Annual Personal Income Tax Return under Art. 50 of the Bulgarian Personal Income Tax Act – Electronic or Paper Submission?

Filing the annual personal income tax return under Art. 50 of the Bulgarian Personal Income Tax Act is an obligation for many individuals and raises an important question each year – is it better to submit the declaration electronically or on paper. Both options are legally acceptable, but they differ significantly in terms of completion, risk of errors, and overall convenience.

When submitting electronically, the tax return is completed through the portal of the National Revenue Agency (NRA) using a Personal Identification Code (PIC) or a qualified electronic signature. In this case, part of the data is pre-filled automatically – for example income from employment, civil contracts, rent, or other sources reported by employers and payers. The system performs checks and supports calculations, which significantly reduces the likelihood of technical errors. This makes the electronic option faster, more secure, and more convenient for most individuals. An additional advantage is the possibility to benefit from a 5% discount on the tax due, if the return is submitted and the tax is paid by March 31.

Submitting the declaration on paper remains an alternative for individuals who do not have a PIC or electronic signature, or who prefer personal service. In this case, the declaration is submitted at an NRA office or sent by post with a return receipt. Unlike electronic submission, all data must be completed manually. There is no automatic data population, no real-time validation, and no automatic calculations. This means that the risk of errors is higher, especially in more complex cases involving different types of income. In addition, the 5% discount is not applicable when filing on paper.

Regardless of the chosen method, one key principle always applies – the responsibility for the accuracy of the declared data lies entirely with the individual submitting the return. Even when filing electronically, the pre-filled data must be carefully reviewed. In practice, there are often cases where income from abroad, from other individuals, or from additional activities is missing because it has not been reported to the NRA. When filing on paper, this risk is even higher, as all data is entered manually.

The most common mistakes include omitted income, incorrect selection of annexes, duplication of income when having more than one employer, and failure to apply available tax reliefs. In paper submissions, these are often combined with calculation errors and technical omissions such as missing signatures or incomplete personal data.

The deadline for submitting the annual tax return is April 30, with the possibility of one correction until September 30 of the same year. This allows for correction of mistakes, but does not replace the need for careful and accurate completion from the outset.

In conclusion, electronic filing is generally the more efficient, secure, and cost-effective option, while paper submission requires greater attention and preparation. Regardless of the method chosen, the key to a correctly submitted tax return lies in the proper identification and accurate reporting of all taxable income.

For additional services and professional assistance with the preparation and submission of the annual personal income tax return under Art. 50 of the Bulgarian Personal Income Tax Act, you can rely on the team of Accounting Firm KONTADOR. We will ensure that everything is prepared accurately, optimized, and submitted on time, helping you avoid errors and pay exactly what is due, without unnecessary risks.

INCOME TYPE CODES UNDER ARTICLE 73 OF THE BULGARIAN PERSONAL INCOME TAX ACT – A PRACTICAL GUIDE

The income type code nomenclature is a key element in the correct reporting of individuals’ income to the Bulgarian National Revenue Agency. These codes are used when preparing the annual statement under Article 73 of the Personal Income Tax Act (PITA), as well as for annual personal income tax returns, and they directly affect the applicable tax treatment.

Selecting an incorrect income code is not a minor technical issue. It may lead to inconsistencies between submitted data, requests for corrections, inquiries from the tax authorities, and potential penalties. Therefore, the correct application of income type codes is essential.

1. Income Subject to Taxation on the Annual Tax Base

Income from Economic Activity and Non-Employment Relationships (Codes 301 – 30714)

This category includes the most common types of income earned by individuals outside employment relationships.

Code 301 applies to income from activities as a registered agricultural producer for the production of unprocessed agricultural products, excluding decorative plants.

Codes 302 and 303 cover income from processed or unprocessed agricultural products, as well as income from forestry, hunting, and fisheries.

Code 304 is used for copyright and licensing remuneration, including income from the sale of scientific, cultural, or artistic works by their authors.

Code 305 applies to income from craft activities not subject to patent tax.

Code 306 is used for income earned from exercising a liberal profession.

Of particular practical importance are codes 3071 – 30714, which apply to income from non-employment relationships, categorized by type of service. These include financial and insurance intermediation, consultancy services, accounting and legal services, IT services, transport, construction, repairs, education, healthcare, and other services.

For example:

• consultancy services under a civil contract are reported using code 3073;
• accounting and legal services are reported using code 3074;
• when the activity does not clearly fall into a specific category, code 30714 – other non-employment relationships is used.

1. Income from Rent and Granting of Rights (Codes 401 – 403)

Code 401 is used for income from renting out immovable property where no transfer of ownership is provided.

Code 402 applies to income from renting movable property.

Code 403 is used for remuneration under franchise, factoring, and other agreements for granting rights for use.

III. Income from Other Sources under Article 35 of the PITA (Codes 601 – 606)

This group includes:

• compensation for lost profits and penalties;
• cash and non-cash prizes from games and competitions;
• interest income;
• dividends from cooperatives;
• income from exercising inherited intellectual property rights;
• other income not classified under previous categories.

1. Income from the Transfer of Rights or Property (Codes 501 – 509)

This section includes income from the sale or exchange of immovable and movable property, financial assets, shares, equity interests, foreign currency transactions, and leasing arrangements with explicit transfer of ownership.

A common mistake is confusing taxable income from the sale of property with income that is exempt from taxation, which makes careful classification particularly important.

1. Income Subject to Final Withholding Tax under Chapter Six of the PITA (Codes 801 – 821)

These types of income are subject to final withholding tax and are not included in the individual’s annual tax base.

They include:

• rental income;
• dividends and liquidation proceeds;
• interest income;
• copyright and licensing fees;
• remuneration for management and control;
• income from the sale of immovable property where final taxation applies.

1. Non-Taxable Income Reportable When Exceeding BGN 5,000 Annually (Codes 901 – 907)

Under Article 73, paragraph 1, item 4 of the PITA, certain non-taxable income must still be reported if its annual amount exceeds BGN 5,000. Such income includes:

• income from financial instruments;
• income from supplementary voluntary pension schemes;
• interest from government and municipal bonds;
• winnings from licensed gambling activities;
• income from rent or lease of agricultural land.

Common Mistakes in Applying Income Type Codes

The most frequent errors include:

• selecting a code based on assumption rather than the actual nature of the income;
• confusing liberal professions with non-employment relationships;
• using an incorrect code for rental income;
• discrepancies between the Article 73 statement and the annual tax return.

Conclusion

Income type codes are not a formality but a fundamental element of proper tax reporting. Choosing the correct code ensures accurate reporting to the tax authorities, prevents unnecessary corrections, and avoids administrative complications. When there is uncertainty regarding the applicable code, consulting a professional accountant is strongly recommended to ensure lawful and accurate income reporting.

Amendments to the VAT Act as of 01.01.2026 – N

ew Regime for Small Enterprises

On 30 December 2025, the Act amending and supplementing the Bulgarian VAT Act was promulgated in the State Gazette, issue No. 115. The amendments entered into force on 1 January 2026.

Through these changes, Directive (EU) 2020/285 is transposed into Bulgarian legislation, introducing a new special regime for small enterprises (SME regime).

