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Bulgaria Freelance Taxes: Detailed Breakdown
This article is a living document; I try to update it as time goes. As of 2024, it is up to date
In the past few years I've been living in Bulgaria, working remotely as a software engineer (technically, “consultant”) for foreign companies (both European and US), and by now I have a pretty good idea about all the taxes and other business-related expenses one has to pay in this setup. Since it's ridiculously hard to find a good and detailed breakdown like that (most often you'll find that income tax is 10%, and dividend tax is 5%, which is accurate but awfully incomplete), I just decided to put this page together. After all, taxes here are pretty simple, unlike countries like US.
Note that what I'm going to be talking about is focused on this exact case: being a resident in Bulgaria, and working as a freelance software engineer (consultant) for companies outside of Bulgaria. So e.g. if your line of business is different (not considered consulting), or maybe you're not planning to be a resident here, then some rules will change and I don't know much details. Also note that this is not about employment. By “freelance” here I mean that I have some sort of Service Agreement with my clients, and I'm not an employee.
Bulgarian national currency is BGN, and as of now, its value is pegged to EUR with the fixed ratio of 1.95583. So, 1 EUR is 1.95583 BGN, and it doesn't change over time, at least not yet.
One more thing to mention explicitly before we start: this article is intended to help you with accurate estimations and planning, but it's by no means 100% precise, meaning, you can't rely on it for the actual accounting and tax reporting. It's only based on my personal experience paying taxes in Bulgaria. If you actually move to Bulgaria, get yourself an accountant before you start working.
Overview
Overall there are two options: either register a company, or register your business as an individual consultant (software engineering is generally considered “consulting”). I was doing both: I started by registering a company and worked like that for a few years, and at some point switched to being an individual instead.
If going with a company, there are more sub-options like whether one only gets dividends, or has a salary and maybe some bonuses from the company, but I was only doing the dividends, because, as per my accountant, it ends up being cheaper (although this is being countered by a HN user, who is saying: “Past a certain threshold, with a company, the best option is to pay yourself a salary every month”. Check this followup comment for more details. My math still doesn't show how this can be true unless you're making like 50K BGN monthly. And since I personally was only going the dividends way, this article only focuses on dividends, as long as a company is concerned)
A short summary of those options is: having a company is considerably less convenient, a lot less private (financial info is accessible to anyone), and more burdensome; in my opinion, the only decent reason for going with a company is when your income is below certain threshold, because it's cheaper this way (or, well, if you don't plan to be a resident here but want to have your business registered in Bulgaria, then having a company is your only option, but as I said above, I personally don't have experience doing that and I don't know much details). Another reason to prefer working as a company is the limited liability, but I don't think it's much relevant for software engineers, because a reasonable Service Agreement with the clients shouldn't put a lot of liability on software engineers in the first place.
Also, keep in mind that those who are not EU citizens or permanent residents, pay a bit less business-related taxes due to health insurance: they pay other kind of health insurance, unrelated to income at all. Fyi in my case it was about 200 BGN per year (I was getting just some bare minimum required insurance), and since it's not a business-related expense, it's not included in the calculations below.
The TL;DR charts for both cases in 2024:
As you see, there is a tipping point where being a company stops being cheaper: in 2024, for EU citizens or permanent residents it's around 10500 BGN per month, for others it's around 7500 BGN.
Source code to generate those charts can be found on github.
Now, let's break it down.
Detailed breakdown
Expense categories
One has to pay the following business-related expenses:
- Income tax. It's the same for companies and individuals: 10%, but it's calculated against profit, and what exactly is considered profit is different for companies and individuals. More on that later.
- Dividend tax. Obviously it's only relevant for companies, and it's 5%.
