Significant amendments to the Local Taxes and Fees Act (LTFA) were adopted in late December 2023, as follows:
Introduction of amendments regarding tax relief for buildings that have received energy performance certificates
Buildings that were put into operation before January 1, 2005, and have received energy performance certificates under the Energy Efficiency Act (EEA) are exempt from the real estate tax under the following conditions:
- Certificates with an energy performance class “A” are exempt for a period of 6 years starting from the year following the year of issue of the certificate.
- Certificates that certify the technical requirements for a “building with near-zero energy performance” within the meaning of the EEA, in the existing state of the building, are exempt for a period of 10 years from the year following the year of issuance of the certificate.
Buildings that were put into operation between January 1, 2005, and December 31, 2023, and have received certificates under the EEA, affirming that they meet the technical requirements for a “building with near-zero energy performance” in their current state, will also be exempt from the tax. This exemption applies for a duration of 10 years starting from the year following the issuance of the certificate.
The objective is to align the tax reliefs related to the energy efficiency of buildings with the energy efficiency policies, targets, and measures outlined in the Energy Efficiency Act (EEA) and its implementing regulations.
The entitlement to tax exemption for buildings with certificates under the EEA, which was exercised prior to the amendments to the LTFA, remains valid until the expiration of the current certificate. However, the total duration of exemption for the respective building cannot exceed 10 years.
Starting from January 1, 2024, buildings that have obtained energy performance certificates for classes “B”, “C”, and “D” under the Energy Efficiency Act (EEA), and for which the exemption right was not exercised before the LTFA amendments, will not be exempt from property tax.
These amendments to the LTFA become effective on January 1, 2024.
Introduction of templates of applications and documents under the LTFA
The applications pertain to documents issued by municipalities for recognizing, exercising, or extinguishing rights or obligations related to local taxes. These templates are endorsed by order of the Minister of Finance, based on proposals from the National Association of Municipalities and in consultation with the Minister of e-Government. The objective is to prevent errors and the collection of unnecessary information, while also reducing the administrative burden for both individuals and the administration.
The amendments entered into force on 01.01.2024.
Introduction of ex-officio inclusion of circumstances stored in registers pertinent to tax determination
Municipal administration officials will ex officio record changes from the real estate property registrar, cadastral map, and municipal registers, including those related to building reconstruction, changes in building use, and other relevant tax-related circumstances. Individuals or legal entities will receive notice within 30 days. This initiative aims to lessen the burden on individuals. The changes will be effective from January 1, 2025.
Amendments to Ship Transport Vehicle Tax
A clarification is made regarding the inclusion of ships listed in the registrar books of small and large ships under the Bulgarian flag in the scope of vehicle tax. This change will be effective from January 1, 2024.
Furthermore, it is specified that the amount of tax for ships will be determined by municipal administration officials based on data from the registrar of ships sailing under the Bulgarian flag, maintained by the Executive Agency “Maritime Administration”. This change aims to streamline the process through automated links for determining transport vehicle tax. It will come into effect on January 1, 2025. By December 31, 2024, the Executive Director of the Executive Agency “Maritime Administration” and the Minister of Finance will ensure the technical feasibility of this process.
The language concerning the assessment of the tax in the City Council Ordinance has been enhanced in terms of:
- small crafts, “excluding yachts, jet skis and other vessels for sport, tourism and recreation” – in force as of 01.01.2024;
- large ships, “excluding yachts and other vessels for sport, tourism and recreation, tugs and pushers“ – in force as of 01.01.2024;
- “sailing and motor yachts and other vessels for sport, tourism and recreation” – in force as of 01.01.2024;
- “river non-self-propelled vessels” with the criteria “deadweight” and introduction of its definition – in force as of 01.01.2025.
Scooters are excluded from the above list with effect since 01.01.2024.
Introducing Amendments to the License Tax Regulations
Amendments to the License Tax: Expansion to Include Mass-Catering and Entertainment Establishments
Legal entities engaged in activities listed under item 2 of Annex No 4 to the LTFA, such as mass-catering and entertainment establishments, are now subject to the license tax. This measure is aimed at combating the shadow economy.
These amendments will be effective from January 1st of the year following the year in which the European Commission determines that the measure is not State aid or is compatible State aid.
Additionally, another set of amendments involves raising the turnover threshold below which individuals or legal entities are liable for the annual license tax under the LTFA. The turnover for the previous year should not exceed BGN 100,000.
The same threshold applies in the following cases:
- When an individual terminates an activity under the LTFA within 12 consecutive months and/or establishes a new enterprise engaging in such activity, and the combined turnover of the two enterprises exceeds this threshold for 12 consecutive months. Taxation is conducted under the Personal Income Tax Act (PITA).
- When, within the current tax year, the turnover of an individual or legal entity surpasses this threshold, or when the individual or legal entity registers under the Value Added Tax Act. Taxation is then governed by the general rules of the PITA or the Corporate Income Tax Act (CITA), respectively.
The amendments regarding the thresholds for the license tax took effect on January 1, 2024, with the exception of the reference to the Corporate Income Tax Act (CITA), which will be in force from January 1st of the year following the year of the European Commission’s ruling.
Clarification of the description of a construction with code M1 in Annex No 2 to the LTFA
The description of the construction, as of 01.01.2024, is: “solid without reinforced concrete elements, solid with wooden beams or prefabricated panels (bungalows).”
The objectives declared by the legislator are:
- a clearer definition of the types of building construction to be established, in compliance with the available official information and case law;
- avoidance of the under-taxation of similar dwellings.
