On representative expenses such as; dinners, gifts, cloths, food and drinks, a tax of 10% has to be paid. The expense is, together with the paid tax, deducted from the companies’ taxable income. The VAT on these expenses cannot be offset nor claimed. The tax is due up to the 15th of the following month.
We regularly get the question whether it’s worth to recognize representative expenses for your company. It appears there is a general opinion that it is not worth the effort. Why to pay first a tax and later to deduct it from your income seems to only generate work without any benefit?
In our opinion it is worth the effort;
- When you spend companies money on representation, without recognizing it. The corporate tax will apply to this. Effectively you lose 10% when not recognizing the expense.
- The tax paid and the expenses are deducted from your taxable income. The difference is not much but you benefit 1%.
- When you spend companies’ cash without documentation against it, you create an unclear cash situation. You have cash which is physically not there anymore.
To get your expenses recognized you need to keep the cash receipts (in Bulgarian it should have “fiskalen bon/фискален бон” written on it) and get the receipts to your accountant.
Please contact us when you are in doubt what exactly can be recognized, or when you have any further questions.