0% VAT on bread and flour in Bulgaria extended until end of 2023
What’s new in Bulgarian agrifood taxation.
Food
Together with the 2022 central government budget extension into 2023, Bulgarian legislators approved also a 0% VAT on bread and flower to be applied until the end of 2023. The measure, announced as a counter inflationary, was initially introduced for an year starting 1st of July 2022. The Parliament also extended until the end of the year a discounted 9% VAT on HoReCa services. In addition, the temporary 9% VAT on baby foods was permanently implemented.
Extensive state budget revision is highly likely to be introduced later into the year, especially if a regular government replaces the current caretaker cabinet.
General macroeconomic
The monthly turnover threshold for mandatory VAT registration has been doubled - from BGN 50 000 to BGN 100 000 (approx. €51 129).
The minimum wage has been also increased by 9,9% to BGN 780 (approx. €400) from 1st of January, which rounds its YoY growth to 20%. Meanwhile, there are no changes in the minimum insurable income levels per professional category (BGN 710 for self-insured registered agricultural producers) as well as the maximum insurable threshold.
Transportation
From Jan 1st 2023, the annual car vignette price decreased by almost 10% to BGN 87 (€44,50). In the same time, the Council of Ministers decided to postpone the substantial spike (50+% in most of the categories) in freight transport and bus tolls and the expansion of their toll network with six months – for July 1st 2023, citing concerns that increase in transportation costs will put additional upward pressure on consumer prices. The BGN 0,25 (€0,13) per liter retail subsidy for individuals on regular gasoline, diesel, LPG and CNG expired on Dec 31st. This measure was introduced in July 2022 aiming to overcome social and economic impacts of rising fuel prices, but turned out too costly for the budget and actually bolstered further fuel demand and retail prices.
Tobacco products
A new four-year calendar for increase of excise duties on tobacco products is in place starting 1st of March 2023. The average annual rate of increase in duties on cigarettes is about 5% and 10% for rolling tobacco. The most substantial raise in duties will be applied to heated tobacco products – 72% cumulatively until 2026.
The specific duty on cigarettes is set to BGN 117,50 (€60,08) per 1000 pieces from March 2023 gradually increasing to BGN 143 (€73,11) from Jan 1st 2026, while the ad valorem duty is supposed to decrease in four steps from 23,5% of the selling price on March 1st 2023 to 19% at the beginning of 2026. The total minimum excise duty (specific and ad valorem combined) on cigarettes has been lifted from the current BGN 177 (€90,50) per 1000 pieces to BGN 188,50 (€96,38) from March 1st and is expected to reach BGN 211 (€107,88) on Jan 1st 2026.
Despite the increase, excise duties on tobacco products in Bulgaria are projected to remain by far the lowest in the EU. In the same time, the country has the largest share of daily smokers among all member states – 28,7% - almost 10 pp above the EU average. Bulgarian market for tobacco products is estimated at around BGN 3,7 bn (€ 1,9 bn) of which approx. 92% cigarettes and 4-5% heated tobacco products (2021).
