18.10.2021
WHEN AM I ENTITLED TO TAX RELIEF?
Tax relief is a legal and guaranteed opportunity to pay less tax or defer payment of part of the tax you owe. You can use a reduction of the due tax for:
- Reduced ability to work;
- Voluntary insurance;
- Insurance length of service upon retirement;
- Donations;
- Young families;
- Children;
- Disabled children;
- Cashless payments;
- Improvements and/or repairs of real estate.
The state voluntarily gives up part of its revenues in favor of taxpayers in order to encourage them to assume part of its obligations to them. For example, part of its obligation to provide security and protection to citizens.
So, if you decide to take extra care of your security and protection in a way and in forms that the state considers important to support, this will lead to a reduction in your income tax or a delay in its payment.
Among the most common and accessible forms of such protection are life insurance and supplementary pension insurance in a voluntary fund (supplementary voluntary pension insurance - SVPI).
However, the condition for using tax relief is that you do not have enforceable public obligations as of the date of filing the annual tax return.
When you have used in full the tax relief for donations, children and children with disabilities through your employer under the main employment contract and you have submitted the necessary documents to the employer, do not attach the documents again to the annual tax return.
Reduced ability to work
The tax relief for reduced working capacity is for persons with 50 and over 50 per cent reduced working capacity (Article 18 of the Personal Income Tax Act). It gives you the opportunity to reduce your tax base by BGN 7,920. You can use the tax relief including for the year of incapacity for work, as well as for the year of expiration of the validity of the expert decision in which the reduced working capacity is determined.
Voluntary insurance
The tax relief for personal contributions for voluntary insurance is up to 10% of the tax base for personal contributions for additional voluntary insurance paid during the year and up to 10% of the tax base for personal contributions for voluntary health insurance and life insurance contributions paid during the year. (Article 19 of the Personal Income Tax Act).
Taxable income from additional voluntary insurance, voluntary health insurance and life insurance is subject to final tax.
Insurance length of service upon retirement
The tax relief for personal contributions for insurance length of service upon retirement reduces your tax base with the insurance contributions paid during the year at your expense for the purchase of insurance length of service upon retirement under Art. 9a of the Social Insurance Code (Article 20 of the Personal Income Tax Act).
Donations
The tax relief for donations allows a reduction of the tax base by a total of up to 65% (Article 22 of the Personal Income Tax Act).
Up to 5% for donations for:
- health or medical establishments;
- social services for residential care, according to the Law on Social Services, as well as the Agency for Social Assistance and the Social Protection Fund under the Minister of Labor and Social Policy;
- nurseries, kindergartens, schools, colleges and academies;
- budget enterprises, religions registered in the country, specialized enterprises or cooperatives of people with disabilities and the Agency for People with Disabilities;
- The Bulgarian Red Cross;
- cultural institutes, community centers, as well as for the purposes of cultural, educational or scientific exchange under an international agreement to which the Republic of Bulgaria is a party;
- non-profit legal entities registered in the Central Register of non-profit legal entities for carrying out public benefit activities;
- Energy Efficiency and Renewables Fund;
- communes for treatment of drug addicts;
- the United Nations Children's Fund (UNICEF);
- identical or similar to the persons described above established in another Member State of the European Union or in the European Economic Area.
Up to 15% for cultural donations.
Up to 50% for donations to the National Health Insurance Fund - for activities related to the treatment of children, financed by transfers from the budget of the Ministry of Health and the Center for Assisted Reproduction.
Attach copies of documents certifying the status of the person receiving the donation and that the subject of the donation has been received to the annual tax return. When you use relief for donations made for the benefit of persons in another Member State of the European Union or the European Economic Area, you shall attach to the declaration an official legalized document certifying the status of the recipient of the donation, issued or certified by a competent authority. his translation into Bulgarian by a sworn translator.
