Taxes on income from compensation, interest, intellectual property and others
Taxable income originating from incidental transactions and other sources is regulated by the Income Taxes on Natural Persons Act (ITNPA).
Taxable income from incidental transactions and other sources
According to Art. 35 ITNPA the taxable income is the gross amount of the taxable income received during the year of taxation originating from:
- compensation for loss of profit and indemnities of that nature;
- pecuniary and non-pecuniary awards in games and competitions, these awards not being provided by an employer or an assignor;
- interest, including the interest contained in lease instalments, except the interest on commercial banks deposits (Art. 38 (13) ITNPA);
- production dividends from cooperative societies;
- the exercise of intellectual property rights as a legal successor;
- any other sources that have not been explicitly specified in the ITNPA and are not subject to final taxes under the Act or to final taxes under the procedure set forth in the Corporate Income Tax Act - Art. 35 ITNPA
Determination of the basis of taxation
Depending on the income received, the basis of taxation is equal to:
- instalments received under a lease contract; in cases where the instalments also include interest, the latter is subject to a single tax.
- the gross amount of remuneration received by the franchise-grantor under a franchising contract;
Pursuant to Art. 35 ITNPA, taxable is only the income under lease, franchising and factoring contracts that is received by natural persons that have Bulgarian citizenship. Income received from foreign natural persons is taxable by final tax under Art. 37 ITNPA.
The annual basis of taxation of other sources is determined by decreasing the taxable income referred to in Art. 35 received during the year of taxation by the contributions due by the person at their own expense during the year of taxation. The basis of taxation is further decreased by the tax relief provided in the ITNPA:
- Tax relief for persons with reduced working capacity (Art.18 (1) ITNPA).
- Tax relief for personal contributions for voluntary insurance (Art. 19 (1) ITNPA).
- Tax relief for personal contributions for personal contributions for insurance length of service (Art. 20 ITNPA).
- Tax relief for donations (Art. 22 ITNPA). It should be noted that the tax reliefs do not include the contributions under the Social Insurance Code.
Calculation and declaration of the tax
The tax on income of natural persons under Art. 35 is 10%.
The annual tax declaration must be submitted by 30 April of the year following the year for which the tax is due. To this declaration the person needs to attach the official certificates issued by the income payer - Art. 45 (7) and Art. 50 ITNPA.
A 5 percent discount is enjoyed by persons who submit the annual tax return by 10 February on the tax remaining to be paid under the annual tax return within the same period, as well as those who submit the annual tax return by 30 April electronically, and also the natural persons obligated to pay advance tax who have paid the full tax amount due within the time limits under Art. 67 ITNPA.
Time limits and venue of payment of the tax
The annual tax due is payable by 30 April of the year following the year in which the income was received. The tax is paid into the state budget by crediting the account of the territorial directorate of the National Revenue Agency by the address registration of the local natural person, including that of sole proprietors.The tax due by a foreign person who has received income by proxy having their residential address within the country is paid into the state budget by crediting the account of the territorial directorate of the National Revenue Agency by the residential address of the proxy. In those cases where it is impossible to determine the venue of contributing the tax, it is paid into the state budget by crediting the account of Sofia Territorial Directorate of the National Revenue Agency.