In relation to the amendments adopted by the Bulgarian Parliament on the State Budget Act for 2022, promulgated in State Gazette dated 05.07.2022, the following amendments of the amount of tax relief for children under the meaning of art. 22c and 22d of the Income Taxes on Natural Persons Act are applicable.
Amendment of the amounts of tax relief for children
For 2022 the income tax base of employees shall be deducted with the following amounts:
For one minor child – total of BGN 6 000 per year
For two minor children – total of BGN 12 000 per year
For three or more minor children – total of BGN 18 000 per year
For children with disability – total of BGN 12 000 per year
I. Advance partial use of the tax relief in July and October 2022
A new rule has been implemented that the tax relief can be used in advance by the employees, as:
The tax relief due for the period January to June can be used in July 2022 by deducting the tax base for July with the following amounts:
BGN 3 000 for a parent of one minor child
BGN 6 000 for a parent of two minor children
BGN 9 000 for a parent of three or more minor children
The tax relief due for the period July to September can be used in October 2022 by deducting the tax base for July with the following amounts:
BGN 1 500 for a parent of one minor child
BGN 3 000 for a parent of two minor children
BGN 4 500 for a parent of three or more minor children
The employees can use the advance tax relief for children only once for the year, in July or in September.
The third option is using the full amount of the tax relief at the end of the year, the same way as this rule has been applied before the current amendments.
II. Amendments of the turnover threshold for obligatory VAT registration
The Bulgarian Parliament adopted an Act for amendments of the VAT Act dated 14.07.2022 implementing amendment of the threshold upon reaching which the taxable persons shall be subject to obligatory VAT registration.
The new threshold has been increased from BGN 50 000 to BGN 100 000 for taxable supplies of goods or/and services performed for a period of not more than 12 months.
The amendment enters into force as of the first day of the months following the month of the of the decision of the EU Council for granting permission to Bulgaria to implement a special measure of derogation from art. 287 of Directive 2006/112/EC related to the common system of VAT, but not earlier than 01.01.2023.
We use this opportunity to mention that subject to obligatory VAT registration shall be any tax liable person not established on the territory of the country and performing taxable supplies of goods or services, different than those for which the reverse-charge mechanism is applicable for the recipient. Meaning that the above stated threshold shall not be applicable for foreign tax liable persons which do not have an establishment in Bulgaria. The registration of these persons is obligatory in 7-days term before effecting the taxable supply.
III. Recent changes in the Labor Code
Legislative changes related to promoting of transparency and predictability of the employment relationship and reconciling of the employment and family responsibilities
On 01.08.2022 entered into force the last amendments to the Bulgarian Labor Code (“LC”) related to promoting of the transparency and predictability of the employment relationship and the reconciling of the employment and family responsibilities. The aforesaid changes to the LC transpose into Bulgarian legislation Directive 2019/1152/EU on transparent and predictable working conditions in the EU and Directive 2019/1158/EU on work-life balance for parents and carers.
Transparency and predictability of the employment relationship
The adopted legislative changes develop some of the already existing provisions of the LC but also implement some new obligations of the employer.
Amendments in the LC which aim at increasing the awareness of the employees for their employment rights are:
Obligation of the employer to inform the employees in writing of any changes in the employment contract not later than the date of their entering into force (Article 66, paragraph 5 of the LC);
Obligation of the employer to inform the employees of the content of the internal salary rules (Article 127, paragraph 1, item 5 of the LC) – together with the obligation for informing the employees of the internal employer’s regulations and the internal health and safety regulations;
Obligation of the employer to inform in advance the employees on the grounds and manner of termination of the employment contract (Article 127, paragraph 1, item 6 of the LC);
Obligation of the employer to inform on a regular basis the employees on any trainings for increase of their professional qualifications, organized by the employer (Article 127, paragraph 1, item 7 of the LC).
