Statutory Deductible Expenses (НПР) Under Art. 29 PITA — 25%, 40%, 60% for Freelancers, Authors, Farmers (2026)

What the statutory deductible expenses are

Statutory deductible expenses (НПР) are a fixed percentage that reduces the tax base of an individual earning income outside an employment relationship. They do not represent actual expenses but a statutory presumption — the legislator assumes that a fixed share of gross income has been spent on carrying out the activity and should not be taxed.

The rationale is twofold: taxation becomes fair (net result rather than full gross is taxed), and self-insured individuals are freed from the administrative burden of keeping books of actual expenses.

The regime is governed by Art. 29 of the Personal Income Tax Act (PITA) and applies only to specifically listed income categories — liberal professions, royalties and license fees, registered agricultural producers. Unlike a sole trader under Art. 26 PITA, where actual expenses are deducted under the Corporate Income Tax Act, the Art. 29 regime is simplified — a single declaration and a fixed percentage.

Important: НПР is a simplified regime, not necessarily an optimal regime. If real expenses substantially exceed the statutory percentage, switching to sole trader or EOOD is recommended.

The three rates — overview

Art. 29 PITA provides for three different percentages depending on the type of activity. Each percentage is tied to a specific professional category that the legislator considers economically equivalent to real expenses of that size.

The effective rate in the table is calculated on gross income before social security. Example: on EUR 10,000 gross with 60% НПР, tax is EUR 400 (10% × EUR 4,000 taxable base).

For liberal professions and farmers, around 27.8% social security is added separately on a chosen insurance base between the statutory minimum and maximum. For royalties under Art. 29(1)(2), no social security is due (Art. 6(2) Social Insurance Code).

25% НПР — liberal professions and non-employment relationships

The widest category in scope is the 25% regime under Art. 29(1)(3) PITA. It covers all persons practicing a liberal profession as well as individuals receiving income under non-employment (civil) contracts.

Professions in this category

• Consultants — tax, financial, business, management. Auditors (other than registered auditors employed by an audit firm).
• IT specialists — programmers, software engineers, system administrators, UX designers, when operating as self-insured individuals.
• Journalists, writers of non-copyrighted editorial material.
• Scientific researchers — outside an employment relationship with a research institution.
• Translators, editors, proofreaders, lecturers — for oral translations and teaching assignments.
• Actors in culture, education and science — fees for lectures, jury work, reviews.
• Professional athletes — individual sports outside an employment contract with a club.
• Medical and dental practitioners — in individual practice.
• Architects, engineers, appraisers, experts — registered in the relevant professional chamber.

Formal obligations of a liberal profession

• Registration in the BULSTAT register at the Registry Agency (no state fee).
• Notification to the NRA and start of self-insurance from the date of commencement of activity.
• If annual turnover exceeds EUR 51,130 (BGN 100,000) — mandatory VAT registration within 14 days.
• Annual income tax return under Art. 50 PITA, Annex №3, code 07.

40% НПР — royalties and lawyers

The 40% rate is set out in two separate clauses of Art. 29(1) PITA — for royalties and license income (item 2) and for lawyers in individual practice (item 4, in force from 01.01.2023).

Royalties and license income

The scope of this regime is narrowly defined. It applies to payments to an individual for the use of an already created work — not for creating a work on commission. The legal basis is the Copyright and Related Rights Act.

• Writers and journalists — royalties from books, articles, reprints.
• Photographers — license income from stock platforms (Shutterstock, Getty Images, Adobe Stock).
• Musicians and composers — royalties from Spotify, YouTube, Musicautor, PROPHON.
• Programmers — income from software licensing, where the individual holds the copyright.
• Illustrators, designers, artists — licenses for commercial use (stock imagery, commercial design).
• Translators of literary works — royalties for translations that are re-published.

Key distinction: if the individual creates a work on commission and assigns the rights as a one-off, the income is more commonly classified under Art. 29(1)(3) (25% НПР). If the person receives compensation for the use of an already existing work (true royalty), the 40% rate applies.

Lawyers — new regime from 01.01.2023

With the amending PITA statute promulgated in State Gazette No. 106 of 22.12.2022, lawyers received their own category in Art. 29(1)(4) with 40% statutory deductible expenses. Until 31.12.2022, lawyers were included in the general liberal-profession category at 25% НПР.

The regime covers lawyers and junior lawyers admitted to a Bar Association and practicing individually. In-house legal counsel on employment contracts remain outside. The economic rationale is to align legal practice with royalty income, given the high cost of qualification, professional liability, and court-related expenses.

60% НПР — agricultural producers

The highest deductible percentage applies to registered agricultural producers who produce unprocessed plant and animal output. The legal basis is Art. 29(1)(1) PITA.

What "unprocessed" means

Unprocessed product is sold in its natural or near-natural state, without substantive change in its structure. The boundary is drawn by applicable agricultural regulation and NRA practice.

• Plant output — grain crops (wheat, barley, maize, sunflower, rapeseed), fruits, vegetables, herbs, flowers, planting material.
• Animal output — raw milk (unhomogenized), eggs, live animals for slaughter, honey.
• Forestry and game output — firewood, mushrooms, berries, wild fruits from registered forestry holdings.

