revenue for the year before the previous year.

Accelerated tax depreciation for approved software

Persons using approved software for sales management on commercial sites will be able to apply a 100% annual tax depreciation rate in terms of such software, as well as for computers and mobile phones on which such software is installed.

Extension of the period for the application of tax relief for manufacturing activities in municipalities with high unemployment rates

The period for the application of the tax relief for manufacturing activities in municipalities with high unemployment rates has been extended until the end of 2023 (initially, it was until the end of 2020).

The official text of the amendments to the CIT Act is included in the additional provisions of the amendments to the VAT Act and is available here (in Bulgarian only).