The amendments are substantial and affect almost all persons not registered for VAT, including:

• a new mandatory VAT registration threshold expressed in euro;
  • a new method for determining annual turnover;
  • introduction of two regimes for small enterprises;
  • changes in the deadlines and the method of monitoring turnover.

Below is a structured overview of the main amendments.

1. Registration threshold and annual turnover
   1. New mandatory VAT registration threshold

As of 1 January 2026, three key changes apply with regard to mandatory VAT registration under Article 96 of the VAT Act.

1.1. Turnover is now monitored on a calendar-year basis

Until now, turnover was monitored based on the last 12 consecutive months (a rolling period).

As of 2026, this changes as follows:

• turnover is monitored for the calendar year from 1 January to 31 December;
  • however, monitoring is performed on a daily basis rather than monthly.

In practice, this requires continuous tracking of revenues from the very beginning of the year.

1.2. The threshold is now set in euro – EUR 51,130

The previous threshold in Bulgarian leva is replaced by a threshold of EUR 51,130.

An extremely important aspect, highlighted by the National Revenue Agency in its latest guidance, concerns the method for determining turnover for the year 2025.

Although turnover is calculated for a past period, the new rules under Article 168v of the VAT Act must be applied.

This means that:

• supplies which under the previous regime were excluded from turnover (for example certain real estate transactions or financial services when they are not incidental);
  • may now be included when determining whether the EUR 51,130 threshold has been exceeded.

It is therefore strongly recommended that the structure of revenues for 2025 be carefully reviewed in light of the new definition of “ancillary supplies”, in order to avoid missing an obligation for VAT registration.

1.3. New deadline for filing the VAT registration application – 7 days from exceeding the threshold

A significant change also applies to the registration deadline.

Previous regime: application submitted by the 7th day of the following month.
New regime: a 7-day deadline starting from the actual date on which the threshold is exceeded.

Example:
If the threshold is exceeded on 5 March, the VAT registration application must be submitted no later than 12 March.

This makes daily turnover monitoring mandatory.

1. Invoicing between 01.01.2026 and receipt of the registration act

A practical question often arises regarding the documentation of sales performed in the period between 1 January and the receipt of the VAT registration act.

According to the guidance of the National Revenue Agency:

• all supplies carried out during this period;
  • must be invoiced with VAT or previously issued documents must be corrected accordingly;
  • within a 5-day period from the date of service of the VAT registration act.

This deadline is extremely important, as it:

• preserves the right to deduct input VAT for customers;
  • prevents the imposition of penalties;
  • ensures correct VAT reporting for the transitional period.

The amendments to the VAT Act as of 2026 require increased attention, timely turnover analysis and accurate assessment from the very beginning of the year in order to avoid omissions and sanctions.

For questions related to the application of the new VAT regimes, VAT registration or the need for professional consultation, you may contact Accounting Firm KONTADOR, where you will receive clear guidance, reliable support and an individual approach in line with the applicable legislation.

Introduction

The topic of introducing the euro in Bulgaria raises many questions among both individuals and businesses. Common concerns include whether tax rates will change, whether new obligations to the National Revenue Agency will arise, and how the transition to the euro will affect accounting and financial reporting.

In practice, it is important to clearly distinguish between actual changes and widely spread misconceptions that often create unnecessary concern.

Will taxes change with the introduction of the euro

The introduction of the euro does not automatically lead to changes in the tax system. Bulgarian tax legislation remains in force in its current form, with the only change being the currency in which amounts are calculated.

Corporate income tax, personal income tax and value added tax rates remain unchanged. The transition to the euro does not mean the introduction of new taxes or an increase in existing ones.

What will actually change

The main change concerns the currency used to express all accounting and tax-related values. This includes accounting records, annual financial statements, tax declarations and liabilities to the National Revenue Agency.

All amounts will be converted using the officially fixed exchange rate established by law. The conversion will not be carried out at discretion, but according to clear and mandatory rules.

How the euro will affect companies

For commercial entities, the introduction of the euro requires thorough preparation. This includes proper conversion of accounting balances, assets and liabilities, as well as adaptation of accounting and payroll systems.

During the transition period, dual display of amounts is expected in order to ensure transparency and consumer protection. For businesses, this requires increased attention when documenting and reporting transactions.

Incorrect conversion or improper rounding may lead to discrepancies that could later become subject to inspections by the revenue authorities.

Salaries, social security contributions and the euro

After the official introduction of the euro, salaries and insurable income will be calculated in euros. This includes basic salaries, additional remuneration, seniority bonuses, as well as all due social security contributions.

The submission of Declarations Form 1 and Form 6 will continue under the existing procedure, but the amounts will be stated in euros. Rounding rules will be regulated by law and will not depend on the employer’s discretion.

The euro and VAT

For VAT-registered entities, the transition to the euro means issuing invoices in the new currency, as well as maintaining VAT ledgers and submitting VAT returns in euros.

The VAT mechanism, tax rates and statutory deadlines remain unchanged. Only the currency expression of the amounts will differ.

Conclusion

The introduction of the euro in Bulgaria represents primarily a technical and organizational change, rather than a change in the tax burden. For both businesses and individuals, relying on accurate information and professional accounting support is essential.

Timely preparation and proper application of currency conversion rules ensure a smooth transition and help avoid future administrative issues.

For questions related to the introduction of the euro, taxation and accounting reporting, the team of Accounting Firm KONTADOR is available to provide professional consultation.

What employers, employees and self-insured persons need to know

As of 1 January 2026, significant changes enter into force in Bulgaria regarding the minimum wage and the application of social security rules in the context of the country’s transition to the euro.

With the promulgation of the so-called Extended Budget Act, published in the State Gazette No. 113 of 23.12.2025, the main financial and social security parameters applicable from the beginning of 2026 are regulated until the adoption of:

• the State Social Security Budget Act, and
• the National Health Insurance Fund Budget Act.

During this transitional period — for up to three months — most existing rules remain unchanged, with the key exception being the increase of the national minimum wage, now expressed in euro.

What is the Minimum Wage

The minimum wage represents the statutory minimum amount of basic salary applicable to employment under:

• full-time working hours;
• 8 hours per day;
• 5 working days per week.

It is uniform throughout the entire country and constitutes basic remuneration only.

All additional payments — including remuneration for length of service and professional experience (“seniority bonus”) — are added on top of the basic salary.

It is important to emphasize that additional payments cannot compensate for a basic salary set below the minimum wage.

Can the basic salary be below the minimum wage?

The answer is unequivocal: no.

The basic salary stipulated in an employment contract must not be lower than the statutory minimum wage, regardless of:

• the employee’s seniority percentage; or
• whether the total gross salary would exceed the minimum wage after supplements.

While gross remuneration may differ between employees, the basic salary itself must always meet or exceed the minimum wage threshold.

Minimum Wage as of 01.01.2026

As of 1 January 2026, the national minimum wage has been increased:

• from BGN 1,077 to BGN 1,213
• increase: 12.63%
• after conversion: EUR 620.20

\u27a1 This is the new mandatory minimum basic salary for full-time employment.