Young families
The tax relief for young families allows a reduction of the tax base with the interest paid on the first BGN 100,000 of a mortgage loan for the purchase of a home (Article 22a of the Personal Income Tax Act). You must meet the following conditions, which you declare with the annual tax return (Appendix №10):
- the mortgage loan agreement is concluded by you as the taxable person and / or by a spouse with whom you have a civil marriage;
- at least one of the spouses has not reached the age of 35 as of the date of concluding the mortgage loan agreement;
- The mortgaged home is the only home for your family during the tax year.
The relief can be used by local and foreign natural persons established for tax purposes in a Member State of the European Union or in a country of the European Economic Area. The relief cannot be used for the income from economic activity as a sole trader.
You attach the following documents to the annual tax return:
- Document certifying the amount of interest payments made during the year on the first BGN 100,000 of the principal of the mortgage loan for the purchase of a home. It is issued by the lending bank.
- When the creditor bank is established for tax purposes in a Member State of the European Union or in a country of the European Economic Area, legalized translation into Bulgarian of the document certifying the amount of interest payments made during the year. The translation must have been done by a sworn translator.
- When the declarant is a foreign natural person established for tax purposes in another Member State of the European Union or a country of the European Economic Area, official legalized documents certifying the existence of the conditions under Art. 22a, para. 1 of the Personal Income Tax Act and their translation into Bulgarian, performed by a sworn translator. They are issued by the competent authorities of the respective foreign country.
When during the tax year both spouses have used the tax relief for young families, each of the persons owes the part of the tax corresponding to the amount of the used benefit.
Children
The tax relief for children allows a reduction of the tax base (Article 22c of the Personal Income Tax Act) by:
- BGN 200 - for one minor child;
- BGN 400 - for two minor children;
- BGN 600 - for three or more minor children.
The child for whom you will use the tax relief must by December 31 of the tax year:
- is a resident of a Member State of the European Union or of a country in the European Economic Area;
- has not reached the age of majority (the relief is used including for the years in which the child was born and has reached the age of majority);
- is not accommodated in a social or integrated health and social service for resident care at full state support.
As of December 31 of the tax year, you must be a local natural person, sole trader or foreign natural person established for tax purposes in a Member State of the European Union or in a country of the European Economic Area and be:
- a parent who is not deprived of parental rights and the child is not placed outside the family and no guardianship or trusteeship has been established for him / her; or
- a parent who has not been granted the exercise of parental rights in cases of divorce; or
- guardian or trustee; or
- a member of the families of relatives or relatives, when the child is placed for a period of not less than 6 months with relatives or friends within the meaning of the Child Protection Act; or
- foster parent, when the child is placed for long-term upbringing in a foster family within the meaning of the Child Protection Act.
You attach the following documents to the annual tax return:
- Declaration for use of tax relief for children under Art. 22c, para. 8 of the Personal Income Tax Act (sample 2005).
- When you use the tax relief as a foreign natural person established for tax purposes in a Member State of the European Union or in a country of the European Economic Area, copies of official documents proving the existence of the conditions for using the tax relief for children and their translation in Bulgarian, performed by a sworn translator.
The tax relief shall be used up to the amount of the annual tax bases under Art. 17 of the Personal Income Tax Act and provided that the other parent, respectively the other foster parent, relative or relative, will not use the reduction for the respective tax year.
When the amount of the tax relief is higher than the amount of the annual tax bases, the difference can be used by the other parent, respectively by the other foster parent, relative or relative, by submitting an annual tax return.
The tax relief can also be used by a parent who has not been granted the exercise of parental rights in cases of divorce, when the above-mentioned conditions for using the tax relief are met for him.
The tax relief is used including for the years in which the child was born and has reached the age of majority.
When the full amount of the tax relief for children is used by more than one person, each of the persons owes the part of the tax corresponding to the amount of the used relief.
Disabled children
The tax relief for children with disabilities allows a reduction of the tax base by BGN 2,000 for raising a child with a 50 and over 50 percent degree of disability (Article 22d of the Personal Income Tax Act).
