Book vs tax depreciation in Bulgaria, with an example

The same asset is depreciated twice in Bulgaria: once in the books, under the accounting policy and the National Accounting Standards (НСС), and once for tax, under the Corporate Income Tax Act (ЗКПО). The two usually give different amounts for the year, so in the annual tax return book depreciation is added back to the result and tax depreciation is deducted. Over the asset's life the total deducted is the same, with the adjustments on disposal; only the timing of the deduction differs.

How book and tax depreciation differ

Most small companies prepare their accounts under the national standards (Art. 34, para. 1 of the Accountancy Act, ЗСч). For them the rules are:

Under IFRS, depreciation starts when the asset is available for use (IAS 16, para. 55), and revaluation is allowed. A sole trader's taxable income is formed under the Corporate Income Tax Act (Art. 26, para. 1 of the Personal Income Tax Act), so the same tax depreciation applies.

The threshold: when an asset is a tax asset

A tax tangible fixed asset is an asset that meets the national standards' requirements for a depreciable tangible fixed asset and whose value equals or exceeds the lower of two amounts (Art. 50, para. 1 of the Corporate Income Tax Act): the materiality threshold in the accounting policy and "seven hundred leva". The same rule applies to intangibles (Art. 51, para. 1, item 1). The Act was not rewritten in euro for this threshold, so BGN 700 applies converted at the fixed rate: €357.90 (Arts. 11-13 of the Act on the Introduction of the Euro).

The lower-amount rule has one consequence: any depreciable asset above the policy threshold is also above the tax threshold. The reverse is not true. If the policy threshold is above €357.90, some purchases are expenses in the books but tax assets:

When a purchase is an expense in the books but a tax asset, the expense is not recognised for tax (Art. 67) and the asset is depreciated in the tax schedule. If you raise the policy threshold later, assets already in the tax schedule stay there until fully depreciated for tax (Art. 60, para. 3, item 2 and para. 4). If your policy still states the threshold in leva, restate it in euro.

Tax depreciation rates by category

The maximum annual rates are in Art. 55, para. 2 of the Corporate Income Tax Act. The rate is set once for the year and may be lower than the maximum:

Some assets qualify for higher rates:

• 01Category II: up to 50% for new machines and equipment that are part of an initial investment (Art. 55, para. 3).
• 02Category IV: up to 100% for software on the list under Art. 118, para. 16 of the VAT Act and the computers, peripherals and mobile phones it is installed on (Art. 55, para. 7).
• 03Category V: up to 50% for electric cars acquired on or after 1 January 2026 (Art. 55, para. 8 and § 16 of the final provisions of the amending act, State Gazette No. 30 of 2026).

The tax depreciation schedule

The tax depreciation schedule is a tax register in which the company lists all its tax depreciable assets (Art. 52, paras. 1 and 2 of the Corporate Income Tax Act). For each asset it holds the name, the month it was put into use, the tax depreciable value, depreciation charged, the tax value, the annual rate and annual depreciation, and the months of changes, suspension and write-off (Art. 52, para. 3).

• 01The tax depreciable value is the asset's historical cost less any provisions and grants included in it (Art. 53, para. 1). Tax depreciation charged cannot exceed it (Art. 53, para. 3).
• 02Annual tax depreciation is the tax depreciable value times the annual rate times the number of months depreciated divided by 12 (Art. 58, para. 3).
• 03The date the asset is put into use must be documented (Art. 58, para. 1), for example with a protocol.
• 04When an asset is temporarily unused for more than 12 months, tax depreciation is suspended, and the year's depreciation is reduced by the amount charged for those 12 months (Art. 59).
• 05The asset leaves the tax schedule when fully depreciated for tax (Art. 60, para. 1), even if it was fully depreciated in the books earlier.

The adjustments in the annual tax return

Book depreciation is not deductible for tax; annual tax depreciation is deducted instead (Art. 54, paras. 1 and 2 of the Corporate Income Tax Act). In the annual return under Art. 92 this means two adjustments: the accounting result is increased by book depreciation and reduced by tax depreciation. In the return form for 2024 these are codes 7010 and 8010.

• 01When the asset leaves the book schedule, the result is increased by its carrying amount (Art. 66, para. 1), and when it leaves the tax schedule, reduced by its tax value (Art. 66, para. 2).
• 02If the asset is written off in the books before it is fully depreciated for tax, it leaves the tax schedule from the start of the month of the book write-off (Art. 60, para. 2).
• 03Book income and expenses from revaluing or impairing tax assets are not recognised (Art. 65).

The annual return is filed from 1 March to 30 June of the following year (Art. 92, para. 2). What else to do before and after 31 December is covered in year-end closing for 2026.