- Social security (in Bulgarian, “осигуровки”). Technically, the percentages are large, but there are a few important details outlined below, so don't be too afraid when you see the numbers. The percentages are as follows: “ДОО” (State Social Insurance): 14.8%, plus “ДЗПО” (Additional Mandatory Pension Insurance) 5%, plus if you are an EU citizen or you have a permanent residence permit here, then also “НЗОК” (National Health Insurance Fund): 8%. And the two important details are:
- First, the amount from which those percentages are taken, is limited: there is minimal social security income (“минимален осигурителен доход”), and therefore maximal social security income (“максимален осигурителен доход”). Those numbers change (go up) nearly every year, and since Jan 1, 2024, they are 933 BGN and 3750 BGN respectively. So if your income is larger than 3750 BGN (doesn't matter how much larger), then all those social security percentages (14.8% + 5% + in certain cases 8%) are only taken from 3750 BGN. And if your income is smaller than 933 BGN, even if it's straight zero, then you'll have to pay social security as if your income was 933 BGN (as long as you're registered as doing business actively). And again, those exact thresholds are subject to change nearly every year.
- Second, what matters for those social security percentages is the income of an individual. Your company's income (if you decide to register a company) doesn't really matter here. Only the income of you as an individual matters. More on that later.
- Accountant fees: about 200 - 500 BGN per month independently of the income (yeah that's quite a range, in Sofia I've seen someone taking 500 BGN monthly, but depending on the city, it's possible to find one for about 200 BGN per month)
- Very minor, but for completeness also let's include bank fees here: assuming you'll need 2 accounts (one in USD or EUR to receive your income directly from your clients, and another one in BGN to pay the taxes and other Bulgarian expenses), for the company it's around 20 - 25 BGN per month, and for an individual it's 5 - 10 BGN.
Now, let's take a closer look at each of the two major options (company vs individual).
Working as a company
If you're working as a company, when you just received money from your clients, obviously it's not possible to simply start spending them on your personal things, since it's not your money. So first of all you need to come up with a plan on how to be making them your money. The approach that I was using is this: just wait for the end of year and then distribute dividends, and if I need money sooner than that, then make a loan from the company to myself (I'll explain more details about the loan below). It sucks to not have my personal money without having to do extra paperwork (to make a loan), but it's the cheapest way, so that's what I was doing.
Another option is to hire yourself, and pay yourself some monthly salary plus optionally bonuses: this way, you'll get your personal money every month, but it's a more expensive option so it defeats the purpose of working as a company in the first place. I'm not going into details about this option to hire yourself since I wasn't doing it personally and I'm not very familiar with all the subtleties. So, in the examples below I'll only be using the first option (dividends and, when necessary, loans).
UPDATE 2023: it might actually be possible to get money sooner without a loan: my accountant incidentally told me that since 2023, it's now possible to distribute dividends in advance, before the fiscal year ends. However, by that time I was working as an individual already, and so I never tried it out personally and I don't know any details of how exactly it works. But keep that in mind, and if you decide to work as a company, definitely talk about it with your accountant; it sounds better than making a loan.
Example calculations of net income
Let's assume our gross income is 10000 BGN.
As mentioned above, income tax is calculated against profit (that is, all incomes minus all expenses). However, when using a company just as a legal front for freelancing, the company's expenses are very small: only accountant and bank fees, so the tax is applied almost to the full received amount.
- First, calculate social security. As mentioned before, what matters for social security is the income of an individual; and since I do not hire myself, and don't have a salary or any other bonuses from the company, my income as an individual is zero. Therefore, social security is taken from the minimal amount (933 BGN in 2024), and the calculation is as follows: 933 * (0.148+0.05) = 184.73 BGN. Note that we didn't include the health insurance here; if you are an EU citizen or a permanent resident, you'll need to add 8% more here.
- Calculate tax base: deduct the expenses (assuming those are 250 BGN for the accountant, and 25 BGN for the bank), and also deduct the social security we calculated above: 10000 - 250 - 25 - 184.73 = 9540.27 BGN.
- Calculate income tax: 9540.27 * 0.10 = 954.03 BGN
- So the amount left on the company is: 10000 - 184.73 - 250 - 25 - 954.03 = 8586.24 BGN
- Deduct 5% dividend tax: 8586.24 * 0.95 = 8156.93 BGN
So from the gross 10000 BGN we got net 8156.93 BGN, which means we had to pay about 18.43% of taxes and other expenses.