Amendments in the LC which aim at a higher predictability of the employment relationship are:
Implementing a short probation period (up to 1 month) towards the employment contracts concluded for a limited term of less than 1 year (Article 70, paragraph 1 of the LC);
Limitation of the prohibition for concluding an employment contract with another employer (Article 111 of the LC) – the prohibition could only be applied for the purposes of protecting commercial secret and/or prevention of conflict of interests;
Implementing a right of the employee to propose in writing the contract term to be changed to unlimited/the part-time work to be changed to full-time (Article 119, paragraphs 2 - 4 of the LC) – in case of refusal to amend the employment contract, the employer is obliged to provide the reasons on the refusal in writing in a 1-month term;
Obligation of the employer to cover the costs for trainings on improvement of the employees’ qualification (Article 228a, paragraph 2 of the LC) – applicable in case such trainings are obligatory as per the employment contract, a collective employment agreement or the applicable law. In such cases, the training shall be considered working time.
Reconciling of the employment and family responsibilities
The changes to the LC aim at ensuring more possibilities for the employees to balance their work and private life.
The amendments related to reconciling of the employment and family responsibilities are:
Implementing a new type of a leave to be used by fathers (adoptive fathers) for taking care of a child at the age of up to 8 years (Article 164c of the LC) – the leave is 2 months and could be used at once or in parts subject to several conditions and limitations. The period of the leave is recognized as work experience and the father (adoptive father) is entitled to social security benefits;
Implementing a right of the employees parents (adoptive parents) of a child at the age of up to 8 years to propose in writing the amendment of the employment relationship (Article 167b, paragraph 1 of the LC) – the proposed amendment might be related to change of the duration and the distribution of working time, switching to remote work or any other changes in the employment relationship which would enable the reconciling of the employment and family responsibilities of the employee;
Implementing a right of the employees who, due to strong medical reasons, are taking care of a parent, child, husband, sibling, husband’s parent or other close relatives to propose in writing the amendment of the employment relationship (Article 167b, paragraph 2 of the LC);
Conditions for applying the right (Article 167b, paragraphs 3 - 6 of the LC):
The proposed amendment shall be for a limited term;
The employees are entitled to propose earlier the employment relationship to be restored back to the initial work conditions;
The employer has a limited 14-days term to accept the proposal and to conclude an
additional agreement to the contract or to refuse the amendment to the employee;
The employer’s refusal shall be in writing and shall contain the employer’s reasons for the refusal.
In conclusion, the newly implemented changes to the LC envisage more obligations to the employer. The noncompliance with those obligations shall be interpreted as a breach of the Bulgarian employment law and might lead to imposing of penalties by the state authorities.
TPA expands its Legal Services in partnership with Savov & Partners Law FirmThe international tax advisory, accounting and audit company TPA has formed a partnership with the law office “Savov & Partners” in Sofia (Bulgaria). With Valentin Savov and his team TPA will position itself as a leading tax and law firm in Bulgaria.
The renowned Bulgarian lawyer Valentin Savov has been working with great success for more than 15 years for leading legal firms in Bulgaria, Japan and the Netherlands. He has been the Managing Director of “Savov & Partners” since 2016. With his many years of experience, he will from now on play an important part in the TPA Team as a Partner in Bulgaria, and in this role he will strengthen the Legal Services business division. Furthermore, Valentin Savov is a “Highly regarded Tax Controversy Leader in Bulgaria”, according to “WTR – World Tax Review”. Since 2019 he is a Member of the International Fiscal Association Executive Committee.
Thomas Haneder, TPA Partner and Member of the Management Team, said: “This partnership is a milestone for us. With Valentin Savov we gained a like-minded renowned top expert who is well-known in Bulgaria. It is a clear signal that our strong focus lies on high quality services. Having Valentin on board means that we strengthen our forces in Tax and Legal. Together we build great futures for our clients.
Valentin Savov, S&P Partner, said: “We are very excited to join forces and expertise with such a reputable company as TPA. I am certain that our synergies will create great value and benefit to our clients.”
TPA has been represented with great success since 2008 in Bulgaria and has managed to steadily expand its services. In addition to Bulgaria, the TPA Group is – with approximately 1,700 employees – active in 11 further countries in Central and South Eastern Europe: Austria, Albania, Croatia, the Czech Republic, Hungary, Montenegro, Poland, Romania, Serbia, Slovakia, and Slovenia.
