Newly adopted tax law changes

At the end of last week, changes to the State Budget Law for 2022 were adopted which amend a number of provisions of tax laws. 

• Until July 1 2023, supplies of central heating and natural gas will be taxed with a 9% VAT rate;
• In the same period, a zero rate of VAT will be applicable for supplies of bread and flour. Definitions of the concepts of bread and flour are provided for the purposes of applying the reduced VAT rate;
• Exemption from excise duty on electricity, liquefied petroleum gas and natural gas is planned to be applicable until June 30 2025;
• Compensation in the amount of BGN 0.25 is introduced in the form of a price reduction upon sale of (certain types) of fuels for explicitly listed types of motor vehicles owned by individuals. An explicit procedure for reporting in VAT returns and declaring the granted discounts is provided;
• The amounts of tax reliefs for 2022 for children under the Personal Income Tax Act are also increasing;
• The scope of services that can be paid for with food vouchers is being expanded again, including tourism services;
• As of the beginning of 2023, the deductible amount of expenses of lawyers is increased from 25% to 40%.

The purpose of the introduced measures is to deal with the increase in the prices of food, fuel and basic consumables. However, to the extent that they are intended to be temporarily applicable, the terms for which they are introduced must be carefully monitored. This is also necessary given the nature of the law by which the reliefs are introduced. An increased interest of the tax administration in complying with the requirements for the application of the reduced VAT rates and exemption from excise duty can be expected. Changes create opportunities for optimization, but also require increased attention of the business.