Law on taxes on the income of natural persons (Bulgarian personal income tax act)

(Extract)

Subject Matter of the Law

Art. 1. This Law shall regulate the taxation of natural persons, including their income from activity as a sole proprietor.

Object of Taxation

Art. 2. The object of taxation under this Law shall be the income of local and foreign natural persons.

Taxable Persons

Art. 3. The taxable persons under this Law shall be:

1. the local and foreign natural persons that are bearers of the obligation to pay taxes under this Law;

2. the local and foreign persons that are obligated to withhold and pay taxes under this law.

Local Natural Persons

Art. 4. (1) Regardless of the citizenship thereof, a local natural person shall be a person:

1. whose permanent place of residence is in Bulgaria, or

2. who spends inside the territory of Bulgaria more than 183 days in each period of 12 consecutive months, or

3. who resides abroad on assignment of the Bulgarian State, its authorities and/or its organizations, or Bulgarian establishments, and the members of his/her family shall also be local natural persons, or

4. who has his/her centre of vital interests in Bulgaria.

(2) For the purposes of para. 1, item 2 the person shall be regarded as a local one for the year during which his/her stay exceeds 183 days. The day of entering the country and the day of leaving the country shall be regarded as days of stay within the country.

(5) A person who is permanently residing in the country, however, his/her centre of vital interests is not located in the country, shall not be a local natural person 

Foreign Natural Persons

Art. 5. Foreign natural persons shall be the ones who are not local persons within the meaning of Art. 4.

Tax Obligations of Local Natural Persons

Art. 6. Local natural persons shall be bearers of the obligation to pay taxes on income originating from sources located either within the Republic of Bulgaria or abroad.

Tax Obligations of Foreign Natural Persons

Art. 7. Foreign natural persons shall be bearers of the obligation to pay taxes on income originating from sources located within the Republic of Bulgaria.

Income from Sources within the Republic of Bulgaria

Art. 8. (1) The income originating either from business activity through a certain establishment inside the territory of the Republic of Bulgaria or from disposal of the property of such an establishment shall be income from a source in Bulgaria.

(2) The income originating either from performance provided inside the territory of the Republic of Bulgaria or from services provided inside the territory of the Republic of Bulgaria shall be income from a source in the Republic of Bulgaria.

(3) The income originating from dividends and liquidation shares in local legal entities and unincorporated companies, including joint venture contracts shall be income from a source in the Republic of Bulgaria.

(4) The income originating from the transfer of an establishment of a sole proprietor, registered in the Republic of Bulgaria, shall be income from a source in the Republic of Bulgaria, regardless to whether the transferor is a local person or not.

(5) Awards and remuneration for activity carried out inside the territory of the country by foreign natural persons – public figures, scientific workers, eminent figures in arts, culture and sport shall be income from a source in the Republic of Bulgaria, including those cases in which the income has been due or paid through a third person, such as an impresario agency, producer’s firm or another intermediary.

(6) The following income due/paid by local persons, or by a commercial representative office, or from a place of business activity or an establishment within the Republic of Bulgaria, shall be income from a source in the Republic of Bulgaria:

(7) The income referred to in para. 6 due by local legal entities or local sole proprietors through a place of business activity or an establishment outside the country or paid by local natural persons through an establishment outside the country shall not be income from a source in the country.

(8) The income originating from stocks, shares, compensatory instruments, investment bonds and other financial assets emitted by the State, municipalities, local legal entities, unincorporated companies or from any forms of joint venture, as well as the income originating from transactions therein shall be income from a source in Bulgaria.

(9) The income originating from agriculture, forestry, game husbandry and fish industry inside the territory of the country shall be income from a source in Bulgaria.

(10) The income originating from the use, sale, exchange or any other transfer of immovable property, including the common indivisible parts thereof and limited property rights thereupon, the immovable property being located inside the territory of the country, shall be income from a source in the country.

(11) In determining the source of income under this Art. the place in which the income is paid shall not be taken into consideration.

Types of Income

Art. 10. (1) Depending on its source, the types of income under this Law are the following ones:

1. income from an employment legal relationship;

2. income from business activity as a sole proprietor;

3. income from other business activities;

4. income from rent or any other granting of the use of rights or property;

5. income from the transfer of rights or property;

6. income from sources referred to in Art. 35, as well as income taxable with final taxes under this Law.

(2) Depending on the form of payment, the income might be pecuniary or non-pecuniary income.

(3) In those cases where the income is in the form of foreign currency, it shall be calculated in BGN in accordance with the fixing rate of the Bulgarian National Bank as at the date of receiving the income.

(4) The value of non-pecuniary income shall be calculated in BGN as at the date of receiving the income, that value being the market price of the non-pecuniary income.

Taxable Income

Art. 12. (1) Taxable income under this Law shall be the income originating from all sources received by the taxable person during the year of taxation, with the exception of the income that is non-taxable by virtue of law.

(2) In those cases where this Law provides for a deduction of expenses, the expenses determined under this Law shall be taken into consideration in determining the taxable income originating from the respective source.

Taxation of Income

Art. 14. (1) The income referred to in Chapter Five received during the year of taxation shall be subject to a tax on the total annual basis of taxation, except the income from business activities as a sole trader.

(2) Income from business activities as a sole trader shall be charged by tax on the annual basis of taxation as per Art. 28.

(3) The income referred to in Chapter Six shall be subject to a final tax.

(3) Natural persons, including sole traders, shall be subject to a patent tax with regards to income from patent activities under the terms and following the procedures laid down in the Law for Local Taxes and Fees. Regarding income from other activities, persons shall be taxed pursuant to this Law.

Year of taxation

Art. 15. The year of taxation shall be the calendar year. 

Determining the Taxable Income and the Basis of Taxation

Art. 16. (1) The taxable income and the basis of taxation shall be determined separately for each source of income, in observance of the provisions of this Law.

(2) In determining the taxable income, the following income shall not be included: the income subject to a final tax under this Law and the income subject to a final tax under the Law on Corporate Income Taxation, as well as income, subject to taxation by patent tax pursuant to the Law for Local Taxes and Fees.

Total Annual Basis of Taxation

Art. 17. The total annual basis of taxation is the aggregate of the annual bases of taxation as per Art. 25, 30, 32, 34 and 36, decreased by the tax relief provided for in this Law.

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