Difference between Minimum Wage and Minimum Insurable Income

In practice, these two concepts are often confused, although they serve different legal purposes.

Minimum Wage:

• applies under labour law;
• determines the lowest permissible basic salary.

Minimum Insurable Income (MII):

• applies under social security law;
• represents the minimum income base on which social security contributions are due;
• depends on the employer’s economic activity and the employee’s qualification group.

Minimum Insurable Income as of 01.01.2026

The minimum insurable income thresholds remain frozen at their levels as of 31.12.2025.

After conversion into euro using standard mathematical rounding:

• Minimum Insurable Income = EUR 550.66

For many economic activities, this amount applies across all qualification columns.

Important practical rule

Social security contributions are calculated on the higher of:

• the agreed remuneration; or
• the minimum insurable income.

Since the minimum wage (EUR 620.20) exceeds the frozen minimum insurable income (EUR 550.66), social security contributions in practice are calculated on EUR 620.20.

Self-insured persons in 2026

The following amounts remain applicable:

• minimum insurable income: EUR 550.66
• maximum insurable income: EUR 2,111.64

These thresholds apply equally to:

• self-insured persons;
• registered farmers;
• tobacco producers.

Health insurance contributions

Unpaid leave

For periods of unpaid leave, health insurance contributions are due on:

• 50% of the minimum insurable income for self-insured persons
• contribution base: EUR 275.33

Sick leave, maternity and childcare

Health insurance contributions are paid by the employer on:

• EUR 550.66

Unemployed persons

Monthly health insurance contribution:

• EUR 22.03

Social security contribution rates

No changes apply to:

• contribution rates for the Pension Fund;
• General Sickness and Maternity Fund;
• Unemployment Fund;
• Health Insurance Fund;
• Occupational Accident and Disease Fund (rates between 0.4% and 1.1%);
• zero contribution rate for the Guaranteed Receivables Fund.

Food vouchers

The non-taxable monthly amount remains:

• EUR 102.26 per employee.

Unpaid leave and insurable service

Up to 30 working days of unpaid leave per calendar year are recognized as insurable service.

Benefits and sick leave in 2026

The existing rules remain unchanged:

• temporary incapacity for work — calculation based on 18 months;
• unemployment benefits — 24 months;
• maternity and childbirth — 24 months.

Maternity:

• paid maternity leave period: 410 days;
• second year maternity benefit: EUR 398.81.

Unemployment benefits:

• entitlement requires at least 12 months of unemployment insurance within the last 18 months;
• minimum daily benefit: EUR 9.20;
• maximum daily benefit: EUR 54.78.

Conclusion

As of 01.01.2026, Bulgaria’s social security system operates under a transitional regime in which:

• the minimum wage has increased and is denominated in euro;
• minimum insurable income thresholds remain temporarily frozen;
• contributions are effectively calculated on the higher amount — the minimum wage;
• contribution rates and benefit rules remain unchanged.

These rules are essential for accurate payroll planning and cost forecasting for 2026, both for employers and for self-insured persons.

If you require reliable guidance on payroll, social security contributions or employment-related matters in 2026, the team of Accounting Firm KONTADOR is available to support you with professional advice and practical payroll solutions.

Еffective 1 January 2026

Discontinuation of the reverse charge mechanism for supplies of goods accompanied by assembly/installation

As of the beginning of 2026, the VAT treatment of supplies of goods where the assembly or installation on the territory of Bulgaria is performed by the supplier or at their expense is amended.

For suppliers established in an EU Member State, the reverse charge mechanism will no longer apply.
Instead, where such EU-based suppliers carry out supplies of goods with assembly/installation in Bulgaria, they will be required to register for VAT in Bulgaria before performing their first taxable supply.

For suppliers established outside the EU, the rules remain unchanged — the obligation to register for Bulgarian VAT continues to apply.

The amendment requires businesses to review existing contractual arrangements with foreign suppliers to ensure correct VAT treatment after 1 January 2026.

Introduction of new regimes for small enterprises

The amendments to the VAT Act transpose the EU rules regarding VAT simplifications for small enterprises and introduce two regimes:

Small enterprises regime applicable in Bulgaria

The existing exemption from VAT registration is retained, with several key modifications:

• The registration threshold is set at EUR 51,130 per calendar year, rather than on a rolling basis.
• When calculating turnover, certain exempt supplies are now included, including transactions related to real estate.
• Persons who exceed the new threshold during 2025 must submit a VAT registration application by 8 January 2026.
•  

EU small enterprises regime

A new option is introduced allowing small enterprises established in one EU Member State to benefit from VAT exemption on supplies carried out in other Member States under specific conditions:

• Registration is made by submitting an application specifying the Member States in which the exemption will apply.
• Businesses operating under this regime are not entitled to input VAT deduction on goods and services acquired for making such exempt supplies.
• A new form of VAT identification is introduced, whereby the VAT number will end with the suffix “EX”.
• To qualify, the total annual turnover within the EU must not exceed EUR 100,000.

Additional amendments

The law also introduces corresponding revisions and technical adjustments to other provisions of the VAT Act in order to align national legislation with the new rules.

For more questions, the team of Accounting Firm KONTADOR is available to provide professional consultation.

Over the past few months, the same question has repeatedly arisen in our conversations with clients and colleagues:
once payments are made in euros, bank accounts are converted to euros, and accounting software operates in euros, in which currency should annual financial statements be prepared and filed?

The confusion is entirely understandable. That is why in the following lines we address the issue strictly from the perspective of applicable legislation and its practical implementation.

The Euro and Annual Financial Statements: what is actually filed and in which currency

The introduction of the euro leads to changes in payments and current accounting records, but it does not automatically change the currency of annual financial statements for already closed reporting periods.

The law clearly distinguishes between:

• current accounting records; and
• the annual financial statement as a report for a completed reporting period.

The key rule determining the currency of the annual financial statement

The decisive provision is contained in the Law on the Introduction of the Euro in the Republic of Bulgaria.

Article 48, paragraph 8

“Annual financial statements shall be prepared in the currency that is the official currency of the Republic of Bulgaria at the end of the reporting period, and the comparative data for the previous reporting period shall be presented in the same currency.”

This rule is unequivocal.
What matters is not when the report is prepared, but when the reporting period ends.

Why the 2025 annual financial statements are filed in thousands of Bulgarian leva

The end of the reporting period is decisive

The reporting period for the 2025 annual financial statements ends on 31 December 2025.

As of that date, the official currency of the Republic of Bulgaria is the Bulgarian lev.

This follows directly from:

Article 4

“As from the date of the introduction of the euro … the currency of the Republic of Bulgaria shall be the euro.”

Until that date, the official currency remains the lev.

Filing in 2026 does not change the currency

A common misconception is that because the 2025 annual financial statements are filed in 2026, they should be prepared in euros.

The law does not allow such an interpretation.

Article 48, paragraph 8 (again)

“… at the end of the reporting period.”

Not at the end of the year of filing.
Not at the date of preparation.
But as of 31 December 2025.

\u2192 The annual financial statements for 2025 must be prepared and filed in Bulgarian leva, in thousands of leva.