Facts & Figures about TPA Bulgaria and Savov and Partners TPA is a leading tax advisory and audit company. Its range of services includes Tax Advisory, Audit, Advisory and Legal Services. In addition to Bulgaria, the TPA Group is – with approximately 1,700 employees – active in 11 further countries in Central and South Eastern Europe: Austria, Albania, Croatia, the Czech Republic, Hungary, Montenegro, Poland, Romania, Serbia, Slovakia, and Slovenia.
More information can be found on the following websites www.tpa-group.bg and www.tpa-group.comSavov and Partners is a fully-fledged law firm, recognized in international rankings among leaders in Bulgaria in the field of taxation, tax controversy, M&A and B&F.
In the case of further inquiries please contact:
Mag. (FH) Gerald Sinabell, Head of Corporate Communications
Tel. +43 (1) 58835-428, firstname.lastname@example.org
Mag. Isabel Segrelles Vaello, MAS, Corporate Communications
Tel. +43 (1) 58835-217, email@example.com
With a Decree dated 30.03.2020 the Bulgarian Government determined the procedure for payment of compensations to the employers with the aim of retention of the employees jobs during the State of Emergency announced on the 13.03.2020.
Employers which have suspended partially or in full the business activity of their enterprises as result of an order of a Governmental body or on the ground of issued internal order are allowed to compensations.
Employers who can also qualify for compensations are those who suspended the activity of certain employees or workers (e.g. particular department or production lines), as well as , those who implemented reduced working time for the enterprise based on an internal order of the management.
The compensation shall be available for the employers for the period of the validity of the State of Emergency, but for not more than 3 months. The compensations shall be equal to 60% of the social security base of each employee for January 2020 for whom the above stated suspension measures have been applied. In case of implemented reduced working time the compensation shall be due proportionally for the non-working time, but for not more than 4 hours per day. An employer who benefits from the compensations shall be obliged to retain the employment relations with the employee for an additional period which is equal to the period for which the compensation has been paid.
Employers who apply for compensations shall comply with the following:
They are local legal entities, local individuals or foreign legal entities performing activity in Bulgaria trough permanent establishment.
They are allowed to apply for compensation only for the economical business sectors stated in an appendix to the Decree
They don’t have due payables for taxes, social security contributions or payables for Municipality taxes and fees which have been established and documented by the competent body.
They are not declared in insolvency, in a procedure of insolvency or liquidation.
They will retain the employment relations with the employees for an additional period which is equal to the period for which the compensation has been paid
They won’t terminate any labor contracts of their employees on the ground of provisions of the Labor Code related to decreased volume of work, partial closing of the business or temporary suspension of the work for more than15 days.
They don’t have established or entered in force acts for violations of the certain provisions of the Labor Code and the Labor Migration and Labor Mobility Act for a period of 6 months before the order for suspension of the business activity.
Employer from other business sectors, in addition to those listed in the Appendix of this Decree, have the right to apply for compensation on the basis of declared reduction of their incomes from sales as:
Not less than 20% for the month preceding the month of filing of the application for compensation, compared to the same month of 2019 – for entities established before 01.03.2019
Not less than 20% for the month preceding the month of filing of the application for compensation, compared to the averaged incomes from sales for January and February 2020 – for entities established after 01.03.2019
Adopted measures in Bulgaria under the Bill on the Measures and Actions during the State of Emergency announced by the Bulgarian National Assembly on 13.03.2020I. Below is a list of the most significant measures related to the prevention of the spreading of COVID-19 on the territory of the Republic of Bulgaria. The Bill on the Measures and Actions during the State of Emergency announced by the Bulgarian National Assembly on 13.03.2020 (the “Bill”) was adopted in its final version at an extraordinary meeting of the National Assembly which took place on 23.03.2020 and was promulgated in the Bulgarian State Gazette on 24.03.2020.
The Bill enters into force as of 13.03.2020 with the exclusion of several provisions entering into force as of 24.03.2020 (e.g. considering seizure of forcible execution proceedings, penalty proceedings, measures as per the tax legislation – please see section III below, customs legislation).
