With the adoption of the State Budget Act for 2025 (published in the State Gazette on 27th of March 2025), additions have been introduced in the areas of corporate income taxation, personal income taxation, and certain accounting disclosures.
I. Amendments in the corporate Income taxation
The following amendments in the corporate taxation are among the key ones:
1. Additional provisions are introduced to the ones related to the taxation for multinational enterprise groups and large-scale domestic groups with top-up tax and top-up national tax.
Amendmentshave been introduced regarding the calculation of the top-up tax. When entities within the same group apply identical accounting standards, the taxable period shall be the calendar year, rather than the fiscal year of the group.
In the case of secondary application of top-up tax, constituent entities of multinational enterprise groups in Bulgaria shall be subject to top-up taxation if:
- the ultimate parent entity is located in a jurisdiction where no top-up tax is due under the applicable primary top-up tax regime; or
- the ultimate parent entityis an excluded entity.
The secondary top-up tax shall be allocated equally among all constituent entities of the multinational enterprise group in Bulgaria. This tax shall not apply to investment constituent entities.
It is further provided that constituent entities of multinational enterprise groups in Bulgaria shall be subject to secondary top-up tax if:
- their ultimate parent entity is located in a low-tax jurisdiction outside the EU; and
- have not been taxed with primary top-up tax.
The tax shall be allocated equally among all the constituent entities in Bulgaria. The rules shall not apply to investment entities.
Additional amendments have also been made to the top-up tax rules to ensure alignment with the latest guidance of the Organisation for Economic Co-operation and Development on the interpretation and application of such rules.
2. Amendments concerning de minimis tax relief under CITA have been introduced, pursuant to the Commission Regulation (EU) 2023/2831 dated 13th of December 2023 on the application of Art. 107 and 108 of the Treaty on the Functioning of the European Union to de minimis aid.
The maximum of the de minimis aid has been increased to EUR 300,000.
The provisions regarding the top-up tax and domestic top-up tax applicable to multinational and large domestic groups (point 1), as well as the de minimis tax relief in compliance with Regulation (EU) 2023/2831 (point 2), are substantial. Their importance requires a separate, detailed analysis.
3. Pursuant to § 4 of the Transitional and Final Provisions of the State Budget Act, legal entities are allowed to make voluntary contributions to the central government budget in support of public investments provided for in the State Budget for 2025.
Such contributions shall be recognized for tax purposes under CITA – one-third of the contribution amount may be deducted in each of the three subsequent calendar years. In this case, the non-deductibility rule for donations under Art. 26, item 7 of the CITA shall not apply.
Where the contribution is not accounted for as an expense, the accounting financial result shall be reduced by them in the above amount and period for the purposes of determination of the corporate tax.
II. Amendments in the personal income taxation
The amount and application mechanism of the tax reliefs for children and children with disabilities remain unchanged for 2025. These reliefs are applied as deductions from the annual taxable amount, as well as reductions to the monthly taxable amount for income from employment relationships.
Clarifications and amendments have been introduced regarding the right to claim child tax reliefs by a parent who has not been granted parental rights in cases of divorce or when the parents are not married. The amendments aim to define and clarify the order of priority in claiming these tax reliefs by both of the parents.
III. Amendments to the AA
It is provided in the requirements under which branches of enterprises regulated by the legislation of third countries, shall publish a declaration with information on income/corporate tax for the second of two consecutive reporting periods, that the amount of net income from sales should not exceed the threshold under Art. 19, para. 3, i. 2 of the AA for each of the last two consecutive accounting periods – threshold of BGN 20 000 000 (and not, as before, the threshold of BGN 16 000 000).
Also, the provisions concerning the publication on the website of the obliged enterprise of declaration with information on income/corporate tax and the statement of medium and large subsidiaries under Art. 62d related to Art. 62b, para. 5 and 7 of the AA have been amended and clarified.
The present article is for information purposes only. It is not a (binding) legal advice. For a thorough understanding of the subjects covered and prior acting on any issue discussed we kindly recommend Readers consult Ilieva, Voutcheva & Co. Law Firm attorneys at law.