What changes as of the date of the euro’s introduction

The law clearly regulates what happens after the introduction of the euro.

Article 48, paragraph 7

“As from the date of the introduction of the euro in the Republic of Bulgaria, current accounting documentation and accounting records shall be carried out in euros…”

This means that:

• current transactions are recorded in euros;
• accounting systems operate in euros;
• account balances are converted.

However, this provision does not override paragraph 8 and does not change the currency of annual financial statements for past periods.

The bank account is in euros, but the 2025 financial statements are in leva – how does this work in practice?

This is one of the most frequently asked practical questions.

Example:

• in March 2026, the company’s bank account shows a balance of EUR 600;
• the accountant is preparing the annual financial statements for 2025.

The question is: can this euro balance be directly used in the financial statements?

The answer is no.

Why the euro balance cannot be used

The euro balance results from the automatic conversion on 1 January 2026.

Article 28, paragraph 1

“On the date of the introduction of the euro … credit institutions shall convert all lev-denominated balances on their clients’ accounts into euros…”

This conversion:

• has no retroactive effect;
• does not change the accounting values as of 31 December 2025.

What is explicitly excluded from automatic conversion

Article 47, paragraph 3

“The requirement for automatic conversion shall not apply to values in leva contained in financial and other reports or statements…”

Therefore:

• reporting data for 2025 remain in leva;
• they are not replaced by euro values;
• they are not reconverted from euros to leva for the purposes of annual financial statements.

What the accountant actually does when preparing the 2025 financial statements

• Determines the balance as of 31 December 2025 in leva,
  based on bank statements or accounting records.
• Records this lev amount in the 2025 annual financial statements.
• The fact that the account is already in euros at the time of preparation is irrelevant.

Yes, in practice this means manual entry of the lev amount in the financial statements – and this is fully compliant with the law.

Comparative data in the first financial statements prepared in euros

The first annual financial statements prepared in euros will be those for 2026.

Article 48, paragraphs 7 and 8 (combined)

• the 2026 financial statements are prepared in euros;
• the data for 2025 are presented converted into euros solely for comparability purposes.

The original 2025 annual financial statements:

• remain in leva;
• are not amended;
• are not resubmitted.

A common mistake that will occur frequently

The law does not allow:

• choosing the currency at discretion;
• filing the 2025 annual financial statements in euros;
• “aligning” them with current euro-based accounting.

Such actions directly contradict Article 48, paragraph 8.

Conclusion

The introduction of the euro changes the future of accounting, but it does not change the reporting rules for completed periods.
Annual financial statements are always prepared in the official currency at the end of the reporting period.

Therefore:

• the 2025 annual financial statements are filed in thousands of Bulgarian leva, even if prepared in 2026;
• euro bank balances do not replace reporting values in leva;
• the first annual financial statements in euros will be those for 2026.

KONTADOR Accounting Firm
Expert solutions in times of change.

From January 1, 2026, Bulgaria will join the Eurozone, meaning the euro will become the country’s official currency. This change affects everyone – citizens, businesses, and organizations – and requires preparation to ensure a smooth transition to the new system.

Key Dates and Periods

• Introduction of the Euro: Expected on January 1, 2026.
• Dual Price Display: During this period, prices will be shown in both lev and euro, lasting approximately 18 months.
• Dual Circulation of Currencies: From January 1 to January 31, 2026, payments can be made in either lev or euro. After this period, the lev will no longer be a legal tender.

How Currency Conversion Will Work

All amounts in lev will be converted to euro at the fixed rate of 1 euro = 1.95583 BGN.

• For regular purchases, amounts are rounded to two decimal places.
• For salaries, pensions, and social benefits, rounding is always done upward at the third decimal place.
• Incorrect application of the conversion rate may result in fines – up to 10,000 BGN for individuals and up to 14,000 BGN for companies in case of repeated violations.

Contracts and Bank Accounts

• All contracts stated in lev will automatically be converted to euro without the need for amendments.
• Bank and electronic accounts will be converted automatically and free of charge, with the option to merge lev and euro accounts within two months.

How to Exchange Cash

• Bulgarian National Bank (BNB): Unlimited and free exchange of lev to euro.
• Banks: Free exchange during the first six months; after one year, the service may be discontinued.
• Bulgarian Posts: Free exchange up to 1,000 BGN per day for six months in locations without bank branches.

Prices and Payments

• Prices cannot be raised without justification.
• During the dual price display period, amounts will be shown in both lev and euro on labels, receipts, and advertisements.
• When paying in cash, change will be returned in euro, or in lev if euro is not available.
• In a single transaction, no more than 50 lev coins can be used.

From January 1, 2026, the minimum wage in Bulgaria will be BGN 1,213 (€620.20), marking a 12.6% increase or BGN 136 compared to the current level. This is outlined in a draft ordinance by the Council of Ministers, published for public consultation by the Ministry of Labor and Social Policy (MLSP).

The minimum hourly wage will also increase to BGN 7.31 (€3.74) per hour.

The higher minimum wage will affect approximately 600,000 workers, including:

• 456,700 employees on full-time contracts earning the minimum wage;
• around 83,000 personal assistants caring for children and adults with disabilities;
• nearly 30,000 workers in state-funded social services;
• employees under government employment programs and professional foster families.
•  

The new rate is set in accordance with the Labor Code, which stipulates that the minimum wage should be 50% of the average gross wage over the last four quarters – a method consistent with the EU Directive on adequate minimum wages.

Expected effects include reducing in-work poverty, increasing purchasing power, and boosting consumption. The proposed BGN 1,213 aligns with forecasts for GDP growth and labor market developments in Bulgaria.

The draft ordinance will be discussed at the National Tripartite Cooperation Council before being submitted to the Council of Ministers for approval.

The National Social Security Institute (NSI) is updating its services, and by the end of the year, all online services will be available only through the Unified Portal for Electronic Services (UPES).

The new structure of the site places the portal at the center of electronic services. It already includes a user guide and information on the correspondence between the old and new services.

Gradually, the old electronic services will be phased out, and all inquiries and applications will be made only through the EPEU.

The portal, introduced in March 2024, unites all NSSI platforms and offers:

• access to an electronic insurance file with data on insurance, benefits and pensions;

• requesting services online with a single entry of email and authentication via PIN or QES;

• submission of data by insurers through integrated electronic systems and registers.

Anyone can check whether there are overdue public debts to the NRA – most often taxes, social security contributions and fines – and, if necessary, pay them through the electronic Statement of debts with the possibility of payment. It shows the amount of the debt, the accrued interest and the stage of collection.

Legal interest is charged for debts not paid on time – the basic interest rate of the Bulgarian National Bank plus 10 points. Interest on interest and fines is not due. The amount can be calculated using the NRA interest calculator.

Unpaid debts are collected in accordance with the Tax and Social Security Procedure Code through various methods of enforcement, and if necessary, precautionary measures are also imposed.

Upon request, the NRA issues a certificate of the presence or absence of debts, which shows all unpaid amounts with an expired deadline for voluntary payment.