Example: a €1,800.00 laptop

A VAT-registered company using the national standards buys a laptop for €1,800.00 excluding VAT and puts it into use on 10 March 2026. In the books the laptop is depreciated straight-line over 3 years, €50.00 a month from April 2026 (Standard 4, item 6.1). For tax it is category IV at 50%, and the company also starts tax depreciation in April (Art. 58, para. 1): for 2026, €1,800.00 × 50% × 9/12 = €675.00.

In 2028 tax depreciation is only €225.00 because it cannot exceed the tax depreciable value (Art. 53, para. 3): the laptop is fully depreciated for tax in March 2028. Tax depreciation is faster, so the company pays less corporate tax in 2026 and 2027 (by €22.50 and €30.00) and more in 2028 and 2029 (by €37.50 and €15.00). The total is the same.

Example: €6,000.00 of office furniture

The opposite case is when book depreciation is faster. Furniture for €6,000.00, put into use in June 2026, is depreciated in the books over 5 years, €100.00 a month from July. For tax it is category VII at 15%, €900.00 for a full year, also from July.

In June 2031 the furniture is fully depreciated in the books, but it stays in the tax schedule until February 2033 (Art. 60, para. 3, item 1 and para. 4). The company pays more tax in 2026-2030 and gets it back in 2031-2033. A deferred tax asset is recognised only to the extent future taxable profit is probable (Standard 12, item 4.3).

An expense in the books, an asset for tax

A company with a €500 materiality threshold buys a monitor for €420.00 and puts it into use in March 2026. In the books the monitor is a current expense. The tax threshold is the lower of €500 and €357.90, that is €357.90, so the monitor is a category IV tax asset:

• 012026: the result is increased by €420.00 (the expense is not recognised, Art. 67) and reduced by €157.50 of tax depreciation (€420.00 × 50% × 9/12, from April).
• 022027: the result is reduced by €210.00.
• 032028: the result is reduced by €52.50, and the monitor is fully depreciated for tax.

Deferred tax

The difference between an asset's carrying amount and its tax value is a temporary difference (Standard 12). When tax depreciation runs ahead of book depreciation, the difference is taxable and a deferred tax liability is recognised, mandatorily for all taxable temporary differences (Standard 12, item 4.6). When book depreciation runs ahead, a deferred tax asset is recognised only to the extent future taxable profit is probable (item 4.3). The rate is 10% (Art. 20 of the Corporate Income Tax Act). Standard 12 does not exempt micro enterprises.

The annual SAF-T asset file

The Standard Audit File for Tax (SAF-T) includes fixed asset data, with book and tax depreciation charged (Art. 71i, para. 2, item 5 of the Tax and Social Insurance Procedure Code). The asset data are filed once a year, by the corporate income tax return deadline of 30 June (Art. 71k, para. 2). Small enterprises file SAF-T from 2029, unless their revenue or payments to the tax agency put them in an earlier wave, and VAT-registered micro enterprises from 2030; who starts when is covered in SAF-T Bulgaria requirements.

What the draft for 2027 proposes

The other proposals are covered in Bulgaria tax changes 2027.

Common mistakes

• 01Treating €357.90 as the tax threshold whatever the policy says. The tax threshold is the lower of the policy threshold and €357.90 (Art. 50, para. 1).
• 02Assuming a high policy threshold also removes purchases from tax depreciation. A purchase of €357.90 or more expensed in the books is still a tax asset (Art. 50, para. 1 and Art. 67).
• 03Quoting the tax threshold as BGN 1,000 or €511.29. Since 2008 it has been BGN 700, that is €357.90.
• 04Starting book depreciation under the national standards in the month of acquisition. Under Standard 4, item 6.1 it starts the following month.
• 05Using a rate above the maximum or changing it during the year. Rates are maximums set once for the year (Art. 55, para. 2).
• 06Removing an asset from the tax schedule once it is fully depreciated in the books. It stays until fully depreciated for tax (Art. 60, paras. 3 and 4).
• 07Forgetting the disposal adjustments: the carrying amount is added and the tax value deducted (Art. 66, paras. 1 and 2).
• 08Not recognising deferred tax. Standard 12, item 4.6 requires a deferred tax liability for all taxable temporary differences.

In smetni.app

The fixed asset register is the "Assets" tab in the Purchases module (Business plan). For each asset it keeps separate book and tax depreciation schedules, both straight-line, with categories I-VII under Art. 55 of the Corporate Income Tax Act and their basic maximum rates. Depreciation starts in the month set in "Depreciation from", which defaults to the acquisition month: if you follow Standard 4, item 6.1, set the following month. With accounting enabled, book depreciation is posted every month (Dr 603 / Cr 241). Tax depreciation is not posted; with accounting enabled it feeds the "Annual return" worksheet in Declarations and the annual SAF-T asset file. The app does not calculate deferred tax and does not allow the higher rates: 50% for category II (Art. 55, para. 3), 100% under Art. 55, para. 7 and 50% for electric cars (Art. 55, para. 8). See the guides to purchases, accounting and declarations, and plans and pricing.