Bulgarian CIT legislation allows tax deductibility of expenses that are supported with proper primary accounting documents (e.g. invoices acceptable in both electronic or hard copy forms). If such documents are not available with the Bulgarian company then the authorities of the National Revenue Agency may refuse tax deductibility of the respective expenses, which may lead to unfavourable tax implications for the Company (e.g. assessment of additional CIT on the amount of the disallowed expenses, penalty interest, decrease in the loss carry forward, etc.)
In addition, the Bulgarian accountancy legislation requires that all transactions of local companies are substantiated with sufficient relevant documents evidencing their nature, timing and value. Therefore, besides the incoming invoices companies would also have to keep and make available to the tax authorities (upon their request) all the relevant business agreements, purchase orders, receipts, performance reports, etc.
Furthermore, all the incoming invoices in foreign language should be translated into Bulgarian language. In view of the above it is advisable that the Bulgarian company strictly keeps record and maintains all the incoming invoices accompanied with Bulgarian translation (where applicable) and all other supporting documents.
In conclusion it shall be mentioned that the Bulgarian tax legislation provides maximum tax allowable depreciation rates that should be applied for different categories of fixed assets.
Category I: Solid buildings, incl. investment properties, plant, transmission facilities, electric power carriers, communication lines; Annual rate of depreciation: 4%
Category II: Machinery, process equipment, apparatus; Annual rate of depreciation: 30%
Category III: Means of transport excluding automobiles; surfacing of roads and of runways; Annual rate of depreciation: 10%
Category IV: Computers, computer peripheral equipment, software, and right to use software; Annual rate of depreciation: 50%
Category V: Automobiles; Annual rate of depreciation: 25%
Category V: Tax tangible and intangible fixed assets whereof the period of use is restricted; Annual rate of depreciation: 100/years of legal restriction. The annual rate may not exceed 33 1/3 %
All other depreciable assets Annual rate of depreciation: 15%