Before taking enforcement action, the NRA notifies debtors by email, phone, mail or through their employer. Therefore, it is important that the contact details are up-to-date. This way, timely action can be taken and sanctions and garnishments can be avoided.

If the obligation has been paid but has not been reflected, it usually takes technological time (up to 3 days) to process it. If it still does not appear, you should contact the NRA office or submit a written notification with a payment document.

1. Meal vouchers on electronic media as social benefits

• Social benefits provided in kind include meal vouchers on electronic media (Art. 204, para. 1, item 2, letter “v” of the Corporate Tax Act – CTA).
• Vouchers are not electronic money, but payment instruments usable only for meals in restaurants, eateries, or stores (Art. 2, para. 1, item 11, letter “v” of the Payment Services and Payment Systems Act – PSPSA).

2. Tax exemption on expenses

• Up to BGN 200 per month per employee, vouchers are tax-free (Art. 209a CTA), provided that:

1. The employee’s base monthly salary is not lower than the average monthly salary for the previous 3 months.
2. The employer has no outstanding public obligations at the end of the month.
3. Vouchers are provided through an operator authorized by the Minister of Finance.

• Expenses exceeding this limit are subject to 10% tax.

3. Requirement for equal availability

• Vouchers must be available to all employees, including those under management or control contracts.
• Main approaches:

1. Fixed monthly amount for all employees.
2. Based on worked days/hours, with the same voucher value per day/hour.
3. Mixed approach – fixed part + part proportional to worked days, maximum BGN 200/month.

• For newly hired or terminated employees:
• Vouchers can be provided proportionally to the employment period within the month.
• Vouchers already loaded after termination are not returned (Art. 40, para. 8, Ordinance No. 7).

4. Choice between different social benefits

• If employees can choose between meal vouchers, sports cards, or health insurance:
• The right of choice must be clearly documented.
• The benefit amounts must be comparable.
• Equal accessibility is considered fulfilled if everyone has the same access to choose.

5. Vouchers for temporary staff

• A company providing temporary work is considered the employer under the Labor Code, but the entity liable for the tax treatment of vouchers is the company that accounts for them as social expenses.

On 25.07.2025, the National Revenue Agency (NRA) published an Order from the executive director under Art. 71k, para. 4 of the Tax-Insurance Procedure Code (TIPC), which establishes the format and procedure for submitting a standard audit file for tax purposes (Standard Audit File for Tax - SAF-T).

At the end of March 2025, changes were made to the Tax-Insurance Procedure Code, introducing mandatory SAF-T reporting in Bulgaria. The detailed requirements for the format and submission procedure of the new file were anticipated and were realised with an order published by the Executive Director of the National Revenue Agency on 25 July 2025.

The technical documentation regulates the procedure for submitting the new SAF-T report, its format, the nomenclatures for standardising the submitted information, as well as the associated validation rules. Additionally, this order dated 25.07.2025 includes three sample XML files (monthly, annual, and upon request) and provides some additional guidance regarding data submission in certain specific situations such as identifying accounting errors; for deliveries for which, according to the VAT Act, the issuance of an invoice or protocol is not mandatory; for purchases related to consumable expenses such as office supplies, utilities, and others; when reporting imports and intra-Community supplies.

The main points in the law are:

• Double designation period:

It begins on August 8, 2025 and lasts for one year. During this period, prices must be announced simultaneously in levs and euros, and they are intended to be written clearly, legibly and in the same font.

• Currency conversion:

The conversion from levs to euros is carried out using the fixed exchange rate set by the European Union and the rounding rules set out in Regulation (EC) No. 1103/97 are applied.

• Obligations for traders:

Merchants have an obligation to announce prices in both currencies, provide conversion information to customers, and comply with rounding rules.

• Control and sanctions:

The Consumer Protection Commission (CPC), the National Revenue Agency (NRA), and the Financial Supervision Commission (FSC) have the authority to request information and conduct inspections, and regulators can impose sanctions for violations. Initially, however, regulators will not impose sanctions for some of the potential violations, such as unjustified price increases, to give businesses time to adapt.

• Exceptions to dual labeling:

Some exceptions to dual price display are introduced, such as the selling price of fuels, the price on labels issued by electronic scales, and the price displayed on vending machines and self-service systems.

• Price publishing:

The CPC will publish daily selling prices on a publicly accessible internet portal, based on information received from traders. It is important to note that the law has been prepared in accordance with the requirements of the European Union and is aimed at the smooth and seamless introduction of the euro in Bulgaria.

May 30, 2025

A significant change in the procedure for certifying the length of service of all insured persons will come into effect from June 1, 2025. From this date, the paper employment record book will be replaced by unified electronic employment records, which will be part of the Employment Register, administered by the National Revenue Agency. Thus, from now on, data on the employment relationship will be entered and stored entirely in electronic form.

Employment records issued and maintained before June 1, 2025, retain their validity as official certification documents for the circumstances recorded in them, related to employment. Therefore, the National Social Security Institute (NSSI) recommends that insured persons keep all their employment records until the final termination of their employment and retirement. They can be used to certify the insurance periods recorded in them.

According to legal requirements, by June 1, 2026, employers are required to prepare employment records, indicating in numbers and words the length of employment with them, certifying it with signatures and a seal, and then returning the document to the employee.

The act preserves the amount of an individual quota as it was determined for 2024 as well. This is done to reduce the administrative burden on food voucher operators when providing individual quotas.

According to Art. 5 of the Law on the Collection of Revenues and the Expenditure in 2025. until the adoption of the Law on the State Budget of the Republic of Bulgaria for 2025, the Law on the State Public Insurance Budget for 2025. and the Law on the budget of the National Health Insurance Fund for 2025, until the adoption of the state budget for 2025. the amount of the total annual quota for the provision of food vouchers under the Law on Corporate Income Taxation, defined in the Law on the State Budget of the Republic of Bulgaria for 2024, is applied.

Petkova recalled that for about a month - a month and a half, she has been holding meetings in connection with the planned measures both with the employer and trade union organizations, with the National Association of Municipalities in the Republic of Bulgaria, and with the political parties represented in the parliament in the 51st National Assembly. As a result of these meetings, some of the revenue measures will not be introduced, for example, the measure to increase insurance will not be proposed. What will be proposed as revenue measures, Petkova explained, are taxation of excess bank profits, a tax on underground wealth, two tax amnesties - one related to declaration of late taxes and insurances, the other related to undeclared income.

An increase in excise duties on tobacco, tobacco products and alcoholic beverages is foreseen, as well as some proposals related to the elimination of reduced VAT rates. "It is leading for us that there should be no increase in the main taxes - VAT, corporate tax, on the income of individuals, as well as insurance, as they have a direct impact either on inflation or on economic development. That's why we propose these measures that have the least negative effect on the country's economy," the finance minister explained the philosophy behind the proposals.

In terms of spending, salary increases for police, military and teachers in 2025 will be provided in the amount and in the manner voted into law by the National Assembly, the Deputy Prime Minister promised. She explained that a new income policy in the amount of a 10% increase is also planned, as well as an update of pensions under the Swiss Rule.

