Finance

Tax relief for individuals

Ecovis | 24 April 2024

In a dynamic economic environment, interest in and awareness of tax relief for individuals is a key factor in optimising the financial position and the associated liabilities. In Bulgaria, a number of legal provisions provide relief for individuals in order to stimulate various areas, such as education, health insurance, families with children, etc.

In this article, the team of Ecovis Bulgaria, a leading company in accounting and auditing services, will introduce you to the main types of tax reliefs and services for individuals, the conditions for their use, as well as practical steps to declare.

Tax relief for disabled individuals

The tax relief for persons with reduced working capacity is a financial instrument with which the State supports persons whose capacity to work is reduced. It consists in a reduction of the taxable amount, which also reduces the tax payable.

Art. 18 - Tax relief for persons with a reduced working capacity of more than 50%. The tax base is reduced by BGN 7920 on an annual basis or BGN 660 on a monthly basis. Can be claimed through an employer.

Tax relief for persons with reduced working capacity is declared in the annual tax return under Article 50 of the Income Tax Act.

Tax relief for personal contributions

In the modern world, looking after our own health and financial future is of paramount importance. The government encourages these responsible actions by offering tax benefits for personal contributions in various areas:

• Voluntary health insurance: protection for you and your loved ones.
• Voluntary retirement insurance: a secure and safe future.
• Additional financial support.
• Donations: Supporting charitable causes and important community causes.

Through tax relief, you not only reduce your tax burden, but also invest in:

• Your own well-being: Better health insurance, a higher pension, a more peaceful future.
• Your loved ones' well-being: The ability to provide for family members.
• Community development: Supporting important causes and organisations.

Let's take advantage of the opportunities that are available to us to build a better future for ourselves, our loved ones and society!

Tax relief for individuals on donations

A donation is an act of generosity and compassion that can support causes important to us and contribute to the betterment of society. The state encourages charitable giving by offering a tax deduction for individuals who make donations to non-profit organizations.

But what are the eligibility conditions? The donation should be made to a non-profit organisation listed by the NRA and documented by a bank transfer or other payment document. The donation should be declared in the annual tax return.

Art. 22 - Tax relief for donations.

1. The tax base shall be reduced by the donations made by the person to health, medical institutions, social services for residential care, nurseries, kindergartens, schools, higher schools or academies, budgetary enterprises, religious denominations registered in the country, specialised enterprises or cooperatives of the disabled, the Agency for the Disabled, the Bulgarian Red Cross, cultural institutes, community centres, non-profit legal entities registered for public benefit, the Energy Efficiency Fund, drug treatment communes, UNICEF with up to 5% of the annual tax base
2. For donations to culture - by up to 15% of the annual tax base
3. For donations to the NHIF for activities related to the treatment of children or the Assisted Reproduction Centre - by up to 50% of the annual tax base

The total amount of recognised donations may not exceed 65% of the annual tax base. If the donation is in kind, it is valued at acquisition cost if the acquisition is within 3 months before the donation, otherwise at market price. There must be a contract and a donation certificate for the donation made.

Tax relief for young families

Art. 22a - Tax relief for young families. Applies to mortgage interest if the following conditions are met simultaneously:

1. The mortgage loan is with one or jointly both spouses and they have a civil marriage
2. One of the two spouses is under 35 years of age when the mortgage loan agreement is concluded
3. The mortgaged home is the family's only residence for the calendar year.

The tax relief is available for the interest on the first 100,000BGN of the mortgage loan, with a document from the bank.

Tax relief for children

Art. 22c Tax relief for children

This is the most popular tax relief. It can also be used with an employer. Its amount is - 6 000lv. Reduction of tax base for 1 child, 12 000 lv. for two children, 18 000 lv. for three or more children.

Conditions for use:

1. The child must not be placed in an institution.
2. Only one parent can claim the relief.
3. The child has not reached the age of majority by 01.01 of the year to which the tax relief applies
4. In case the parent fails to avail of the entire amount of the tax base, the other parent can avail of the balance.

Tax relief for disabled children

Art. 22d - Tax relief for disabled children - the most troublesome tax relief. The conditions are as above, however the amounts are double, the child must have a TELC of over 50%. The two reliefs - Art 22c and Art 22d are taken independently of each other and are cumulative.

Tax relief for individuals on cashless payments

Art. 22e - Tax relief for payments made non-cash payments - in case the entire income of the person is acquired by bank transfer, and more than 80% of the payments are made by non-cash means (incl. debit, credit cards) then the tax base is reduced by 1%, but not more than BGN 500.

Tax relief to an individual for repairs

Art. 22f - Tax relief for repair/improvement of immovable property- can be used up to 2000lv reduction of the tax base in case:

1. The real estate is owned by the person or the person is one of the owners
2. There is a document for the renovation
3. The person carrying out the renovation and the person benefiting from the tax relief are not related persons The tax relief can only be used for labour costs.

We hope you have found this article useful and that it has clarified whether you are entitled to tax relief. If you still have questions, don't hesitate to contact us!