The child for whom you will use the tax relief must by December 31 of the tax year:
- is a resident of a Member State of the European Union or of the European Economic Area;
- as of January 1 of the tax year the child has not reached the age of majority;
- is not accommodated in a social or integrated health and social service for resident care at full state support;
- there is an effective decision for damage of a competent authority (the relief is used, including for the year during which the type and degree of damage have been established, and for the year of expiration of the validity of the decision).
The person who will benefit from the tax relief must be a local natural person, sole trader or foreign natural person established for tax purposes in a Member State of the European Union or in a country of the European Economic Area as of December 31 of the tax year and must be:
- a parent who is not deprived of parental rights and the child is not placed outside the family and no guardianship or trusteeship has been established for him / her; or
- a parent who has not been granted the exercise of parental rights in cases of divorce; or
- guardian or trustee; or
- a member of the families of relatives or relatives, when the child is placed for a period of not less than 6 months with relatives or friends within the meaning of the Child Protection Act; or
- foster parent, when the child is placed for long-term upbringing in a foster family within the meaning of the Child Protection Act.
You attach the following documents to the annual tax return:
- Declaration for use of tax relief for children with disabilities under Art. 22c, para. 7 of the Personal Income Tax Act (sample 2006).
- When the tax relief is used by a foreign natural person established for tax purposes in another Member State of the European Union or in a country of the European Economic Area, copies of official documents proving the existence of the conditions for using the tax relief for children with disabilities, and their translation into Bulgarian by a sworn translator.
The tax relief shall be used up to the amount of the annual tax bases under Art. 17 of the Personal Income Tax Act and provided that the other parent, respectively the other adoptive parent, relative or relative, will not use the reduction for the respective tax year.
When the amount of the tax relief is higher than the amount of the annual tax bases under Art. 17 of the Personal Income Tax Act, the difference can be used by the other parent, respectively by the other foster parent, relative or relative, by submitting an annual tax return.
The tax relief can also be used by a parent who has not been granted the exercise of parental rights in cases of divorce, when the above-mentioned conditions for using the tax relief are met for him.
When the full amount of the tax relief for children with disabilities is used by more than one person, each of the persons owes the part of the tax corresponding to the amount of the used benefit.
Cashless payments
The tax relief for non-cash payments allows a reduction of the tax due by 1%, but not more than BGN 500 (Article 22e of the Personal Income Tax Act).
You can use the relief if you are an individual, under the following conditions:
- You have during the year income subject to tax on the total annual tax base;
- 100% of this income you received by bank transfer;
- You have made non-cash payments of 80% or more of this income.
You do not attach documents to the annual tax return. All you need to do is tick the appropriate box in Appendix №10 of the annual tax return.
The relief cannot be used for the income from economic activity as a sole trader.
Improvements and/or repairs of real estate
The tax relief allows domestic and foreign individuals established for tax purposes in a Member State of the European Union or a country of the European Economic Area to deduct from the tax base the labor payments made in 2021 in connection with improvements and/or repairs of one real estate in a total amount of up to BGN 2,000, under the following conditions:
- the real estate is on the territory of the Republic of Bulgaria;
- the natural person is the owner or co-owner of the real estate;
- the improvements and/or repairs have been carried out by natural or legal persons resident in a Member State of the European Union or in another country of the European Economic Area;
- the immovable residential property is not included in the activity of the enterprise, in case the person carries out economic activity as a trader within the meaning of the Commercial Law;
- the natural person has a document for the paid work in connection with the implementation of the improvements and / or the repair of the residential property. The document must be accompanied by a document for payment (fiscal receipt, when there is an obligation to issue it, a receipt, bank or other document);
- the natural person is not a person related to the person who performed the repair.
When the immovable residential property is owned by more than one natural person, the relief may be used by each co-owner, provided that the total amount of the relief used by all co-owners for the property does not exceed the maximum amount of BGN 2,000.
When a larger total amount of the tax relief for a tax year has been used in violation, each of the persons who has used the relief shall owe the part of the tax corresponding to the amount of the used relief.
The relief cannot be used for the income from economic activity as a sole trader.
