Using tax relief for children in 2021 in Bulgaria

The increased tax relief can be used once and only to reduce 2021 income. The amount of the relief depends on the number of children: for each minor child the income is reduced by 4500 leva, and if there are three or more children, income of 13500 leva is exempt from tax. A parent of a child with a disability may not pay tax on an amount of 9000 leva.

Important: before using the relief, all tax arrears must be settled.

Parents who were on parental leave in 2021 cannot use the relief, since they did not pay taxes; however, in that case the other parent may use it.

Conditions for obtaining tax relief

The relief may be used by local or foreign individuals who pay taxes in EU countries or in other states party to the Agreement on the European Economic Area (EEA), if as at 31 December 2021 the person is:

• a parent who has not been deprived of parental rights, with a child who has not been removed from the family and over whom no guardianship or custody has been established;
• a legal guardian or custodian, or
• a member of a family of relatives or close persons with whom the child has been living under the Child Protection Act for at least 6 months, or
• a foster parent — in the case of long-term placement of the child in a foster family under the same law.

To obtain the relief for a child, several conditions must be met:

1. As at 31 December 2021, the child for whom the relief is claimed must be a local person in an EU country or an EEA country;
2. The child must have been a minor as at 01.01.2021;
3. The child must not be placed in a children’s home or similar institutions where children are maintained at the state’s expense;
4. The parent claiming the relief must have no arrears to the budget.

To obtain the relief for a child with a disability, the following conditions must be met:

1. As at 31 December 2021, the child for whom the relief is claimed must be a local person in an EU country or an EEA country;
2. As at 1 January 2021, the child must have been a minor;
3. The child must not be maintained at the state’s expense in social services, children’s homes and similar institutions;
4. The child must have a valid ТЕЛК/НЕЛК decision on disability certifying the type and degree of disability of the child for whom the tax relief is due.

Naturally, the parent claiming the tax deductions must be paying taxes.

How the relief can be used

There are two ways to use the tax relief:

• Through the employer. In this case the parent must submit to the employer a declaration of tax relief for a child (or for a child with a disability).
• When filing the annual tax return under Art. 50 of the ЗДДФЛ. In this case the return is filed directly with the National Revenue Agency (NAP).

In the first case, in addition to the declaration, by the end of December 2021 the employer must be provided, along with the declaration of tax relief, with a written declaration stating that there are no arrears on taxes and duties or that a tax return will be filed for the tax year. Instead of completing an additional declaration, the corresponding box can be ticked in the declaration of tax relief for a child.

By 31 January 2022 the employer carries out the necessary calculations and determines the annual amount of tax and, accordingly, of the relief. This amount is refunded to the employee by the end of January.

If the employer has not refunded the amount, the employee can receive the tax relief when filing a tax return. Those who are not employed do the same. In this case, too, one must have no arrears to the state.

Parents of children with disabilities can use two reliefs at the same time. In this case both reliefs may be used by one parent or divided between them. The tax relief may also be used by a parent who does not exercise parental rights after a divorce, provided all the necessary conditions are met.

Each relief may be used by only one parent, but if the amount of the relief exceeds the amount on which one parent pays tax, the difference may be used by the other parent when filing a tax return.

The accountants of Bulgarian Expert will help with the preparation of documents for obtaining tax deductions and will advise you on any questions you may have.

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