Law on taxes on the income of natural persons
Personal Income Tax Act, Taxable income, Taxable person (last amended Dec 2015 / Extract)
Subject Matter of the Act
Personal Income Tax Act – Art. 1. This Act shall regulate the taxation of natural persons, including their income from activity as a sole proprietor.
Object of Taxation
Personal Income Tax Act – Article. 2. The object of taxation under this Act shall be the income of local and foreign natural persons.
Personal Income Tax Act
Personal Income Tax Act – Arti. 3. The taxable persons under this Act shall be:
1. Taxable person – the local and foreign natural persons that are bearers of the obligation to pay taxes under this Act;
2. Taxable person – the local and foreign persons that are obligated to withhold and pay taxes under this Act.
Local Natural Persons
Personal Income Tax Act – Artic. 4. (1) Regardless of the citizenship thereof, a local natural person shall be a person:
1. Taxable person – whose permanent place of residence is in Bulgaria, or
2. Taxable person – who spends inside the territory of Bulgaria more than 183 days in each period of 12 consecutive months, or
3. Taxable person – 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. Taxable person – 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.
(3) For para. 1, item 2 the period of stay in Bulgaria for the sole purpose of receiving education or medical treatment shall not be regarded as a period of stay in Bulgaria.
(4) For paragraph 1, item 4 the person shall have his/her centre of vital interests in Bulgaria in those cases where the interests of the person are closely connected with the country. In the course of determining those interests, the following may be taken into consideration: the family, the property, the place in which the person carries out his/her employment, professional or business activity, and the place from which he/she manages his/her property.
(5) A taxable 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
Personal Income Tax Act – . 5. Foreign persons shall be the ones who are not local persons within the meaning of Art. 4.
Tax Obligations of Local Natural Persons
Personal Income Tax Act – Ar. 6. Local 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
Personal Income Tax Act – Art. 7. Foreign persons shall be bearers of the obligation to pay taxes on income originating from sources located within Bulgaria.
Income from Sources within the Republic of Bulgaria
Personal Income Tax Act – Article. 8. (1) The income originating either from business activity through a certain establishment inside the territory 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 or from services provided in Bulgaria shall be income from a source in the Republic.
(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 Bulgaria.
(4) The income originating from the transfer of an establishment of a sole proprietor, registered in BG, shall be income from a source in the Republic, 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 in BG, 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 Bulgaria, shall be income from BG:
1. indemnities and compensations realized in lieu of or along with other income originating from a source in the Republic;
2. pecuniary and non-pecuniary awards in games and competitions, these awards not being provided by an employer or an assignor;
3. remuneration other than remuneration under employment legal relationships paid to an employee or a member of the management or supervisory body of a Bulgarian legal entity, or a branch of a foreign person, an employee in a commercial representative office of a foreign person, or any other person performing identical or similar functions;
4. interest, including interest under a lease contract;
5. income originating from rent or any other granting of the use of movable or immovable property;
6. remuneration under franchising contracts and factoring contracts;
7. author’s and licence remuneration;
8. remuneration for technical services;
9. remuneration under enterprise management contracts and supervision contracts;
10. study grants in the state and abroad;
11. income from social insurance and insurance.
(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 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 for Bulgaria.
(9) The income originating from agriculture, forestry, game husbandry and fish industry inside the territory of the country shall be income for BG.
(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 in the country.
(11) Penalties and compensations of any kind, except for insurance reimbursements accrued from local legal persons, local sole entrepreneurs or foreign legal persons through a place of economic activity or certain base in the country in favour of foreign persons established in jurisdictions of preferential tax regimes, shall be income in the country.
(12) 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 Act 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 Act.
(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.
Art. 12. (1) Taxable income – Taxable income under this Act 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) Taxable income – In those cases where this Act provides for a deduction of expenses, the expenses determined under this Act shall be taken into consideration in determining the taxable income originating from the respective source.
Taxation of Income
Art. 14. (1) Taxable income – 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 for the income from business activities as a sole trader and the income from another business activity under Art. 29a.
(2) Taxable income – Income from business activities as a sole trader shall be charged by tax on the annual basis of taxation as per Art. 28. and the income from another business activity under Art. 29a
(3) Taxable income – 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 Local Taxes and Fees Act. Regarding income from other activities, persons shall be taxed pursuant to this Act.
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 Act.
(2) In determining the taxable income, the following income shall not be included: the income subject to a final tax under this Act and the income subject to a final tax under the Corporate Income Tax Act, as well as income, subject to taxation by patent tax pursuant to the Local Taxes and Fees Act.
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 Act.
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