When the product is "processed" (40% НПР)

If the product undergoes processing, the lower 40% rate applies under Art. 29(1)(1) second hypothesis. Processing is any thermal, fermentation, mechanical or chemical treatment of the natural product.

• Cheese, yellow cheese, yoghurt, curd — processed milk.
• Minced meat, sausages, cured meats — processed meat.
• Canned vegetables and fruits, juices, jams, marmalades.
• Wine, rakia, wine vinegar from own-grown grapes.
• Flour, bread, bakery goods from own-grown grain.

Formal obligations of an agricultural producer

• Registration with the regional Directorate "Agriculture" under Ordinance No. 3/1999 (not with the Commercial Register).
• Self-insurance from the date of registration.
• Annual re-certification of the registration card by end of February.
• Annex №3 to the annual return, code 09 (unprocessed) or code 10 (processed).

How to apply НПР — formula and practical examples

Computing income tax under Art. 29 follows a strict sequence: first the statutory expenses are deducted, then social security, and finally the 10% rate is applied to the remainder.

Formula: Taxable base = (Gross income − НПР%) − Social security. Tax = Taxable base × 10%.

Example 1 — IT consultant on liberal profession

• Annual gross income: EUR 36,000 (EUR 3,000 monthly).
• НПР 25%: EUR 9,000.
• After НПР: EUR 27,000.
• Social security on maximum insurance base (EUR 2,111.64 × 12 = EUR 25,340 × 27.8%): approximately EUR 7,045 annually.
• Taxable base: EUR 27,000 − EUR 7,045 = EUR 19,955.
• Annual tax at 10%: EUR 1,995.
• Effective tax rate (income tax only on gross): 5.5%.
• Combined burden (tax + social security): around 25%.

Example 2 — photographer earning royalties

• Annual royalty income (Shutterstock + Getty): EUR 20,000.
• НПР 40%: EUR 8,000.
• Taxable base: EUR 12,000 (no social security — royalties are not insurable income).
• Annual tax at 10%: EUR 1,200.
• Effective rate: 6%.

Example 3 — farmer with unprocessed grain

• Annual income from grain crops: EUR 50,000.
• НПР 60%: EUR 30,000.
• Taxable base (before social security): EUR 20,000.
• Annual tax at 10%: EUR 2,000.
• Effective income-tax rate: 4%.

Insurance income under the НПР regime

A common mistake is to assume that the statutory expense deduction also applies to the insurance base. It does not — social security contributions are due on an insurance income chosen by the self-insured individual, within the limits set by the annual State Social Insurance Budget Act.

For 2026, the insurance-income range is:

• Minimum insurance income: EUR 550.66 per month (BGN 1,077).
• Maximum insurance income: EUR 2,111.64 per month (BGN 4,130).
• Total contribution rate for self-insured: approximately 27.8% (pension, supplementary pension, health).

The self-insured individual chooses the amount within that range; a higher base means higher current contributions but also higher future pension entitlements.

Category-specific features

• Liberal professions (25% НПР): full self-insurance contributions on the chosen base.
• Agricultural producers (60% НПР): self-insurance under the general rules; reduced rates available only under specific conditions.
• Authors (40% НПР): royalties are not insurable income — no contributions.
• Lawyers (40% НПР): self-insurance under special Bar Association rules (health insurance mandatory; pension optional).

Filing — Annex №3 to the annual return

Income under Art. 29 PITA is reported in Annex №3 to the annual income tax return under Art. 50 PITA. Each income type has its own code, which determines the applicable НПР percentage.

Deadlines for filing and payment

• Annual return: by 30 April of the following year.
• 5% discount: for e-filing and payment by 31 March — Art. 53(6) PITA. Discount capped at BGN 500 per year.
• Quarterly advance payments: due for the first three quarters — by the end of the month following the quarter.

Advance payments are computed on quarterly income net of НПР and social security for the period. No advance payment is due for the fourth quarter — the tax is paid with the annual return.

Comparison with sole trader and EOOD — when НПР is the optimal choice

Art. 29 PITA is not the only regime for a self-insured individual. The alternatives are sole trader (ET) under Art. 26 PITA, which deducts actual expenses, and EOOD, which organizes the activity as a limited-liability company.

Break-even analysis

• Turnover up to EUR 40,000–50,000 with low real expenses: liberal profession (Art. 29) is usually the most advantageous — simplified accounting and low tax burden.
• Turnover above EUR 50,000 with high real expenses: sole trader or EOOD become preferable — real expenses, which exceed the statutory percentage, are fully deductible.
• High turnover, low margin (e.g. trading): EOOD with real expenses usually wins — 15% combined rate on net financial result.
• Professional services with near-zero costs (consultant, lawyer): Art. 29 remains optimal even at high income — there are no real expenses to claim.

For any serious decision on legal form we recommend tax modelling with concrete numbers over a 3–5 year horizon, including one-off costs of changing form (registration, accounting, VAT).

Frequently asked questions