According to Art. 50 of the Income Taxes on Natural Persons Act (“ITNPA”), residents - natural persons have the legally established obligation to submit an annual tax return (“ATR”) for their taxable income during the past tax year.
For tax purposes, whether a person will be defined as "resident" does not depend on his or her nationality. Pursuant to Art. 4, para. 1 ITNPA, a person is considered resident when he or she:
1) has a permanent address on the territory of the Republic of Bulgaria, or
2) is present within the territory of the State for more than 183 days during each 12-month period, or
3) has been sent abroad by the Bulgarian State, by its bodies and/or organizations thereof, by Bulgarian enterprises, and the members of his/her family, or
4) has his/her center of vital interests in Bulgaria
Please note that not all the above prerequisites need to be met for a person to acquire the status of "resident". It is enough that only one of them is fulfilled.
The non-resident persons are also obligated to submit an ATR, insofar as they have obtained income under items 1 and 2 of Art. 50, para. 1 ITNPA or have chosen to recalculate their final income tax under Art. 37 ITNPA. According to Art. 5, a non-resident - natural person is anyone who has not met any of the conditions under Art. 4, para. 1 ITNPA.
In case the income is accruing to persons who have not attained the age of 14 years, who have attained the age of 14 years but have not attained the age of 18 years, and persons placed under guardianship, the ATR should be submitted by their parents, respectively guardians or curators (Art. 50, para. 8 ITNPA). The ATR of deceased persons is to be submitted by their heirs by law or will and the legatees (Art. 50, para 9 ITNPA).
There are some categories of persons who are exempted from submitting an ATR, pursuant to Art. 52 ITNPA. First, exempt from such obligation are the persons who have received income only from employment relationships (Art. 52, para. 1 ITNPA). According to Art. 50, para. 3 ITNPA, the only exception to this rule is in case the resident and non-resident natural persons have acquired income from:
1) the legal relationships associated with the hiring of workers by a non-resident person, where the work is performed within the territory of the country, as well as the legal relationships on hiring of workers of a resident natural persons by a non-resident person, where the work is performed outside the territory of the country;
2) the legal relationships with partners and cooperative members, as well as with shareholders owning more than 5 per cent of the capital of the joint-stock company, for performance of work in person at the corporations and cooperatives wherein they are partners, cooperative members, or shareholders, outside the cases referred to in Art. 37, para. 1 ITNPA.
Furthermore, exempt from the submission of ATR are persons who have received income taxable with final tax under Art. 38 PITA, and foreign persons, whose income is taxed with final tax, unless the foreign person recalculates his final tax according to art. 37a PITA.
First, residents should declare the income acquired during the year, subject to taxation on the total annual tax base. According to Art. 17 ITNPA, the total annual tax base is the sum of the annual tax bases from employment income, income from other economic activity, income from rent or from other onerous provision for use of rights or property, income from transfer of rights or property, and income from other sources. The residents should determine the tax base for each income. The amount received from the separate annual bases should be reduced by the provided tax reliefs, according to art. 18 et seq. ITNPA.
If the economic activity is carried out as a sole trader, the income from it should also be included in the annual tax return. Please note that the taxable income from activity as a sole trader is formed under the Corporate Income Tax Act ("CITA"). However, the annual tax base is formed under Art. 28 ITNPA.
Secondly, residents should declare the income subject to patent tax and/or tax on taxi transportation of passengers under the Local Taxes and Fees Act, as well as the income from taxi transportation of passengers carried out by a natural person, but on behalf of a registered carrier.
Thirdly, the АТR should also include income from a source abroad from dividends, share in a liquidation surplus, exchange of shares and stakes of companies, supplementary voluntary insurance, interest on loans from bank accounts and acquired taxable cash prizes and merchandise awards awarded at competitions and contests.
Next, the shares and participating interests held in corporations, a permanent establishment, a fixed base and immovable property abroad should also be included in the ATR.
Lastly, residents should also claim their income from granted or received loans. However, pursuant to Art. 50, para. 1, item 5, letters "a - d", cash loans should be included in the declaration only if they have passed certain amount, e.g. BGN 10,000 outstanding part of a cash loan granted during the tax year.
The ATR is submitted from 10 January to 30 April of the year next succeeding the year of acquisition of the income. The only exception is the ATR for the persons submitting an annual report on their activity in a merchant capacity within the meaning of the Commerce Act (Art. 51, para. 1 PITA), including sole traders, and the natural persons registered as farmers (Art. 29a PITA). They should submit the ATR between 1 March and 30 June of the year following the year next succeeding the year of acquisition of the income.
Errors in the declared data and circumstances, the taxable amount and the liability for tax can be corrected once after the expiration of the deadline for submission of the ATR, until September 30. The changes are made by submitting a new declaration (Art. 53, para. 2 PITA).
There are two options for submitting the ATR - on the spot, in the territorial directorate of the National Revenue Agency ("NRA"), or online. The competent territorial directorate of the NRA for the acceptance of the ATR is the one at the permanent address of the resident (Art. 54 PITA). The ATR should be submitted in person. However, when the declaration of a foreign person is submitted through a proxy, this is done in the territorial directorate of the NRA at the permanent address of the proxy.
However, more and more people prefer to submit their declaration online through the NRA system. In addition to saving time, those who submit their ATR by 31 March will have a 5% discount on the top-up tax if they have no public obligations subject to enforcement at the time of filing the declaration. However, the total amount of the used discount cannot exceed BGN 500.
Additionally, the information of persons who have a personal identification number ("PIN") or a qualified electronic signature ("QES") is automatically generated from the NRA website for their income from employment, civil contracts and fees, subsidies, paid to farmers, and rental income for properties whose tenants are legal entities. This facilitates the completion of the ATR and attracts more and more individuals to the online service.
Any natural person who fails to submit their tax return on time shall be liable to a fine of up to BGN 500 (Art. 80, para. 1 PITA) unless they are subject to a heavier sanction. In case of repeated violation, the fine is up to BGN 1,000.
Any natural person who fails to declare the cash loans granted or received by him/her shall be liable to a fine in the amount of 10% of the undeclared amounts (Art. 80a, para 1 PITA). In case of repeated violation, the fine is 15% of the undeclared amounts.
In case of failure to meet their obligations, the individuals shall be liable to an administrative penalty in the amount, specified in the PITA. Violations are established by a revenue authority and the penalty decrees are issued by the executive director of the NRA or an official, authorized by him. Their compilation, appeal and implementation are carried out in accordance with the Administrative Violations and Penalties Act (“AVPA”).