Pursuant to Article 18(1) of the Personal Income Tax Act (PITA)
The sum of the annual tax bases under Article 17 for persons with a 50 per cent or greater reduction in working capacity, as determined by a final decision of a competent authority, shall be reduced by 7,920 BGN, including for the year in which the incapacity for work arose and for the year in which the decision’s validity expires.
Pursuant to Article 18(2) of the Income Tax Act, the monthly tax base under Article 42(2) for income from employment of persons with a reduced working capacity of 50 per cent or more shall be reduced by 660 BGN, including for the month in which the incapacity for work arises and for the month in which the decision’s validity expires.
As can be seen from the provisions cited, one of the conditions for the application of the tax relief under Article 18(1) and (2) of the Income Tax Act is that the individual must hold a valid, final decision issued by a competent authority /TELK/NELK), determining a reduction in working capacity of 50 per cent or more.
For an expert decision to be valid, it must have taken effect and the period of the permanent reduction in working capacity specified therein must not have expired, or it must have been issued with a degree of incapacity for work determined to be lifelong, a statutory instrument must confer such effect on it in relation to all institutions and persons, or a provision of tax law must delegate such effect to it for the purposes of taxation.
Pursuant to §10a(3) of the Transitional and Final Provisions of the Income Tax Act, persons with a reduced capacity for work of 50 per cent or more, as determined after reaching the age at which they become entitled to a pension based on insurance contributions and age under Article 68 of the Social Insurance Code, as well as persons who have reached the age of entitlement to a pension based on insurance contributions and age under Article 68 of the Social Insurance Code within the period covered by the decision of the Technical Expert Medical Commission (TELK)/National Expert Medical Commission (NELK), shall be entitled to tax relief for persons with reduced working capacity under the Income Tax Act, irrespective of the period specified in the expert decision. In such cases, even where, according to the expert decision of the competent authority, the period of permanent reduced working capacity has expired, the person is entitled, on the basis of that decision, to a tax relief under Article 18 of the Income Tax Act for life.
It is clear from the cited provision that there are two scenarios in which a person retains their right to relief under Article 18(1) and (2) of the Income Tax Act, regardless of the period specified in the expert decision of the TELK/NELK; the decisive factor is the person’s age, not whether there is a decision by the National Social Security Institute (NOI) to grant a pension.
How can the tax relief under Article 18 of the Income Tax Act be claimed through an employer?
The individual shall submit to their employer, with whom they have an employment relationship, the decision of the TELK/NELK and make a written request to claim the tax relief under Article 18(1) and/or (2) of the Income Tax Act. The employer shall take the necessary steps to enable the individual to benefit from the tax relief by reducing their taxable income arising from the employment relationship.
What happens if the decision of the TELK/NELK is appealed against?
Pursuant to Article 112(1)(3) of the Health Act, decisions of the Regional Medical Expert Commission (TELK) may be appealed only through administrative channels before the National Medical Expert Commission (NELK) within 14 days of their receipt, a fact which is made known by the NELK’s notification letter to the individual and all interested parties involved in the implementation of the contested TELK expert decision. It follows that the employer must be duly notified by the National Expert Medical Commission (NELK) that administrative proceedings have been initiated under Article 112 of the Health Act against a decision of the Regional Expert Medical Commission (TELK), as well as of the date set for the NELK to consider the appealed decision. In view of this, it must be concluded that, until the administrative proceedings are concluded, the grounds for claiming the tax relief under Article 18(2) of the Income Tax Act do not exist.
How can you claim the tax relief under Article 18(2) of the Income Tax Act through your employer?
You should then submit the decision of the TELK/NELK to your employer in a timely manner and request in writing to benefit from the tax relief under Article 18(2) of the Income Tax Act. Each month, your employer will reduce the tax base on your income from employment by 660 BGN (up to a maximum of 660 BGN) and will not deduct any advance tax under the Income Tax Act on this amount.
Claiming the tax relief for reduced working capacity through an employer is at the individual’s discretion. At the individual’s request, the use of the relief under this procedure may be discontinued and the relief applied on an annual basis by submitting an annual tax return under Article 50 of the Income Tax Act. In this scenario, there is no breach of Article 42(3) of the Income Tax Act, nor of Article 49(3) of the same Act.
What happens if you have not submitted the decision of the TELK/NELK to your employer in good time?
If you did not submit the decision of the TELK/NELK to your employer in good time and, for that reason, were unable to claim the tax relief under Article 18(2) of the Income Tax Act, you may claim the tax relief under Article 18(1) of the Income Tax Act through your employer, who, by 31 January of the following tax year, shall calculate the annual tax base, reduced in accordance with Article 49(3) of the Income Tax Act, and determines the annual amount of tax, provided that, as at 31 December of the tax year, they are your employer under your primary employment contract. To this end, you must provide your employer, between 30 November and 31 December of the tax year, with a copy of a valid decision by the Regional Medical Expert Commission (TELK) / National Medical Expert Commission (NELK) /Article 49(4)(1) of the same Act/. Your employer will recalculate your tax liability by reducing your annual tax base from employment by 7,920 BGN (maximum 7,920 BGN).
Claiming the tax relief for reduced working capacity through an employer is at the individual’s discretion.
Is there any other way (apart from through an employer) to claim the tax relief under Article 18(1) of the Income Tax Act?
You may claim the tax relief under Article 18(1)1 of the Income Tax Act by submitting an Annual Tax Return under Article 50 of the Income Tax Act and specifying the reduction in the annual tax base in Appendix No. 10: Claiming Tax Relief. You should complete Part I – Tax relief for persons with 50 per cent or more reduced working capacity. The maximum amount is 7,920 BGN per calendar year.
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