Taxes on expenses
Under Bulgarian tax law, 10% tax rate is levied within three main expenditure groups:
- The expenses of representation relating to the activity;
- Social expenses provided in kind to workers and employees (food vouchers, voluntary pension, health and other insurance, life insurance);
- The expenses connected with the operation of vehicles in those cases where managerial activity is performed therewith.
Art. 211 defines the basis of taxation for the tax on expenses of representation - these are expenses charged for the respective month.
Art. 212-214 determine the basis of taxation for social expenses - social expenses provided in kind are reduced by the income related to such expenses. The basis of taxation for the tax on social expenses for contributions for additional social insurance and life premiums is the excess of these expenses over BGN 60 per month per each employee. In the case of food vouchers, the basis of taxation is equal to the excess of these expenses over BGN 40 per month per each employee.
Art. 216 sets a tax rate of 10 per cent.
As of 01.01.2013, the tax on expenses is accrued on the annual basis of taxation and is paid once until 31 March of the following year. The amendment of the tax law valid until 31.12.2012 provides for tax assessment and payment on a montly basis until the 15th day of the month following the month in which the expenditure has been charged.
Tax on expenses connected with transport vehicles in Bulgaria
To be deductible, the expenses associated with the operation, repair and maintenance of vehicles, must be incurred in connection with the activities of persons vested in the management of the enterprise. Under Bulgarian law, such activities include: the supply of materials related to the main activities of the enterprise; transport of official correspondence, finances and other similar activities serving the administrative managerial personnel; advertising and marketing; conclusion of contracts; training and other.
Next, Bulgarian tax law requires to demonstrate that these activities are in actuality used in the management of the enterprise. Documenting and reporting of transport expenses should be carried out in strict compliance with the Accounting Act and the applicable standards - the incurred expenses need to be evidenced by an invoice for the goods or services for which they are made, as well as accompanied by a roadmap.
CITA introduces no restriction on whether the transportation is carried out by own or rented cars.
Art. 215 determines the basis of taxation for the expenses associated with maintenance, repair and operation of transport vehicles - expenses assessed during the calendar year for maintenance, repair and operation, decreased by the assessed income from insurance indemnities relating to the transport vehicle. These are: fuel, lubricants, spare parts and repair work, including automotive painting services, technical examinations, automotive accessories and cosmetics, parking.
However, this type of expenses does not include expenses for:
- Taxes, fees and insurance of vehicles;
- Salaries and benefits of drivers;
- Interest on leases of the vehicles;
- The cost of renting the vehicles;
Not subject to taxation are social expenses (in kind) of transportation of workers and employees, and the persons employed under management and supervision contracts from the place of residence to the place of work and back, organized by an employer.
Where the cars are used for the personal needs of owners, partners, managers and members of staff, these expenses are not treated as staff-related and are to be added to the financial result in the manner provided for in CITA.