As the end of the calendar year is approaching and the holiday period is around the corner, we emphasize below on the key points from an HR and payroll perspective that should be considered by companies or planned in advance in view of the employer’s year-end obligations.
Transfer of unused paid leave
As the year draws to a close, employers need to deal with the transfer of the remaining days of their employees’ annual paid leave. The days have been granted to them, but they were not able to make full use of them throughout the year. In view of this, the Bulgarian labor law provides for the opportunity for the employees to carry forward the unused days. Annual paid leave entitlement expires within a period of two years after the end of the year for which it was due.
By 31 January 2025, employers shall notify their employees through written notification about paid leave days they are entitled to use during the calendar year 2025, including unused paid leave days brought forward from previous calendar years. The employer is entitled to urge employees to use their annual paid leave at any time after expiry of the year for which it was due, subject to complying with the respective procedure prescribed by the law.
Report overtime work for 2024 to the Labor Inspectorate
As part of the planned actions, the employers should also include in their agenda the approaching deadline for overtime reporting. The overtime performed by the employees during the calendar year 2024 is subject to reporting to the Labor Inspectorate by 31 January 2025. It is important to note that the employer is obliged to maintain a special overtime book with information for the overtime performed by the employees.
Annual personal income tax reconciliation and determination of the tax due by the employees
By 31 January 2025, the employers have the responsibility to calculate the final personal income tax base and determine the annual personal income tax due by their employees when as at 31 December 2024 they have the capacity of main employer.
The annual personal income tax base shall include the employment income from a previous employer when the employee has been hired during the year, as well as the employment income for additional work under a second employment agreement. The income received from other employers during the calendar 2024 shall be taken into account in case the employees have provided their main employer with an Income Statement under Art. 45 of the Personal Income Tax Act (PITA).
Tax Relief for Children
Pursuant to the PITA, the employees who have children could decrease their tax base and, respectively, the tax due by benefiting from tax relief for children. There are two possibilities to request tax relief – by submitting an annual tax return under Art. 50 of the PITA or, alternatively, through the employer.
The employees, who would like to use the tax relief for children through their employer, should meet certain conditions and provide the following documents to the employer by 31 December 2024:
- Declaration for tax relief for children pursuant to Art. 22c (чл. 22в), Para 8 of the PITA
- Written statement that the employee, at the time of its submission, is not subject to any enforcement procedures for unpaid public liabilities.
The employer should make the necessary calculation and transfer the refund to the employee by 31 January 2025.
Employee eligibility criteria:
- A Bulgarian tax resident for 2024
- Having a child / children under 18 years old
- Not deprived of parental rights
- No enforcement procedures for public liabilities.
Tax relief for voluntary insurance contributions, voluntary life insurance and donations
The annual taxable base shall be reduced by the personal voluntary pension insurance contributions of up to 10% from the annual taxable base and with the voluntary health insurance contributions and premiums/contributions under life insurance contracts of up to 10% from the annual taxable base in total when the contributions have been deducted from the monthly net salaries and paid through the employer during the monthly payroll cycles.
The annual taxable base is also reduced with the tax relief for donations when it is processed by the employer through the monthly payroll.
The tax reliefs above apply if the employees provide their employers by 31 December 2024 with the respective documents from the pension/health/life insurance provider evidencing their right to apply the tax relief and documents, certifying that the gifted person is one of those listed in Art. 22 of the PITA (e.g., health institution, Bulgarian Red Cross, etc.) and that the amount of the donation has been received.
In addition, the employees shall provide their employers with a written statement that they are not subject to any enforcement procedures for unpaid public liabilities in order to use the tax relief on an annual basis.
Annual year-end reporting of income paid to employees and non-employed individuals
The submission of an annual reporting form under Art. 73, Para 1 and 6 of the PITA is among the obligations which companies should keep in mind after the holiday season. The obligation to report the taxable employment income, the tax and social security contributions withheld in the respective tax year is due by 28 February 2025. In addition, certain non-taxable income is also subject to reporting, such as:
- Food vouchers up to BGN 200 monthly
- One-time payments provided to the employees at the expense of the social costs in case of childbirth or child adoption, marriage, death of a family member, which are exempt from taxation with personal income tax of up to BGN 2,400 per year
- Per diem allowances, up to twice their amount, are reportable when the total annual payment to the individual exceeds 1,000 BGN.
- Monetary compensation and aid paid on the grounds of the provisions of the Social Security Code, including the first two days from the sickness leave paid by the employer
- Monetary awards paid by the employer on the grounds of a legal act, exempt from taxation with personal income tax
- Monetary compensation provided under the provisions of the Labor Code, exempt from personal income taxation, such as: compensation in case of damage to the employees’ health; compensation for relocation of an employee to another workplace; compensation in case of termination of the employment relationship due to illness or retirement, as well as compensation for damages caused to employees
- Other non-taxable income provided by the employer to the respective employees, if any, which does not include the benefits provided in-kind.
The same deadline applies for annual reporting obligation related to income paid to non-employed individuals.
Tax residency positions and reporting forms under Art 73a, Para 5 of the PITA
It is important to review the tax residency positions of those employees who might be tax residents of another country, for example, posted employees, employees who work from abroad, etc.
We remind that all employers should report the taxable income paid to individuals who are not Bulgarian tax residents but are tax residents of another EU Member State by filing a notification under Art. 73a, Para 5 of the PITA which is due by 30 April 2025.
Determine these positions early to ensure accurate reporting and sufficient time for verification.
Individual personal income tax return obligations
HR professionals should address any employees with cross-border work arrangements during the calendar year 2024, as they likely have a tax return filing requirement for 2024. The deadline for filing of tax returns in Bulgaria will be 30 April 2025.
Additionally, it is advisable to inform employees in companies with active share-based plans that they have an obligation to report capital gains, dividends, and shares held abroad by 31 December 2024.