The Ministry of Finance has made a comprehensive analysis of the projects under the capital program so that funds can be secured from the 2025 budget for that part of the projects that have started and will not be completed in 2024. The capital program will include, in addition to the funds needed to complete the projects from 2024, new projects as well, explained the finance minister. The capital program will be structured along three main directions. The first is related to administrative capital costs, for example for current repairs and for activities that are necessary and without which the relevant institution cannot function.
The second direction is related to IT systems, since the overall digitalization is necessary for both the administration and the economy. And the third direction will be spending on national strategic projects.

Lyudmila Petkova explained that the draft Law on the State Budget for 2025 will be discussed in the National Council for tripartite cooperation with social partners and will accordingly be adopted by the Council of Ministers and submitted to the National Assembly next week.

"To the draft law, in the transitional and final provisions, all proposals for changes in the relevant laws will be included, in relation to which they refer to the revenue and expenditure measures respectively. Proposals in connection with the project to create a Unified Revenue Agency will also be included there," said Petkova.

• Prevention control mechanisms are also introduced in relation to risk persons identified by the customs authorities in order to prevent possible violations;
• It is proposed to clearly define the concepts regarding liquids for electronic cigarettes, containing or not containing nicotine, in order to eliminate the practical difficulties, ambiguities and divergent interpretations that have arisen for the purposes of implementing the ZADS, related to the control of import, export, production, trade and any operations with e-cigarette liquids;
• Provisions are being made to restrict taxable persons from restocking with tobacco products, in the event of new excise rates coming into force;

It is proposed to introduce a mechanism to improve the interaction of the customs administration with the persons carrying out forwarding, logistics and transport activities in order to minimize the possibility of cross-border deliveries of concealed excise goods in Western European countries.

• In fulfillment of the obligation to introduce European law into VAT, proposals have been made to create provisions for special regimes for small businesses - the domestic small business regime and the European Union (EU) small business regime to enable small businesses established in Member States other than the one in which the VAT is due to benefit from the exemption to charge VAT up to the registration threshold. In relation to the proposed changes imposed by the introduction of the provisions of Council Directive (EU) 2020/285 of 18 February 2020 amending Directive 2006/112/EC regarding the common system of value added tax in relation to the special scheme for small enterprises and Regulation (EU) No 904/2010 on administrative cooperation and the exchange of information for the purpose of monitoring the correct application of the special scheme for small enterprises, it is necessary to make changes to the general rules for VAT registration and de-registration. Given this, the bill proposed changes to the general rules for registration and de-registration under the VAT system.
• It is proposed to introduce an obligation to provide data on the available fixed assets and material stocks by the persons registered under the law. It is proposed that the data be declared at the end of a calendar quarter by VAT registered persons separately for the corresponding calendar quarter with the declaration under Art. 55, para. 1 of the Law on Personal Income Taxes and Art. 201, para. 1 of the Law on Corporate Income Taxation, by the end of the month following the quarter. The data will be provided from the current accounting records of the individuals and will cover the amount of fixed assets available with a tax base upon acquisition, production or import equal to or greater than BGN 5,000, valued at acquisition price and the sum of the total amount of available material stocks, valued in accordance with the applicable accounting standards, and for persons who are not enterprises within the meaning of the Accounting Law - the applicable accounting standards are the national accounting standards. The purpose of the proposal is to investigate all the facts and circumstances related to the exercised right of tax credit on the available fixed assets and material stocks, as well as to the existence of transactions concluded under conditions leading to a deviation from taxation.
• In order to ensure that the tax is charged in the Member State where the consumption takes place, it is necessary that all services that can be provided to a consumer electronically, broadcast live on the Internet or to which virtual access is otherwise provided, to be taxed at the place where the user is established.In this regard, the draft law proposes to change the definition of the place of performance of services related to activities broadcast live on the Internet or to which virtual access is otherwise provided.
• In connection with the entry into force of the new Commission Regulation (EU) 2023/2831 of 13 December 2023 on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to de minimis aid in connection with the expiry of the Regulation (EU) No. 1407/2013 of the Commission of 18 December 2013, regarding the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to de minimis aid, amendments have been proposed related to the application of the special procedure for charging import tax for investment projects.
• In connection with the need for adaptation to the program period 2021-2027, including in relation to the function of the Fund Manager of financial instruments in Bulgaria as a performing "Holding Fund", the provision regarding VAT exemption for the supply of certain financial services has been updated.
• In order to bring the current legislation into line with the decision in the law and tax practice, it is proposed that the taxable turnover of taxable persons who carry out supplies of second-hand goods or supplies of a general tourist service should not be formed according to the special order of taxation of the margin, through the sum of the margins.

\u2713 The changes in the Income Tax Act have been prepared with the aim of improving the tax legislation and are in line with the need for editorial changes to the texts of the law, related to the completeness of the structure of the law, as well as proposals received from the National Revenue Agency.

• The provisions related to the right to use tax relief for children and tax relief for children with disabilities by a parent who has not been granted the exercise of parental rights in cases of divorce and in cases where there is no marriage between the parents are clarified ;
• The provisions of the law are being updated, with a view to synchronizing them with the current rules for submitting taxes to the National Revenue Agency;
• Refinement editorial changes are proposed to the texts of the law, related to the completeness of the structure of the law;
• An administrative criminal sanction is established for information and data not submitted or not submitted on time under chapter five of the Law on the National Revenue Agency, thereby reducing the risk that the obliged persons will not provide the information necessary for the implementation of the activities and functions of the National Revenue Agency, or not to provide it on time;

They are in line with Bulgaria's commitments, as a member state of the European Union and as a country that has joined the requirements for implementing the rules of the Organization for Economic Cooperation and Development (OECD) in relation to a global minimum level of taxation of multinationals and large national enterprises; with the need for measures to update and synchronize some texts of the law with other national acts and legislation of the European Union, as well as with proposals received from the National Revenue Agency.

Amendments to the Civil Code (ZKPO) include:

• It is proposed to continue the application of the tax relief, which represents minimal assistance through the concession of corporate tax in the cases of production activity in municipalities with unemployment higher than the national average. The new minimum aid will apply for the period from 1 January 2024. until 31 December 2030, including for corporate tax for 2030, the proposed provisions being in line with the new Commission Regulation (EU) 2023/2831 of 13 December 2023. on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to de minimis aid, which makes it possible to implement the aid;
• It is proposed to clarify and/or supplement the texts related to the application of the regime for the taxation of multinational and large national groups of enterprises with additional tax and with national additional tax, which are in accordance with the administrative guidelines adopted by the OECD for the application of a global minimum level of taxation;
• Also, measures are being introduced to update and synchronize the texts of the ZKPO with other acts, such as the cancellation of the texts concerning paper food vouchers and those related to the change in the accounts of the National Revenue Agency
• In the transitional and final provisions of the draft law, changes are proposed in the Tax and Insurance Procedural Code, related to the requirements of the OECD to ensure the confidentiality of the content of the additional tax information declaration, as well as in the Law on the introduction of the euro in the Republic of Bulgaria.

The employer and the employee are assigned a number of new obligations in connection with the provision of a suitable workplace, compliance with the minimum requirements for health and safety at work, as well as the assignment and reporting of work when an information system is used for this.

