Company car through your Bulgarian company: the 10% expense tax, explained

The expense tax: Bulgaria's "weekend tax" on a company car

If your Bulgarian company owns or leases a car, chances are it does double duty: client meetings during the week, personal errands on the weekend. The Corporate Income Tax Act (in Bulgarian, ЗКПО) has a dedicated regime for exactly this, informally called the "weekend tax."

• Article 204(1)(4) of ЗКПО treats benefits in kind, expenses tied to company assets (including cars) made available for the personal use of owners, managers, staff, or related persons, as taxable expenses.
• Article 216 of ЗКПО sets the rate: 10 percent, a final tax owed by the company itself, not the individual.
• The law gives you a choice of three ways to treat that personal use: the 10 percent expense tax; taxing the benefit as personal income of the individual under the Personal Income Tax Act (ЗДДФЛ); or simply not claiming that portion of the expense for tax purposes at all.
• You choose for the whole calendar year, and declare it in the annual tax return under Article 92 ЗКПО, the same return due by 30 June every year.

Skip the declaration, and the default falls back to treating the benefit as personal income under ЗДДФЛ, with social security and payroll withholding consequences for the individual, not just the company.

Working out the tax base: mileage log vs. a flat 50%

The 10 percent is not charged on the full cost of running the car, only on the share attributable to personal use. Bulgarian tax law gives you two practical ways to determine that share.

• The precise method: keep a mileage log (in Bulgarian, пътен лист) for every trip, date, route, distance, and purpose, business or personal. The tax base is the total car-related costs for the period (fuel, insurance, maintenance, depreciation) multiplied by the ratio of personal to total kilometers driven.
• The simplified method: the company can instead elect a flat 50 percent of vehicle-related expenses as the tax base, without having to prove the exact split with a mileage log for the purposes of this specific tax.
• That 50 percent is the base the 10 percent rate applies to, not the tax itself. Under the flat option, the effective tax works out to 5 percent of the car's total yearly running costs.
• You pick one method per car for the full year, you cannot switch month to month based on whichever looks cheaper at the time.

For a company with a single car and moderate fuel and maintenance costs, the two methods rarely produce a dramatically different bill, but the flat option saves the admin overhead if you are not disciplined about logging every trip.

Which car costs ЗКПО recognizes beyond the personal-use slice

The expense tax only deals with the personal-use portion. The business share of running the car is a normal deductible expense, as long as it is properly documented.

• Fuel: deductible only against an invoice paired with a properly completed mileage log. An invoice alone, without the log, is not enough. NRA practice on this point is consistent and unforgiving.
• Insurance (third-party liability and casco), parking, the road vignette, the annual roadworthiness inspection: deductible, as long as the car is booked as a company-owned or company-leased asset.
• Repairs and servicing: deductible, again against an invoice issued to the company, not to the individual.
• Depreciation: a car booked as a fixed tangible asset depreciates at the statutory tax rate of 25 percent a year for the vehicle category.

Without mileage logs or comparable internal records, a tax audit will strip the undocumented expense out of your taxable result and charge tax plus interest on it, regardless of which of the three Article 204 options you picked for personal use.

VAT on a company car: when you actually get to reclaim it

The expense tax under ЗКПО and your right to input VAT credit under the VAT Act (ЗДДС) are two separate questions, assessed independently. The default VAT rule is stricter than most owners expect.

• A "passenger car" (лек автомобил) under ЗДДС is any vehicle with no more than 5 seats excluding the driver's. As a general rule, such cars carry no input VAT credit at all, not on the purchase, not on fuel, maintenance, or repairs.
• Exceptions apply if the car is used entirely for taxi services, rental, security or transport services, courier delivery, or driver training. In those cases, the VAT credit is claimed in full.
• Vehicles outside the "passenger car" definition, N1-registered vans or models with 6 or more seats (6+1), qualify for the standard VAT credit.
• If a vehicle outside the "passenger car" category is used for both business and personal purposes, Articles 71a and 71b of ЗДДС require the credit to be claimed only in proportion to actual business use, with an annual correction if that ratio changes.

In practice: the typical sedan or hatchback a small-company owner drives usually carries zero VAT credit, no matter which ЗКПО option you picked for the expense tax.

A practical checklist for staying clean with NRA

Three tax regimes, two ways to compute the base, and a separate set of VAT rules sounds like a lot. In practice it comes down to a handful of habits.

• Decide up front which of the three Article 204 options you are using for the year, and declare it in the annual tax return. No explicit choice defaults you into the least favorable option under ЗДДФЛ.
• If you pick the precise method, log every trip, even short ones. A few lines on paper or in an app are cheap insurance against having an entire tax year recalculated during an audit.
• Keep every fuel, maintenance, and insurance invoice issued to the company, not the individual, even when the owner and the manager are the same person.
• Before buying, check whether the car counts as a "passenger car" under ЗДДС. The gap between a 5-seat and a 6+1-seat model can decide whether you get thousands of euro in VAT back on the purchase.
• As the company grows and the car becomes mostly business-use with only occasional personal trips, revisit the chosen regime every year instead of leaving it on autopilot from day one.

None of this requires an accounting degree, just discipline and a bit of planning ahead of time.

The car is just one line item in the company's expenses

A company car is a common example, but far from the only one, of an expense that needs more attention than a plain invoice: mixed use, VAT restrictions, and specific documentation all show up wherever the line between personal and business gets blurry.

Useful next reads:

Which expenses ЗКПО recognizes and how to document them
How VAT and tax filing will work with FreeMe.bg
Deductible expenses: the full list for a small company

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