Bulgaria’s work culture blends traditional and modern practices, placing high value on relationships, hierarchy, and teamwork. Christmas is widely celebrated in Bulgaria and, while not mandatory, employers are generally expected to show appreciation to employees during the holidays by allocating Christmas bonuses.
In fact, a survey conducted in 2023 found that two thirds of Bulgarian employers do provide Christmas bonuses for their employees.
In this article, Leinonen Bulgaria will explore the business, tax, and payroll implications of offering Christmas bonuses in Bulgaria.
How do Companies Provide Christmas Bonuses in Bulgaria?
Christmas bonuses in Bulgaria may be provided in the form of a cash bonus or a non-cash gift, but cash bonuses are more common and well received. Many companies choose to provide employees with an additional month’s salary as a Christmas bonus – this is known as ‘13th-month salary’. Non-cash gifts such as vouchers or gift baskets are also appreciated, but are typically given alongside a cash bonus, not instead of.
Taxation of Christmas Bonuses in Bulgaria
How are Cash Bonuses Taxed?
Cash bonuses in Bulgaria are taxed in the same way as regular payroll. In practice, this means Christmas bonuses are subject to 10% Personal Income Tax (PIT) and social security contributions. To find out more on how cash bonuses in Bulgaria should be taxed, read Leinonen’s previous article here.
How are Non-cash Gifts Taxed?
If a non-cash gift is a job related essential (e.g., a headset or laptop bag), they could be considered tax deductible for the company and recorded as ‘office supplies’. Other Christmas related expenses are not usually tax deductible, and may be recorded as ‘representative’.
Sometimes, small gifts to employees (e.g., a branded mug) may be non-taxable, but Bulgaria does not have an official allowance for tax free gifts. As the rules are not always clear in this area, it is important to seek support from an expert on tax in Bulgaria to avoid confusion and avoidable penalties.
Are Christmas Expenses Deductible for Corporate Income Tax (CIT) Purposes?
As a general rule, Christmas expenses are not deductible for CIT purposes. To find out more on tax in Bulgaria, including regulations surrounding Personal Income Tax (PIT), CIT, withholding tax, Value Added Tax (VAT) and more, read Leinonen Bulgaria’s previous article here.
Christmas Bonuses and Payroll in Bulgaria
How Should Christmas Bonuses be Disbursed for Payroll Efficiency?
Bonuses are processed through regular payroll in Bulgaria, so there are no additional obligations related specifically to bonuses. Christmas bonuses should be calculated and disbursed at least a week before Christmas to ensure they reach employees in time for the holiday.
What Supporting Documentation is Required?
- Cash bonuses do not require any supporting documentation
- Invoices must be provided to support non-cash gifts
What are the Implications of Paying Bonuses in January?
Bonuses are generally better received by employees when they are provided in December, in time for the holiday season. If bonuses are paid in January, they may also come out of the company’s budget for the next financial year.
Get Informed on Christmas Bonuses in Bulgaria With Leinonen
Establishing a successful presence in Bulgaria requires deep knowledge of not only the country’s laws and regulations, but also its business landscape and work culture. The end of the year is always a busy time, but with clear policies, efficient reporting, and streamlined payroll processing, your foreign-owned business in Bulgaria will be able to manage Christmas bonuses with ease and free from potentially costly errors.
For more than 16 years, Leinonen Bulgaria’s accounting, tax, and payroll specialists have been equipping foreign-owned businesses in Bulgaria with the expertise they need for success in a new country. Every business is unique, and our small team of true local experts has supported 80+ clients with high quality, personalised financial services.
For accounting, tax, and payroll support you can trust as a foreign-owned business in Bulgaria, organise a consultation with a Leinonen Bulgaria expert today.
