Amendments in the Income Taxes on the Natural Persons Act in 2021

By Act on amendment and supplement of the the Value Added Tax Act, State Gazette- Issue 104 dated 08/12/2020, amendments were introduced in the Income Taxes on the Natural Persons Act (ITNPA), which entered into force on 1 January of 2021.

NEW tax relief for improvements and/or repairs of immovable residential property

With the last amendments in ITNPA a new Article 22f was adopted, introducing a new tax relief for repair and/or improvement of owned immovable residential property. It is provided for that resident natural persons, as well as non-resident natural persons who are established for tax purposes in an EU Member State or in another state – party to the Agreement on the European Economic Area (EEA Agreement) shall be entitled to deduct from the total annual tax base the made during the year payments for labor in connection with improvements and/or repair of one immovable residential property in the amount of up to BGN 2 000. This means that a tax deduction of up to BGN 200 from the tax due.

It is important to be noted that insofar as the new Art. 22f of the ITNPA enters into force on 01.01.2021, the provided relief can be used in determining the tax liabilities for 2021, but not those for the past 2020 year.

The tax relief can be used under the following conditions:

  • the immovable residential property is located in the territory of Bulgaria
  • the immovable residential property is not included in the enterprise of a person performing business activity as a trader within the meaning of the Commerce Act
  • the tax liable person is an owner or a co-owner of the immovable residential property
  • the tax liable person possesses a document for the paid labor in connection with the improvement and/or repair of the residential property, as well as a document evidencing the payment (fiscal receipt, receipt, bank document or another document)
  • the improvement and/or repair have been performed by resident persons of EU Member State or of another state- party to the EEA Agreement
  • the tax liable person and the person who carried out the repair are not related persons.

In the cases where the immovable residential property is co-owned, the relief can be used by each co-owner, provided that the total amount of relief used by all co-owners does not exceed BGN 2 000. In cases where a larger total amount of the tax relief has been used, each of the persons who has used the relief owes the part of the tax corresponding to the amount of the used relief.

The existence of the conditions for using the relief shall be declared by the person in the annual tax return under Art. 50 of the ITNPA.

Amendments in documenting and accounting of the incomes

Pursuant to the new wording of Art. 9, para 2 of ITNPA the persons who have received incomes from other economic activity and / or incomes from rent or other royalty provision for using rights or property, shall issue a primary accounting document for the incomes acquired by them, containing the requisites under Art. 6, para 3 of the Accountancy Act, and not document under para 1 as it was before the amendment. The cited provision stipulates that the document shall contain at least the following information – name and number of the document; date of issue; name of the enterprise; subject, natural and value expression of the business operation; name and signature of the issuer. For comparison with the previously applicable para 1 of Art. 6 of the Accountancy Act, for the documents under para 3 is not required to contain full identification data of the issuer and the income payer.

The tax liable persons shall issue the document under Art. 6, para 3 of the Accountancy Act in 2 copies, as one shall be provided to the income payer, and the other shall be kept by the natural person.

Exceptions to the rule are provided for, and no document for received incomes shall be issued in the following cases:

  • when the income payer issues the form named “Account for amounts paid”;
  • income is subject to final tax; or
  • income is exempt from taxation on the grounds of Art. 13, Para 1, item 24; or
  • income is paid to the natural person’s bank account.

Increased amounts of tax relief for children

The increase in the amount of tax relief for children, which shall be applicable only for 2021, is introduced by § 9 of the Transitional and Final Provisions of the State Budget of the Republic of Bulgaria for 2021 Act (promulgated in SG No. 104 of 8 December 2020). The persons shall be entitled to use the relief by filing the annual tax return under the ITNPA.

The new amounts of the tax relief are as follows:

  • for one child – BGN 4500 (instead of BGN 200);
  • for two children – BGN 9 000 (instead of BGN 400);
  • for three or more children – BGN 13 500 (instead of BGN 600);
  • for disabled children – BGN 9 000 (instead of BGN 2 000).

Extended deadlines for traders for declaring income and paying taxes

According to the amendments, the persons carrying out economic activity as traders within the meaning of the Commerce Act, including sole traders and farmers, shall submit an annual tax return in a term within 1 MARCH to 30 JUNE of the year following the year of the income acquisition, and not until 30 April as it was up to now (Art. 53, para 1 of the ITNPA).

It is important to note that this amendment in the deadlines is applicable to the annual tax return and payment of the relevant taxes for 2020 as well.

The natural persons who are not traders within the meaning of the Commerce Act, shall declare the due tax from 10 JANUARY to 30 APRIL of the year following the year of the income acquisition.

The deadline for the electronic submission of annual tax return remains unchanged, where the person is entitled to a 5 percent discount on the tax to be paid – until 31 March of the following year, as well as the total amount of the discount – up to BGN 500.

Thе present statement does not constitute legal advice or consultation, but rather our own interpretation and analysis of the issues outlined above.

If you have any questions or need clarification, please contact Dyulgerova&Penkova Law Firm team.