From January 2008, personal incomes will be taxed a flat rate of 10 per cent if Parliament approves conclusively amendments to the Income Tax on Natural Persons Act which got MPs' principled approval on Friday. The amendments were authored by the government and were supported on 152-36 votes, with 4 abstentions.

The proposed flat tax will replace the effective regime of progressive taxation. The percentage of advance tax payments will be reduced from 15 to 10 per cent for natural persons.

The deductibles recognized at present will continue to apply but will be lower - 40 per cent for incomes derived from the sale of non-processed products of agriculture, forestry, the hunting
and fishery industries, copyrights, licences, including incomes from the sale of inventions, works of science, culture and art, artistic performances and crafts; 25 per cent for the incomes of self-employed persons and persons working under contracts for personal services; 10 for incomes from participation in managerial and controlling bodies of enterprises;

The tax for sole proprietors will be 15 per cent.

As from next year, the licence tax will be levied according to the procedure of the Local Taxes and Fees Act, and the proceeds will go into the municipal budgets. So far the licence tax was regulated by the Income Tax on Natural Persons Act.

Individuals will be able to deduct from the personal income tax due in Bulgaria any mandatory social or medical insurance contributions paid for income earned abroad.

The MPs voted down an amendment proposed by Martin Dimitrov (United Democratic Forces) and envisaging a flat tax of 10 per cent, a tax threashold of 220 leva per month and automatic adjustment of the threashold to the previous year's inflation rate.