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Tax relief for children

According to Art. 49, para. 1 of the Personal Income Tax Act, the employer shall, by January 31st of the following tax year, calculate the annual tax base (GAT), reduced by the provisions of para. 3 tax reliefs, and determines the annual amount of the tax, when as of December 31st of the tax year he is an employer under the main employment relationship of the employee. Al. 3 provides that the employer reduces the GDO with the tax reliefs under Art. 19 and 22, when the amounts have been withheld by the employer upon payment of the income from employment, as well as with the tax reliefs under Art. 18, 20, 22c and 22d of the Personal Income Tax Act, among which are the tax reliefs for children (art. 22c) and those for children with disabilities (art. 22d).

The employer is obliged to reduce the GDO with the specified tax reliefs, if the employee provides him / her with the required documents within November to 30th December 31st of the tax year, and with regard to the tax reliefs for children this is a declaration under Art. 22c, para. 8 of the Personal Income Tax Act, including the appendices thereto, as well as a written declaration that at the time of its submission to the employer there are no public obligations subject to enforcement.

It should be provided that the employer has no right to refuse to receive the submission of these documents, and in case it will be specified, he is obliged to adjust the change of the GDO by the amount of the respective relief. These laws are provided by the legislator for the convenience of people who over the years have earned income from the powers, providing the opportunity for rapid and efficient use within the legal period of service (until January 31st of the year) without the need to provide annual tax declaration to the NRA.

This year, the tax benefits for children and children with disabilities are significantly higher, which encourages more people to take advantage of them by submitting the necessary documents to their employer. Although the application of this mechanism for the use of tax reliefs is more burdensome for the employer, it should be noted that in this case he will not issue official notes on the income paid, which will be requested from the employees, if they file an annual tax return.

In this regard, it is important for employers to know that they have the opportunity to deduct the refunded amount from the tax due for future periods. The amount reimbursed to the employee as a result of the application of the mechanism by the order of art. 46, para. 6 and 7 of the Personal Income Tax Act shall be deducted by the employer successively from subsequent contributions to the state budget for taxes on the income from employment of the person or other people. If the employer reimburses to the employee an amount that exceeds the amount of the payment tax for the month during which the recalculation has been made, the difference may be deducted from tax contributions under Art. 42 of the Personal Income Tax Act for the following months.

About this procedure, it is important to know that the refusal of the employer to accept the necessary documents without good reason violates the rights of employees. At the same time, the acceptance of the documents and their non-inclusion in the annual taxation of the income under labor legal relations by the order of art. 49 of the Personal Income Tax Act also constitutes a violation and the employer is subject to a sanction under Art. 84 of the Personal Income Tax Act in the amount of up to BGN 500 for the first violation and up to BGN 1,000 for a repeated violation.

More information about tax relief for 2021 can be found on the NRA website, in the section “Use of tax relief for children in 2021” and in “Questions and answers for accountants / employers for tax relief”. You can ask questions by phone 0700 18 700 or by e-mail: infocenter@nra.bg