Bulgaria: New Regulations On Personal Use Of Company Assets In Bulgaria

Last Updated: 7 November 2016
Article by Stiliyan Vladimirov

The long-awaited clarification on the personal use of company assets - widely known as the "weekend tax"- is now in force.

How company assets can be used in a personal capacity in Bulgaria is determined by both enterprise taxation rules and those affecting the personal income of the employees or manager.

Tax on personal use of company assets

Recently adopted in Bulgaria, this long-awaited clarification to what is widely known as the "weekend tax" was introduced through a change in the local tax acts, thus affecting both taxation of the enterprises and personal income tax for the employees/manager benefiting from the personal use.

The changes were anticipated by the business community, as immediately following the tax authorities' launch of the "weekend tax" campaign at the start of 2016, many aspects remained unclear. Specifically there was uncertainty around calculations, reporting, declaring and taxing of the use of company goods and services for personal purposes.

Following internal discussions and assessments, the Bulgarian tax authorities promoted their idea to decrease the administrative burden for business. The changes are retroactive, thus in force as of 1 January 2016.

Introduction of a one-off 10% tax on personal use

Through the new legislation the Bulgarian parliament allows businesses to make a choice:

  • to consider the use of goods and services for personal purposes as part of the income of the employees/managers (and respectively, include this income in payroll for tax and social security purposes) or
  • to pay a 10% tax over the costs related to the personal use, and not consider these costs as part of the income of the respective physical person.

The enterprises must choose one of the above options with the submission of their annual tax return. This means enterprises may make different choices on annual basis.

If the enterprise chooses to consider these costs as income for the employees/managers, it will be required to report them on a monthly basis as part of their payroll. On the other hand, if the enterprise prefers to tax these costs with the newly-introduced tax, it will have to declare it and pay on an annual basis, by 31 March of the following year.

From an enterprise perspective, allowing one-off taxation may bepreferred as it will decrease administrative efforts for reporting, declaring, payment and practically everything related to tax compliance in terms of personal use of company assets.

However, each company will have to consider and decide on annual basis which approach will be the best for their circumstance.

In view of the specific character of the retroactive change, companies will be allowed to apply a different treatment of these costs in the different parts of the 2016 calendar. Thus, if they have treated these costs as personal income of the employees before the new legislation was promulgated, they may keep this approach until the end of 2016, or change it from 1 October 2016 based on the new rules; and start paying 10% tax on the costs until the end of the year.

Taxable base of the one-off tax

Another positive change introduced by the Bulgarian authorities is the optional rules for calculating the taxable base of the one-off tax over the costs related with personal use of goods and services.

When defining those optional rules, the parliament introduced three main groups of assets subject to personal use by the employees/managers:

  • cars
  • real estate and
  • other assets (any assets not covered by the other two groups)

For each of these groups, the authorities propose different calculation methods that seem to provide enough options and freedom for the enterprises to choose the one that best suits their organisation:

Cars

If a car is used both for company and personal purposes, the enterprise can choose to consider either the kilometres or the number of hours in which the employee/manager has used the car for personal purposes, when calculating the one-off tax.

Alternatively, if the employer is willing to avoid the additional administration that would be required to introduce the respective monitoring, the tax authorities will accept a 50:50 split between company usage and personal usage. This means that if an enterprise introduces this split it will not be required to maintain travel sheets showing for example, the exact time or the exact kilometres in which the employee/manager used the car for, company/personal purposes. This split seems very attractive in view of the easy administration that it offers, however for enterprises that do control the usage of company cars and limit personal use (if any at all), any such split may not be such a good option.

Real estate

If real estate is used both for company and personal purposes the enterprise has the choice to consider either the size of the property area, or the hours in which the employee/manager has used the real estate for personal purposes, when calculating the one-off tax.

Other company assets

All other assets will be covered by one common rule stating that 20% of costs related to such assets should be considered as such related to personal use (irrespective of the actual use of these assets). The enterprise is allowed to prove and apply a different taxable base without such being proposed in the legislation. Considering the broad range of assets that fall within this group (company phones, computers and laptops, tablets, etc.) the enterprises should decide if the administration related to proving the different taxable base for this third group of assets is worth it, or if they will simply apply the 20% rule.

VAT treatment

The new rules are now in force and the enterprises should consider a consistent approach for VAT purposes. At this stage, the criteria in the VAT Act is not identical and enterprises should expect additional clarifications from the tax authorities. There are proposed changes of the VAT Act but these are still under parliamentary discussion and there is no final decision at the time of publishing (particularly on the 50:50 split where the EU derogation procedure should be completed in advance).

Nevertheless, the general VAT rule should remain until the new legislation comes into force: VAT credit is allowed only on purchases which are used for taxable supplies. Thus, if goods and services are used for personal purposes the enterprises will be obliged to self-charge VAT on the same cost, as the personal use of the goods and services is not part of the economic activity of the enterprise. While this is not a new rule one may expect that the local tax authorities will monitor it with greater diligence, in view of the ongoing campaign targeting the personal use of company assets.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Events from this Firm
3 Oct 2019, Webinar, Rotterdam, Netherlands

To view this Webinar in full click here

24 Oct 2019, Business Breakfast, London, UK

Join TMF Group and ACCA for breakfast and a briefing session dedicated to the latest VAT changes and how they affect the UK.

21 Nov 2019, Conference, Shanghai, China

Retail remains a significant growth opportunity even as GDP slows, but the challenge of recruiting and retaining quality staff must never be underestimated and managing these issues successfully can define the winners and losers. TMF Group’s 2019 Annual Retail Summit in Shanghai brings together industry professionals to share opinions on the key differentiators that can lead to achieving growth targets and maintaining momentum for your retail business in China.

 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions