Depreciation of Assets in Bulgariа. Rules and Rates for Accounting. Company Reg 190 EUR. Taxation annually 3%. Free VAT registration.

Depreciation of assets in Bulgaria — practical guide for accountants, business owners, and tax planners. This video complements the full blog post and explains how depreciation is treated for accounting vs tax purposes, common methods (straight‑line, declining, production), typical useful lives and statutory maximum tax rates by asset category, recordkeeping tips, and how disposals and revaluations affect financial statements and taxable profit.

Depreciation of Assets : What you’ll learn

How to choose the correct depreciation method, how to reconcile accounting (NSS/IFRS) depreciation with tax depreciation, which assets are non‑depreciable (land, certain art/financial assets), and practical steps to maintain a fixed‑asset register and supportable documentation for audits. Tax rules generally require straight‑line for tax purposes, while accounting allows straight‑line, declining or production methods; companies must keep consistent policies and separate tax vs accounting records.

Practical advice for businesses: maintain a detailed fixed asset register with purchase cost, installation, commissioning date, residual value policy, and chosen method; record depreciation monthly for smoother reporting; track temporary differences between accounting and tax depreciation for deferred tax accounting; consider revaluation only with proper valuation support.

Important note: Always confirm current statutory rates and guidance with your tax advisor or the latest official tax code, as maximum tax depreciation categories and rates are set by the Corporate Income Tax rules and may be updated.

General Rules for Accounting and Tax

In Bulgaria, managing the depreciation of fixed assets requires balancing Accounting Depreciation (governed by Bulgarian National Accounting Standards / IFRS) and Tax Depreciation (regulated strictly by the Corporate Income Tax Act – CITA).

Core Method: The straight-line method is the most common and accepted choice, dividing the depreciable amount into equal yearly portions.
Depreciation Plan: Every tangible and intangible fixed asset must be listed in a formal company depreciation plan starting from the month it goes into operation.
Non-Depreciable Assets: Land and goodwill cannot be depreciated under Bulgarian law.
Tax vs. Accounting: Accounting standards allow various depreciation methods based on an asset’s useful life, but tax laws enforce strict maximum annual tax depreciation rates.

Maximum Tax Depreciation Rates by Category

Under the Corporate Income Tax Law, assets are split into seven distinct categories with set maximum limits:

• Category I (4%): Massive buildings, industrial structures, and electricity transmission lines.
• Category II (30%): Machinery, production equipment, and plant apparatus (new machinery can qualify for up to 50% under specific initial investment rules).
• Category III (10%): Transportation means excluding standard motor vehicles, road covers, and runways.
• Category IV (50%): Computers, computer peripherals, mobile phones, software, and software rights.
• Category V (25%): Standard motor vehicles and automobiles.
• Category VI (33⅓%): Long-term intangible assets with legal or contractual limits on their use duration.
• Category VII (15%): All other residual fixed assets not matching categories I through VI

Accounting vs. Tax Depreciation (Reconciliation)

Companies maintain two separate depreciation schedules:

1. Accounting Depreciation Plan: Based on real economic useful life and internal accounting policy (can use straight-line, declining balance, or activity-based methods).
2. Tax Depreciation Plan: Strictly limited to straight-line method and subject to CITA maximum annual rates.

Handling Temporary Differences

Because accounting rates often differ from CITA tax rates, the net accounting profit differs from the taxable profit:

• Tax Adjustment: At year-end, the accounting depreciation expense is added back to the accounting profit, and the tax depreciation amount is subtracted to arrive at the final Corporate Income Tax (CIT) base.
• Deferred Taxes: Any timing gap creates deferred tax assets or liabilities under standard accounting rules (NAS 12 / IAS 12).

Special Rules & Disposals

Start Date: Tax depreciation begins from the first day of the month following the month the asset is put into operation.

Accelerated Rates: Category II assets (new machinery and production equipment) that form part of an initial investment project may qualify for up to 50% accelerated depreciation for tax purposes.

Asset Disposals: When selling or derecognizing an asset, the tax treatment is calculated using its Tax Book Value (Original Cost − Accumulated Tax Depreciation). The difference between the sale price and tax book value directly impacts the taxable income.

Accounting Outsourcing – Common Reasons

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