Parliament approved on November 23, in first reading, amendments to the Income Tax for Natural Persons Act, which will introduce a 10 per cent flat tax rate starting from January 2008.

The amendments were supported with 152 against 36 votes, with four abstentions, Bulgarian news agency (BTA) said.

The flat tax rate will replace the current progressive tax system.

Percentage of advance tax for natural persons will be reduced from 15 to 10 per cent.

Deductibles for certain categories of income will continue to apply, but at a lower rate. Forty per cent for income derived from the sale of products of agriculture, fishing, hunting and forestry, copyrighted works, licences, inventions, works of science, culture and art, artistic performances and crafts, 25 per cent for self employed and freelance work and 10 per cent for managerial work and participation in controlling bodies.

Income tax for sole traders will be 15 per cent.

Any mandatory social or medical insurance contributions, paid for income earned abroad, can be deducted from the personal income tax due in Bulgaria.

An amendment by United Democratic Forces Member of Parliament Martin Dimitrov to introduce a tax-free threshold of 220 leva was rejected by Parliament.