Learn how to claim business expenses within Bulgaria. Company expenses (or operating expenses) are ordinary and necessary costs that are business related and refer to those costs in order to run and operate your business (only companies can claim expenses). Expenses include production costs, e.g. material and labor cost, rent for office, wages for staff, depreciation expenses, telephone, traveling, sales promotion and other costs to run your business. Excluded are non-operating cost, e.g. interest, bank fees, and etc.
The total of all expenses is listed as deductions in the income statement and subtracted from the total revenue, thus resulting in lower taxation: Revenue minus expenses equals the total net profit of a company for a given period.
Long term assets vs. company expenses
You have to make difference between long term assets and expenses. A website built for €4k will not be considered an expense. This will be considered a long-term asset. You can claim as company expense only a certain percentage annually of the value of the asset for prolonged period.
Same applies for property investments. If you buy a property to be used as your company office, you can claim only 4% of the value of the property annually as expense for the next 25 years. For example, if the value of the property is 100,000 Euros, you can claim 4,000 Euros annually as expense.
Business trips vs. business lunch and travel expenses
Lunches, dinners, grocery, coffees etc. are not considered company expenses even if those are related to your daily business. They can be justified only when you are on business trips as part of your daily allowance. Different daily allowances apply for each country starting from 40 Euros daily. The 40 Euros daily will not cover all your personal expenses, but at least will cover some. You are not required to provide receipt of your daily expenses on the business trip. In order to claim daily allowance, you need to be employed or self-employed in your Bulgarian company.
Note: Exceptions, like Events, can be recorded as business expenses.
Flight tickets, hotels and rental cars
Flight tickets, hotels and rental cars will be considered a company expense only when these are paid from your company bank account and you provide an invoice.
Office equipment and supplies
Office supplies for use on a day to day basis in the office. For example, pens, papers, clippers, etc.
Utility costs and property tax
Expenses related to utility bills of the company like water and electricity for the daily operating activities, as well as property tax for property used or owned by the company.
Legal, accounting and consulting expenses
All expenses related to legal fees, accounting and consulting services for the company.
Repair and maintenance
Repair and maintenance are operating expense on the asset used for a production like repairing requirements of machines, or the vehicles of the company.
Insurance, salary and wages expenses
Such expenses incurred for taking insurance of health care, general insurance of staff, as well salaries and wages paid. The company charges these to the profit and loss account under the head salaries & insurance expenses.
Research, marketing, advertising and sales
Operating expenses include research, marketing, advertising and costs related to sales.
Entertainment expenses
The entertainment and events that are organized by the company are considered operating Sales promotion and event activities and all costs for organizing, as well as technical costs, e.g. catering, musicians/dj’s, rent of space and etc.
Other company expenses
Expenses for materials
– spare parts for repair and maintenance of long-term assets
– utility bills – if you have a rental agreement or own the property
– car fuel
– stationery
– work clothes
Expenses for services
– courier services
– communication services i.e. phone bills – insurance
– rent
– subscriptions
– custom fees
Depreciation expenses
Salary expenses and social contributions Tax expenses
Non – Operating Expenses
The purchase of an asset such as land or equipment is not considered a simple expense but rather a capital expenditure. Assets are expensed throughout their useful life through depreciation and amortization.
Bank Charges (financial expenses)
The fees charged by the banks for the general transactions going in the business are known as the bank charges. For example, transaction charges for transfers fees, maintaining of the account, interest etc.
How expenses should be recorded
Company expenses paid via personal cards will not be considered company expenses. Make sure to pay expenses via your company debit or credit card, or wired bank transfer with the company account (IBAN & swift payments). Mere receipts will also not suffice. You have to provide a “Faktura” a proper invoice of the expense made. The invoice needs to include your company and / or VAT number, company name, address and date. Best is to use your company card or wired transfers for payment.
When should expenses be recorded
Your company expenses have to be accounted on a monthly basis (same as invoices and statements) for each expense generated the previous month. This applies for VAT registered companies that need to prepare and file monthly VAT declaration.
Note: If your expenses are not related to your business activities, you do not have an invoice or haven’t paid through your company accounts, those will be considered unapproved expenses.
Tipp: Clarify expenses with our accountant in advance. Make sure you understand how to record and handle expenses properly. Ask before you buy or make the expense.
Yours truly,
Uwe Allgäuer
