Changes to the Individuals’ Income Taxes Act and the social security legislation from 1 January 2024
Changes to the Individuals’ Income Taxes Act and the social security legislation from 1 January 2024
Changes to IITA
Income from rental of real estate received by tax non-residents
A change effective from 1 January 2024 eliminates a previous contradiction between two separate provisions of IITA – the first provision regulating the taxation of income from real estate rent received by tax non-residents no matter where the property is located (in Bulgaria or abroad) given that the rental payer is a person liable to deduct tax under IITA, and the second provision envisages that income tax is due only on income from renting out real estate in Bulgaria.
From now on tax under IITA will be due by tax non-residents receiving rental income from real estate located in Bulgaria only. The adopted approach takes into consideration the principle for taxation of non-residents only on income received from sources in Bulgaria as well as the general rules under double tax treaties which reserve the taxation rights over income from real estate for the state in which the property is located.
New tax allowance for transactions with financial assets, incl. crypto currencies
A new 10% tax allowance is introduced as a fixed deduction when calculating the taxable income from sale or exchange of financial assets. So far IITA did not envisage explicit option for deducting any transaction-related expenses incurred by individuals, incl. fees, commissions, etc.
Crypto currency transactions are explicitly added to the taxable dealings with financial assets subject to declaring. The aim of the revenue authority (National Revenue Agency – NRA) is to track more effectively and to be able to analyze the transactions on disposal with crypto currencies.
Wider scope of tax exempt income subject to annual reporting by employers to the NRA
Effective from 1 January 2024 employers are required to report information about additional types (in comparison to year 2023 – initially introduced only some types) of tax exempt employment income. The purpose of the reporting is to trace potential cases of tax avoidance through payments of remunerations in the form of tax exempt income (e.g. business trip allowances), cases of income misinterpreted as tax exempt, as well as better assessment of the actual employment income received by the employees.
The information about tax exempt employment income paid in year 2024 is subject to reporting in the beginning of year 2025.
Exemption of income from sale or exchange of movable property delivered to persons performing activities on collection, transportation, utilization or disposal of waste under the Law on Waste Management
Before the introduced exemption from tax of the mentioned income it was subject to one-off final tax. The change is in accordance with the local striving to achievement of the ecological goals as well as with the significant changes to the ecological policy of the European Union during the recent years.
New tax allowance for farmers
The persons registered as agricultural farmers will be able to use a new tax allowance in the form of deduction from their total annual taxable income base under IITA of the subsidies or other aids received from the European Agricultural Guarantee Fund and the European Agricultural Fund for Rural Development, in amount up to BGN 100 000 (around EUR 51 130).
A new alternative tax will be imposed on income from gathering of wild mushrooms and fruits
The persons who carry out activities on gathering of wild mushrooms and fruits will be subject to registration and issuance of permit to the respective state enterprises under the Forest Law. The state enterprises will be the persons liable to deduct and transfer to NRA on a quarterly basis the alternative income tax at amount of BGN 30 (around EUR 15) per month.
Changes to the social security legislation
Effective from 1 January 2024, there have been introduced increased amounts of minimum salary, minimum and maximum social security income, minimum unemployment compensation, etc.
The self-employed persons will be liable to payment of advance social security contributions based on monthly income between minimum BGN 933 (around EUR 477) and maximum BGN 3 750 (around EUR 1 917).
The new maximum income for social security purposes of BGN 3 750 (in year 2023 –
BGN 3 400) is also valid for all persons working under employment contract.
The minimum social security income is equal to the minimum salary in Bulgaria which is increased to BGN 933 compared to the 2023 amount of BGN 780.
The scope of persons subject to mandatory social security coverage now includes also the persons who perform activities on gathering of wild mushrooms and fruits. These persons will pay social security contributions at own expense based on 50% of the minimum salary and their contributions will be transferred by the state enterprise under the Forest Law to which they are subject to registration and which is also liable to deduct and transfer the alternative tax on their income under IITA.
For some types of businesses the employer’s contribution to Fund “Labour Accident and Professional Disease” has been increased (for instance from 0.09% to 1.1% for business activity on production of tobacco products, cargo storage and supporting transport activities).
The sick-leave days for which the employers are liable to pay compensation to their employees are now decreased from 3 to 2 days. For instance, if the employee is absent due to illness for 5 days, the employer will have to pay temporary unemployment compensation for the first and the second day, and the compensation for the rest of three days will be covered by the state social security.