New generally applicable rules have also been introduced in relation to the inter-day and inter-week rest of the employees. Joint and several liability is also regulated for the contractor under a service contract, when his direct subcontractor, in his capacity as an employer, is in default of his obligations to pay wages.

\u2713 A remote workplace

The definition of a workplace in remote work is being changed: "a place in a room in the worker's or employee's home or in another room of his choice outside the enterprise where the work is carried out", and not, as before, "the worker's or employee's home or other premises of his choice outside the enterprise'.

With the changes, it is possible to specify in the individual employment contract more than one place of work from which the employee can work remotely.

Additionally, the employer may change the place of work for no more than 30 working days per year at the written request of the employee under the conditions and according to the procedure determined by the employment contract and/or internal acts of the enterprise.

For employees who perform remote work, an obligation has been introduced to provide a workplace for remote work on the date of creation or change of the employment relationship, as well as to provide the employer with written information about the characteristics of the provided workplace.

\u2713 Healthy and safe working conditions when working remotely

The employer is obliged to take specific measures to ensure that, on the date of creation or modification of the employment relationship, the specific workplaces for performing remote work meet the minimum requirements for health and safety working conditions.

Employees working remotely must now immediately notify the employer of any workplace accident in a pre-agreed manner and manner.

A new rule has also been introduced in connection with the reduction of the employer's liability in the event of an occupational accident or occupational disease that occurred during remote work, when the victim did not comply with the prescribed rules and norms for health and safety at work.

Changes to the Law on Safe and Healthy Working Conditions related to a number of obligations of the employer in connection with the provision of safe and healthy working conditions for remote workers are also introduced with the ZID of CT.

\u2713 Assigning and accounting for remote work

A legal definition of the term "algorithmic management information system" is being introduced, providing for the use of such a system for assigning and accounting for remote work.

When the remote work assignment and reporting is through an information system, the employer should provide the employee with written information about the type and volume of work-related data that is collected, processed and stored in it.

When an information system is used for the algorithmic management of remote work, the employer provides the employee with written information about how decisions are made. At the written request of the employee, the employer or an official appointed by him is obliged to check the decision of the algorithmic management system and notify the employee of the final decision.

\u2713 Working hours when working remotely

As before, when working remotely, employees organize their own working hours, but in accordance with the changes, they must be available and work during the time when the employer is in communication with third parties, and not only with its commercial partners as before.

Actual time worked can also be reported through an automated timekeeping system. The employer is obliged, upon request, to provide the employee who works remotely with access to the data in the system for his working hours.

\u2713 Interday and weekly rest

Changes have also been introduced in relation to inter-day and inter-week rest, which will apply to all employees, not just telecommuters. It is expressly stated that employees will not be obliged to respond to employer-initiated communication during the inter-day and weekly rest, except when conditions are agreed upon in the individual and/or collective labor agreement, under which this is permissible.

The pre-screening mechanism applies in addition to existing authorization and/or registration regimes, for example concentration authorizations from the Competition Commission or other sectoral authorisations.

The amendments to the ZNI were promulgated in the State Gazette, issue 20 of 03/08/2024, and shall enter into force as of 03/12/2024.

\u2713 General requirements for pre-screening of foreign direct investment

The national foreign direct investment screening mechanism requires prior authorization for any foreign direct investment that cumulatively meets the following conditions:

• It is carried out by a person who is not a citizen of an EU member state or whose seat is not located in the EU, or by a legal entity in which control is exercised by persons who are not EU citizens, as well as by a legal entity or another legal entity in the EU making the investment on its own behalf but for the account of or under the control of a person who is not an EU citizen or whose registered office is not in an EU Member State, and

• It affects any of the industries listed in the Regulation, namely:

• Critical infrastructure (physical or virtual), including related to energy, transportation, water, healthcare, communications, media, data processing or storage, aviation, defense, electoral or financial infrastructure and others;
• Critical technologies and dual-use items, including artificial intelligence, robotics, semiconductors, cyber-security, aerospace and defense technologies, energy storage technologies, quantum and nuclear technologies and others;
• The supply of critical resources, including energy or raw materials, as well as on food security;
• Access to sensitive information, including personal data, or the ability to control such information; or
• The freedom and pluralism of the media, and

• Alternatively, it meets one of the following conditions:

• Through the implementation of the investment, the ownership of at least 10 percent of the capital of an enterprise operating in Bulgaria is acquired, or the value of the investment exceeds the threshold of 2 million euros (or their BGN equivalent);
• Through the implementation of the investment, the ownership of at least 10 percent of the capital of an enterprise that operates in Bulgaria and carries out high-tech activities is acquired;
• A new investment is made (i.e. an initial investment related to an activity such as a new enterprise, a significant change in a production process of existing enterprise, etc.) that exceeds the threshold of 2 million euros (or their BGN equivalent).

\u2713 Exceptions to general screening requirements. Ex officio screening (service start)

• Certain foreign direct investments are subject to screening in all cases (ie regardless of whether they meet the general criteria described above), namely:
• Foreign direct investments in sites and activities related to the production of energy products from oil and products of petroleum origin in sites that are part of or adjacent to critical infrastructure, according to the Law on the Administrative Regulation of Economic Activities Related to Oil and Products of Petroleum Origin;
• Foreign direct investments of foreign investors from Russia and Belarus;
  Regardless of investment threshold restrictions, foreign direct investments are subject to review and authorization when there is a direct or indirect participation of a non-EU country in the capital of the foreign investor, including significant funding from a government body. When the foreign investor is a company whose shares are traded on a regulated market, this exception applies if the direct or indirect participation of a non-EU country in the capital of the company is greater than 5 percent. However, some non-EU jurisdictions subject to further clarification by the National Assembly, as well as the US, UK, Canada, Australia, New Zealand, Japan, the Republic of Korea, the United Arab Emirates and Saudi Arabia, are considered low-risk and do not fall under within the scope of this exception.

In some cases, a foreign direct investment may be subject to ex officio screening (officially initiated and not based on an application by the investor), including by exception:

• On the proposal of a member of the Interdepartmental Council for Screening Foreign Direct Investments (the "Council") with competence in the sector in which the investment will be implemented, in agreement with the representatives of the State Agency "National Security" and the State Agency "Intelligence" - with regard to foreign direct investment, which is a new investment, or does not exceed the threshold of 2 million euros (or their BGN equivalent);
• At the motivated request of the State Agency "National Security" and the State Agency "Intelligence" - regardless of the general criteria described above, when there is evidence that the foreign direct investment may have an impact on security and public order;
• Ex officio at the initiative of the Council - upon learning of a new circumstance that is a prerequisite for the initiation of proceedings for the screening of a foreign direct investment (within three months of learning of this circumstance);
• Ex officio at the initiative of the Council - in case an opinion is received from the European Commission or a signal containing sufficient information from a Member State that a foreign direct investment for which no authorization application has been submitted could be subject to screening, at provided that the investment began up to two years before the opinion or signal was received.

\u2713 Competent authority. Terms and procedure

The screening will be carried out by the newly established Inter-Ministerial Foreign Direct Investment Screening Board, which consists of Ministers from various departments and representatives of various regulatory commissions (ie the Board).

