HOW TO SAVE FROM THE TAX PAYMENTS?
Usually, when it comes to asking ourselves how to pay smaller taxes, one typical interpretation in Bulgaria is how not to pay taxes at all. But this is not the best interpretation of the issue and it isn't the most economically efficient, either.
Obviously, the tax burden grows heavier every year, even though the rulers assure us they are making it smaller. They imposed a flat tax rate, but they cancelled the untaxable minimum amount and cut the size of deductible expenses. They deprived the municipalities of their right to get assigned taxes under the Law on Individuals Income and still allowed them to raise the other local taxes at their discretion.
However, there is no doubt that the society is pouring a growing amount of money in the state treasury and the trend is not going to change any time soon. This is certainly a premise for many people to simply refuse to pay all of their taxes or at least part of them.
Still, there is an alternative - to pay one's taxes using the preferences and concessions stipulated by the law. This saves you the fines you would pay if you get caught hiding or evading tax payments (the amounts differ for each tax). But on the other hand, concessions are so small that they can hardly satisfy the one who wants to evade the payment.
In accordance with the Law on the Individuals Income Tax, everyone who has filed an income tax return and has paid the whole tax amount or part of it by February 10 has a right to get a 5% discount of the paid amount. If you have missed the deadline, you still have a chance to profit by a reduction. By April 30, you can submit your tax return electronically and have the amount due cut by 5 per cent. You only need an electronic signature to do so.
According to the Corporate Income Tax Act, businessmen who submit an annual tax return and an annual financial report electronically by March 31 and pay the amounts due get a 1% reduction of the annual corporate tax due, provided the reduction does not exceed BGN1,000.
For those with patent operations there is a 5% reduction, too, provided they pay the tax due for the whole year in advance by April 30. Otherwise, this is the deadline by which the first and the second tax payments have to be made. Fines amounting to up to BGN500 can be imposed for not filing a tax form or for filing one beyond the deadline. The sanction for those who declare inaccurate data or circumstances that result in tax reduction or tax exemption goes up to BGN1,000.
A 5% tax cut is also provided in case you pay the whole tax due on real estate and household waste in advance by June 30. This is the deadline for paying the first and second tax instalment. For a basic residence everyone can get a 50% reduction of the tax on buildings, whereas disabled people pay 25% less than the amount due by the rest.
Taxpayers will also save money from the payment of motor vehicle taxes if they drive a catalyst car. Ivan Genchev, Head of the Revenues, Local Taxes and Fees Administration directorate at the Metropolitan Municipality, said that there are lots of cars of this type in Sofia and a 50% reduction of the tax due is provided for them.
Tax concessions are also available for those who make donations. According to the Law on Individual Income, up to 5% of the annual income can be donated to medical and cultural institutions, to institutions that provide care for children and injured people, the Bulgarian Red Cross, the Energy Efficiency fund, organisations and specialized institutions. So in practice you will pay taxes cut by 5 per cent. It should be noted, however, that you are not allowed to donate to individuals, people in the lowest income bracket, or disabled ones.
The concession goes up to 15% of the amount assessed when the donation is made for culture and up to 50% when it is made in favour of the Children Treatment Fund Centre.
Another method for saving taxes is to pay a voluntary insurance or a Life insurance. In this case, the amount of the annual tax base is reduced by the personal payments made in the course of the year for additional voluntary insurance as well as by the personal payments made in the course of the year for voluntary health insurance or payments on Life insurance agreements, the National Revenue Agency (NRA) explained.
Tax preferences are also allowed when you make personal payments for social security length of service prior to retirement. The practice is also known as acquisition of social security length of service. It requires that you are employed under a provisional agreement or labour contract and do not pay a patent tax. The payments you have to make amount to 22% of the minimum social security income for 2008 which is BGN240. You can profit by the right to buy social security length of service by the end of 2015. The instalments paid in the course of the year for acquisition of social security length of service are fully deducted from the taxable income. In order to profit by this preference, one needs to submit an annual tax return and attach copies of the documents that certify the payments.
All individuals including those operating as sole traders are eligible to children tax preferences. The NRA experts explained that the preference is fixed and is deducted from the amount of the annual tax base depending on the number of children raised in the family. For one minor child the taxable amount is reduced by BGN420; for two minor children the deduction is BGN840; for three or more minor children it goes up to BGN1,260.