The material herein is only of informative matter and does not represent consultation or advice. Should you wish to receive more information or assistance you may send us your inquiry through our Contact form below.
Income from rental of real estate received by tax non-residents
A change effective from 1 January 2024 eliminates a previous contradiction between two separate provisions of IITA – the first provision regulating the taxation of income from real estate rent received by tax non-residents no matter where the property is located (in Bulgaria or abroad) given that the rental payer is a person liable to deduct tax under IITA, and the second provision envisages that income tax is due only on income from renting out real estate in Bulgaria.
From now on tax under IITA will be due by tax non-residents receiving rental income from real estate located in Bulgaria only. The adopted approach takes into consideration the principle for taxation of non-residents only on income received from sources in Bulgaria as well as the general rules under double tax treaties which reserve the taxation rights over income from real estate for the state in which the property is located.
New tax allowance for transactions with financial assets, incl. crypto currencies
A new 10% tax allowance is introduced as a fixed deduction when calculating the taxable income from sale or exchange of financial assets. So far IITA did not envisage explicit option for deducting any transaction-related expenses incurred by individuals, incl. fees, commissions, etc.
Crypto currency transactions are explicitly added to the taxable dealings with financial assets subject to declaring. The aim of the revenue authority (National Revenue Agency – NRA) is to track more effectively and to be able to analyze the transactions on disposal with crypto currencies.
Wider scope of tax exempt income subject to annual reporting by employers to the NRA
Effective from 1 January 2024 employers are required to report information about additional types (in comparison to year 2023 – initially introduced only some types) of tax exempt employment income. The purpose of the reporting is to trace potential cases of tax avoidance through payments of remunerations in the form of tax exempt income (e.g. business trip allowances), cases of income misinterpreted as tax exempt, as well as better assessment of the actual employment income received by the employees.
The information about tax exempt employment income paid in year 2024 is subject to reporting in the beginning of year 2025.
Exemption of income from sale or exchange of movable property delivered to persons performing activities on collection, transportation, utilization or disposal of waste under the Law on Waste Management
Before the introduced exemption from tax of the mentioned income it was subject to one-off final tax. The change is in accordance with the local striving to achievement of the ecological goals as well as with the significant changes to the ecological policy of the European Union during the recent years.
New tax allowance for farmers
The persons registered as agricultural farmers will be able to use a new tax allowance in the form of deduction from their total annual taxable income base under IITA of the subsidies or other aids received from the European Agricultural Guarantee Fund and the European Agricultural Fund for Rural Development, in amount up to BGN 100 000 (around EUR 51 130).
A new alternative tax will be imposed on income from gathering of wild mushrooms and fruits
The persons who carry out activities on gathering of wild mushrooms and fruits will be subject to registration and issuance of permit to the respective state enterprises under the Forest Law. The state enterprises will be the persons liable to deduct and transfer to NRA on a quarterly basis the alternative income tax at amount of BGN 30 (around EUR 15) per month.
Changes to the social security legislation
Effective from 1 January 2024, there have been introduced increased amounts of minimum salary, minimum and maximum social security income, minimum unemployment compensation, etc.
The self-employed persons will be liable to payment of advance social security contributions based on monthly income between minimum BGN 933 (around EUR 477) and maximum BGN 3 750 (around EUR 1 917).
The new maximum income for social security purposes of BGN 3 750 (in year 2023 –
BGN 3 400) is also valid for all persons working under employment contract.
The minimum social security income is equal to the minimum salary in Bulgaria which is increased to BGN 933 compared to the 2023 amount of BGN 780.
The scope of persons subject to mandatory social security coverage now includes also the persons who perform activities on gathering of wild mushrooms and fruits. These persons will pay social security contributions at own expense based on 50% of the minimum salary and their contributions will be transferred by the state enterprise under the Forest Law to which they are subject to registration and which is also liable to deduct and transfer the alternative tax on their income under IITA.
For some types of businesses the employer’s contribution to Fund “Labour Accident and Professional Disease” has been increased (for instance from 0.09% to 1.1% for business activity on production of tobacco products, cargo storage and supporting transport activities).
The sick-leave days for which the employers are liable to pay compensation to their employees are now decreased from 3 to 2 days. For instance, if the employee is absent due to illness for 5 days, the employer will have to pay temporary unemployment compensation for the first and the second day, and the compensation for the rest of three days will be covered by the state social security.
The material herein is only of informative matter and does not represent consultation or advice. Should you wish to receive more information or assistance you may send us your inquiry through our Contact form below.