The Council adopts decisions within 45 days from the receipt of the application submitted by the investor, respectively from the elimination of inconsistencies in it. This term can be extended once by up to 30 days. The absence of a ruling within these terms is considered tacit consent to make the investment.

The Council adopts a decision allowing the investment to be made or rejecting the application. The Council may issue a conditional permit for foreign direct investment after the investor has fulfilled restrictive measures such as limiting the right to acquire up to 20 percent of a company's capital or up to 10 percent of a company's capital in the case of high-tech productions, protection orders of personal data and others.

\u2713 Sanctions

In case of non-compliance or violation of the obligations related to the screening mechanism, the foreign investor may be imposed a fine or a property sanction in the amount of 5 percent of the value of the investment, but not less than BGN 50,000.

Regardless of the fine or pecuniary sanction, the Council may impose on the foreign investor restrictive measures, including change of control, change and/or suspension of activity, termination of foreign direct investment and other appropriate measures.

To apply the regime, it is necessary for the importer, a person registered for VAT purposes, to have certain permits (permit for centralized processing of goods and permit for deferred payment of import duties), and the tax should be paid no later than the 16th date of the month following the month in which the customs declaration was accepted.

\u2713 Adjustments of used tax credit

Changes have been introduced in the provisions of Art. 79 and Art. 80 of the VAT, which aims to align our national law with the interpretation of the European norms presented by the EU Court regarding the regime for correcting the initially deducted tax credit in the event of the destruction/ scrapping of assets ¹.

A tax credit adjustment will no longer be made for proven or confirmed destruction, loss or absence of goods as a result of events beyond the control of the taxable person, which he can prove were not caused by his fault. No correction will also be due in cases of proven or confirmed destruction, including disposal of goods in a way that leads to their irreversible disappearance as a result of:

• scrapping of goods which, as a result of their usual use, have become objectively unusable for the taxable person; and
• scrapping of goods that are objectively unusable for the taxable person, when they have become the subject of a taxable supply, including such under Art. 163a of VAT (as waste).

¹Decision of the Court of Justice of the EU in case C-127/22, issued on a preliminary inquiry of the Bulgarian Supreme Administrative Court (commented in KPMG Tax News, May 2023 issue)

From October 2023, the National Revenue Agency offers an electronic service that allows suppliers to check whether their clients have deducted VAT on supplies related to irrecoverable receivables. This facilitates corrections to the tax base and accrued VAT under the VAT Act and saves time and uncertainty for businesses.

The benefits for your company:

• Easy and quick check through the National Revenue Agency system
• More accurate analysis of portfolios with uncollectable receivables
• Possibility to optimise VAT liabilities

The Contador team is ready to assist you with analysis, consultation, and practical support to help you make the most of the new service.

The State Budget Act for 2023 introduced a new requirement for enterprises registered under the VAT Act:

• Cash and receivables must be declared on a quarterly basis by owners, employees and accountable persons if their total value exceeds BGN 50,000.

• The information is submitted through the declarations under Art. 55, para. 1 of the Personal Income Tax Act and Art. 201, para. 1 of the Income Tax Act.

• The deadline for submission is by the end of the month following the quarter.

\ud83d\udd39 First declaration period: third quarter of 2023, with an extended submission deadline - November 14, 2023.

Despite some uncertainties regarding the application of the new rules, businesses should prepare by adapting processes and software systems to quickly and reliably collect the necessary information.

The KONTADOR team will continue to monitor developments and will inform you in a timely manner.

The National Assembly adopted amendments to the Anti-Money Laundering Act, which introduce additional measures to combat money laundering and terrorist financing, in accordance with Directive (EU) 2018/843.

Key changes:

• Mechanism for resolving discrepancies between the collected beneficial ownership data and the data in the register.

• Creation of a new public register for persons providing corporate governance services.

• Additional requirements for certain obliged entities (legal advice, company management, brokerage in real estate transactions).

• Enhanced measures for identification of clients and their proxies.

• Updating internal rules and mandatory documents for beneficial owner declarations.

The changes are effective from 14.07.2023, with the new non-compliance notification mechanism coming into effect from 16.07.2024. Obliged entities must update their processes and documentation to ensure compliance with the law and avoid sanctions.

Tax News – May 2023

CJEU: no obligation to adjust tax credit when assets are scrapped

The Court of Justice of the European Union in case C 127/22 ruled that taxpayers are not obliged to adjust the VAT deducted when assets or goods are scrapped or destroyed, provided that the destruction is duly proven.

The ruling addresses two main situations:

1. Sale of scrap goods as scrap.
2. Voluntary destruction or disposal of assets.

In all cases, the CJEU confirms that there is no basis for adjusting the tax credit, even if the sale as waste is not part of the usual economic activity or the value of the goods is lower than the original.

The decision is binding on the NRA and Bulgarian courts, including for tax periods that have already ended. It allows businesses to reassess past adjustments and, in appropriate circumstances, request a VAT refund.
Also, taxpayers can plan future actions on a deductible tax credit upon asset disposal, in accordance with the interpretation of the CJEU.

From 1 January 2023, suppliers whose customers fail to pay their invoices will be able to recover the VAT charged on the unpaid amount.

The law sets clear conditions under which a receivable is considered uncollectible and lists the requirements a supplier must meet.

VAT recovery will be carried out by issuing:

• a credit note, if the debtor was VAT registered at the time of supply;
• a protocol, if the debtor was not VAT registered.

When a protocol is issued, the supplier may recover VAT only up to the difference between the VAT initially charged and the input tax credit already claimed for goods or services directly related to that supply.

If the debtor later pays part of the debt, the supplier must charge VAT again on the recovered portion, through a debit note or protocol.

Obligation to Correct Input VAT by the Debtor

If a supplier issues a credit note to reverse VAT on an uncollectible receivable, the debtor who has previously claimed input VAT must reverse that credit accordingly.

Reduced VAT Rates

A permanent 9% VAT rate now applies to:

• baby food and hygiene products,
• printed and electronic books,
• newspapers, magazines, and other periodicals.

Until 31 December 2023 (temporary measures), the 9% rate remains for:

• restaurant and catering services,
• use of sports facilities,
• package tourism services.

The 0% VAT rate for bread and flour is also extended until the end of 2023.

Other Key VAT Amendments

• Clear rules are introduced allowing non-EU businesses to apply a 0% VAT rate on exports from Bulgaria to third countries.
• Explicit guidance is provided on VAT correction in cases of wrongly treated supplies, including those corrected following an audit report.
• Management services for alternative investment funds that qualify under EU law are VAT exempt.
• No VAT adjustment will be required when goods are written off due to expiry of shelf life, even when the expiry date is set through internal company standards.
• Provisions are refined related to the “one-stop shop” VAT regimes for suppliers selling goods and specific services to final consumers.
• Companies required to provide security for liquid fuel trading may reduce the amount of the guarantee by half under certain conditions.
• From 1 January 2024, payment service providers involved in cross-border payments will need to:
• maintain an electronic register of transactions, and
• submit reports to the National Revenue Agency every calendar quarter.