Tax Treatment of Life Insurance and Additional Health Insurance Expenses for Selected Employees

A medium-sized company in Bulgaria provided additional health insurance and life insurance to a subset of its employees, but these expenses did not qualify as social expenses since they were not extended to all employees. This created a critical tax question about whether these expenses should be treated as employee income taxable under the Personal Income Tax Act (PITA) or as non-deductible expenses for corporate tax purposes under the Corporate Income Tax Act (CITA). The company faced uncertainty about the appropriate tax treatment and needed expert guidance to ensure compliance with Bulgarian tax regulations.

Eurofast provided detailed analysis of the tax implications under both PITA and CITA regulations. The solution involved comprehensive review of relevant legislative provisions, consultation with tax authorities' positions, and evaluation of both possible approaches to the tax treatment. Eurofast's team analyzed the Corporate Income Tax Act requirements and the Personal Income Tax Act implications, providing the client with clear guidance on available options and their respective compliance requirements.

After detailed discussions and review of relevant legislative provisions, Eurofast helped the client understand that both approaches were valid and could be applied. Due to the lack of a definitive position from the National Revenue Agency (NRA), the company opted to treat these expenses as non-deductible under CITA, increasing its financial result. The client achieved full compliance with Bulgarian tax regulations while making an informed decision about the optimal tax treatment for their specific situation.