II. The adopted most significant measures and actions during the State of Emergency in Bulgaria as per the Bill are:
Measures to be implemented by employers in case of State of Emergency:
The employers are entitled upon an employer’s order to stop the work at the company’s premises entirely or partially and to send the employees to work from home without the employee’s consent. In this case only the place of work is changed, all other terms and conditions of the employment contract shall remain the same;
The employer shall be entitled to oblige the employee to use up to one half of his/her annual paid leave without the employee’s consent;
Upon an order of the employer a reduced working time for employees employed on a full-time basis could be implemented for the duration of the State of Emergency of for a part of this term;
The employer is obliged to release in paid/unpaid leave after request of the employee some specific categories of employees (e.g. pregnant women, mother of a child under 12 years of age, employees with disability 50% or over 50%, employees under 18 years of age);
The time of use of paid or unpaid leave due to the state of emergency shall be considered as a work experience;
The employer is entitled to close the working premises or part of the working premises without ordering the employees to use half of their paid annual leave – in this case the employer must pay full remuneration for the days during which the premises are closed. This does not affect the labor law relationship with the employees;
Тhe employees are also entitled to receive their full remuneration If the work premises have been closed due to State of Emergency upon an order of the competent state authorities;
For the duration of the Bill but for not more than 3 months the National Insurance Institute shall transfer onto the bank account of employers 60% of the insurance profit for January 2020 of their employees.
This compensation shall be paid by the National Insurance Institute subject to the following conditions: the employer meets certain criteria to be established by the Bulgarian Council of Ministers; the employer has filed an application with the Bulgarian Employment Agency; the employer has fully paid the remuneration of the respective employees for which the compensation has been paid. Otherwise, the employer must pay back the compensation received.
Procedural measures. Seizure of terms. Payment of debts.
Any pending judicial terms under civil, commercial, forcible execution and administrative court cases shall be seized for the duration of the State of Emergency. The above requirement is not applicable towards criminal court cases;
Any statutory terms which lead to termination or to arising of rights of private individuals shall be seized for the duration of the State of Emergency;
Injunctions are not imposed over bank accounts of natural persons and medical centers, over employment remunerations and pensions except for the cases when this is necessary for repayment of debt arising out of maintenance obligation, tort or employment relationship;
The notary certifications and notary proceedings shall be limited only to the urgent cases for notary certification. The Bulgarian Notary Chamber shall ensure that there is one notary per 50 000 citizens to take over the urgent cases;
The term of validity of the identification cards and driving licenses of Bulgarian citizens as the term of validity of residence permits of foreigners allowing them to reside permanently in Bulgaria which expires in the period 13.03.2020 – 31.10.2020 shall be extended with 6 months;
For the duration of the State of Emergency the consequences of the late payment including penalty and default interest, advanced chargeability, cancellation of a contract shall not be applied.
With regard to taxes and tax related procedures the following most important measures have been proposed:
The term for filing of Corporate Tax Return, payment of Corporate Income Tax (CIT) and tax on expenses for 2019 shall be extended from 31.03.2020 to 30.06.2020.
Advance payment of CIT due for 2020 for the period January – June 2020:
Based on the estimated and declared advance tax for 2020 - provided the CIT return has been filed prior to the entering into force of this Bill.
Based on the estimated and declared advance tax for 2020 – provided the CIT return is filed till 15.04.2020
Based on the estimated and declared advance tax for 2020 with the section of advance tax completed only – provided the CIT return will be filed after 15.04.2020
The term for filing of yearly financial statements shall be extended to 30.09.2020.
The tax on real estate and tax on vehicles for 2020 shall be reduced with 5% if paid in full by 30.06.2020.
The Personal Income Tax return of individuals, as well as, individuals performing commercial activity as Sole proprietorship and agriculture producers shall be extended to 30.06.2020
For the period of the State of Emergency the absolute limitation term for collection of public liabilities of 10 years shall not be applicable.
For the period of the State of Emergency the limitation of 1 year for completion of already started procedures of assessment of public liabilities shall not be applicable
For the period of the State of Emergency” executive proceedings under the Tax Insurance Procedure Code shall not be initiated.
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The year 2018 brings extensive changes in the areas of taxes, duties and social contributions in Central and South Eastern Europe. TPA offers an overview of the most important tax innovations in the following CEE and SEE countries in which we operate: