Bulgaria: freelancers’ tax obligations
Published on 2019-12-05 by Marek Siarkiewicz.
Bulgaria offers conditions that we consider fairly good. This includes law income tax and a significantly high social charges-free allowance.
Remote work in Bulgaria – is it popular?
Freelancing is rather a common way to earn a living there. Although Bulgaria isn’t big (7 mln inhabitants) the number of freelancers registered on popular sites is similar to what we observe in populous countries like Nigeria, Vietnam, Turkey, and even China! We already wrote about the popularity of freelancing in Europe, where you can see some interesting statistics.
Individual with no registered business, working remotely
We consider a typical case of a regular individual who does not run their own business. He/she works for a local or foreign client and receives transfers to the account in the agreed amount. If a client is from abroad, it is on the freelancer to settle taxes and (often) social security contributions. It’s good to be aware of that to avoid getting into trouble with local fiscal authorities at the end of the year.
The discussed case also applies to people whose main occupation is a regular, full-time job. Side gigs are just a way to earn extra income.
Job type: we discuss typical remote work, such as programming, graphics, copy-writing, translations, online customer service etc.
Is Bulgaria a tax heaven for those who work remotely?
It might be so. The tax burdens are relatively low if you analyze the nuances well. This seems to be confirming Bulgaria's position in the classification of countries ranked by the sum of taxes and social security contributions paid in relation to GDP. In Bulgaria, this indicator equals 29.9% which is the third-lowest, result in the EU (followed only by Romania and Ireland).
In this article, for the most part, we consider a situation where both both sides of a contract are Bulgarian tax residents.
No need to register a business
First of all, you do not need to register a business to legally freelance for a local company and live in Bulgaria. You only need to report income and pay income tax and social contributions, as described below.
Statutory tax-deductible costs
Both the corporate tax rate and the one applicable to individuals are the same and equal 10%. It is calculated on the basis of taxable income which, in the case of a remote worker, happens to be 75% of gross payment. It is a friendly tax structure, which translates into an effective tax rate of only 7.5%. What's more, pension contributions are also calculated from this reduced value.
Social charges are divided between the two sides only when working for a local client
Unfortunately, pension and health contributions are obligatory in civil contracts. They total to 27.8% of remuneration and are normally divided between the two sides.
However, if the remote employee runs a company or works for a foreign employer, then (s)he must pay all contributions by him/herself.
Are you interested in obtaining more information?
Do you want to read when social contributions don’t apply, what’s the frequency of settlements with tax offices and what happens when a freelancer works for a foreign client?
Download a full report about taxes for freelancers in Bulgaria.
Encouraged to hire a Bulgarian freelancer?
Do you have a remote worker from Bulgaria or are you pondering how to legally hire one? Consider Useme - with us the whole HR process is completely non-engaging, and thus simple and trouble-free for both sides.
Propose your remote co-worker to issue an invoice as an individual or use our API to account a whole team of Freelancers. Useme will take care of the formalities, payment security, transaction history, file storage and more.
Any questions? Contact us at email@example.com.