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Anumber of changes in tax and social security legislation have been made in the last couple of months. The increase of the maximum income subject to social security contributions to BGN 3,400 from April 1 2022 created even greater challenges for employers in the management of labor costs, especially with the already approved budgets for 2022. Combined with talent shortages in almost all sectors, these challenges call for urgent rethinking of remuneration and benefits policies. Having this in mind, there are changes that open up opportunities, but also require increased attention to compliance with legal requirements.
- The tax on expenses in kind related to the so-called personal use of business assets is reduced from 10% to 3%.
- The tax-free amount of social expenses for food vouchers which are one of the most common and popular social benefits among employees in the country is increased from BGN 80 to BGN 200 per month.
- The scope of the goods and services which could be “paid” with “food” vouchers has been expanded, so they can also be used to pay for household utilities, such as electricity, heating, natural gas and water, cultural activities. It should be taken into account that these changes have been adopted as provisions of the State Budget Act for 2022 and it is necessary to monitor whether this possibility will be provided for the forthcoming years as well.
- From VAT point of view, the general rules for treatment of vouchers provided for in the VAT Act will now apply to food vouchers as well. This changes the moment when the VAT is charged and the mechanism of their VAT taxation.
These changes provide for an opportunity for a tax-efficient response to labor market challenges.
It should be considered that there is a growing interest of the tax administration in tax reliefs. The non-compliance with the general or specific conditions for their application often leads to assessment of additional tax liabilities and default interest. These changes are an additional reason to review and update benefit policies and these for personal usage of business assets.