How to reduce your taxes with relief for young families and property renovations?

Tax relief for young families and relief for improvements or repairs to a residential property

What tax relief in Bulgaria is

Tax relief consists of legally recognised mechanisms for reducing the tax base on which the due tax is calculated. In Bulgaria, individuals have the opportunity to use various reliefs, including for young families and for improvements or repairs made to residential properties. These incentives are intended to support citizens at key life and economic moments.

Tax relief for young families

What it is

This is a tax relief that allows families who have entered into a civil marriage to reduce their tax base by the interest paid on the first 100 000 лв. of the mortgage loan for the purchase of a sole home in the relevant tax year.

Main conditions for using the relief

For a family to benefit from the relief, several basic conditions must be met:

• The mortgage loan agreement must be concluded by at least one of the spouses.
  
  
• At least one spouse must not have reached the age of 35 on the date the agreement is signed.
  
  
• The mortgaged home must be the family’s sole home for the tax year.
  
  
• The spouses must be in a civil marriage.
  
  

This relief may be used by both resident individuals and citizens of the EU and EEA.

What the relief includes and how it is calculated

The amount of the relief is based on the interest paid during the year on the first 100 000 leva of the principal of the mortgage loan. It represents a reduction of the tax base, which ultimately leads to lower tax due.

Documents required to apply the relief

• A certificate from the bank stating the amount of interest paid.
  
  
• A translation of the document by a sworn translator if the bank is in the EU/EEA.
  
  
• For foreign persons – legalised documents proving the conditions under Article 22a of the Personal Income Tax Act.
  
  

Specifics for foreign individuals

Foreign nationals established for tax purposes in the EU or EEA may also use the relief, but they must provide translated and legalised documents issued by the competent authorities in their country.

Common mistakes and how to avoid them

• Missing a document from the bank or using an incorrect translation.
  
  
• Both spouses using the relief above the permitted limit.
  
  
• Omissions when declaring in the annual tax return – Appendix No. 10.
  
  

Tax relief for improvements and/or repair of immovable property

What activities are covered by the relief

The tax relief covers payments for labour related to improvements or repair of one immovable property in Bulgaria. Expenses for materials are not included, only labour.

Requirements for persons using the relief

• The person must be the owner or co-owner of the property.
  
  
• The property must not be part of a commercial activity.
  
  
• The work must have been carried out by local companies or companies from the EU/EEA.
  
  
• The person must not be related to the contractor carrying out the repair.
  
  

Documentation and how expenses are proven

• Invoices and receipts proving the payments.
  
  
• Bank statements or a fiscal receipt.
  
  
• All documents must be for the preceding year.
  
  

Restrictions and exceptions in use

The maximum amount of the relief is 2000 лв. per property, regardless of the number of co-owners. If this limit is exceeded, each person who has improperly used the relief owes tax on the excess amount.

Responsibilities in the event of improper use of the relief

If a violation is established, the persons return the relevant part of the tax, together with any interest. This may lead to subsequent audits by the NRA.

How to file the annual tax return with the reliefs included

Steps for filing the return through the NRA

The process of filing the annual tax return is relatively straightforward, especially if the electronic system of the National Revenue Agency (NRA) is used. The main steps are:

1. Log in to the NRA electronic portal using a personal identification code (PIC) or a qualified electronic signature (QES).
   
   
2. Select the Annual tax return under Article 50 of the Personal Income Tax Act.
   
   
3. Fill in the relevant appendices:
   
   
• Appendix No. 10 for the relief for young families.
  
  
• Appendix No. 12 for relief for repairs and improvements.
  
  
4. Attach the required documents in electronic format.
   
   
5. Review and submit the return.
   
   
6. Receive an incoming number and electronic confirmation.
   
   

Deadlines and options for corrections

• The deadline for filing the annual return is 30 April of the following year.
  
  
• If errors are found, a corrective return may be filed by 30 September.
  
  
• After this deadline, this is possible only with NRA approval on specific grounds.
  
  

Benefits of using tax reliefs

Using tax reliefs brings a number of benefits:

• Financial relief – reducing the tax due.
  
  
• Support for young families at the start of their life together.
  
  
• Encouragement of improvements and repairs, which increase energy efficiency and the standard of living.
  
  
• Formalising work with contractors, through the need for labour documents.
  
  

Frequently asked questions (FAQ)

1. Can I use both reliefs in the same year?

Yes, as long as the conditions for both reliefs are met and the required documents are submitted.

2. Do I need to be a resident to use the relief?

No. Foreign individuals established for tax purposes in the EU or EEA may also benefit.

3. If the property is marital property, who uses the relief?

Both spouses may use the relief, but the total amount must not exceed 2000 лв. for the repairs or the interest on the first 100 000 лв. of the loan.

4. Are materials included in the repair relief?

No. The relief covers only labour costs, not materials.

5. What happens if I submit documents with omissions?

The NRA may not recognise the relief or may require corrections. Penalties are possible for intentional violations.

6. Is there a deadline for using the relief after the mortgage is taken out?

Yes. The relief may be used in the year in which the interest is paid, provided that all other conditions are met.

Conclusion and useful tips

Tax relief for young families and for improvements or repairs to immovable property is an excellent opportunity to reduce the tax burden. It not only eases the family budget, but also encourages the creation of a stable, comfortable and sustainable home.

To benefit successfully, it is important to:

• know the conditions well;
  
  
• collect all necessary documents during the year;
  
  
• file your return on time.
  
  

Do not forget to use the NRA electronic services, which offer a faster and more secure way to submit the documents.