Loans slightly reduce net income as well
NOTE: as mentioned above, apparently since 2023 it's possible to distribute dividends in advance, before the fiscal year ends; I never tried it, but if it actually works, then making loans like that might not be necessary anymore. Regardless, I'll leave this section as is, just in case.
The above calculations don't account for loans, so they assume you'd just keep your money on the company's account, and only get your dividends in the beginning of the next year. If you do need to get some money earlier though (which I think is common), then the loan will also reduce your net income, but not by much. E.g. I was lending money from my company to myself for 4% per year, therefore when the loan is liquidated in the end of the year, technically my company was making another small profit from those extra 4% that I pay back to it, and therefore this profit is taxable in the same way (10% income tax plus 5% dividend tax from the remainder, so in total it's 14.5% from those 4%, i.e. 0.04 * 0.145 = 0.58% per year).
So, in total, if e.g. I borrowed 50 000 BGN at July 01 (therefore I'll have to keep it for exactly half a year, paying extra 4%/2 = 2% of it back to the company), I'd additionally lose 50000 * (0.04/2) * 0.145 = 145 BGN, so for holding this loan for half a year, I lost 0.29% of its amount. Not very significant.
Working as an individual freelancer
First of all, let me clarify what exactly I mean by “individual freelancer”, since some readers were confused after talking to lawyers and accountants. There are technically multiple ways an individual can do business without registering a company, but I mean exactly freelance (in Bulgarian, свободна професия).
Not “Sole Proprietor” (in Bulgarian, едноличен търговец). No. Sole proprietors are taxed very differently and I don't think it's a good fit for software engineers and other consultants. And not “EOOD”, which just means a company with a single founder. What I'm talking about is exactly freelance (свободна професия). You might want to copy paste it to a lawyer and/or accountant that you'll be working with, to avoid any misunderstandings (and try to use an accountant who certainly has experience with freelancing; see contacts of one such accountant below, if you like).
Alright, having that said, let's move on to the tax details.
As I briefly mentioned above, what is considered profit is different for companies and individuals. For companies it's easy: all incomes minus all expenses, since company must have dedicated bank accounts etc, but for individuals it'd be much harder to calculate reliably, since it's not too clear which individual's expenses are related to business and which aren't. So for individuals, government uses a simple model and introduces so called recognized expenses (in Bulgarian, “признати разходи”), which is a fixed percentage of the income. For different lines of business this fixed percentage is different, but for consultants, it's 25%. What it means is: government just assumes (recognizes) that, no matter how large my income is, I always pay 25% of it as expenses, and so the remaining 75% is now considered profit, and all the taxes calculated from those 75%. And it's pretty cool because, as you remember from the section above, the actual business-related expenses in our case are much lower than that. Effectively, the income tax becomes closer to 7.5%. And the social security which we have to pay reduces the tax base even more.
Example calculations of net income
Again, assuming our gross income is 10000 BGN:
- First, calculate social security. Now that the income is related to the individual, we need to look at the actual income amount, and since it's above the maximum (3750 BGN in 2024), we'll use 3750 BGN. Calculated as follows: 3750*(0.148+0.05) = 742.5 BGN. Note that we didn't include the health insurance here; if you are an EU citizen or a permanent resident, you'll need to add 8% more here.
- Calculate tax base: deduct the recognized expenses 25%, and also deduct the social security we calculated above: 10000 - 10000*0.25 - 742.5 = 6757.50 BGN.
- Income tax is 10% of the tax base, which is 6757.50 * 0.10 = 675.75 BGN.
- Fixed expenses as usual: accountant fee 250 BGN, bank fee 10 BGN, so it's 260 BGN.
- Therefore net income is: 10000 - 742.5 - 675.75 - 260 = 8321.75 BGN
So from the gross 10000 BGN we got net 8321.75 BGN, which means we had to pay about 16.78% of taxes and other expenses.
Bonus sections
Let me also share some more advanced or peculiar cases that I happen to be aware of, just in case it's useful to someone.
Taxation of stock options
Stock options are an increasingly popular “extra” part of the compensation package, especially in the tech industry. I'm not going into fine details as to how stock options work in general: there are a lot of existing sources out there which explain it better than I could; but shortly, stock options are the right (not the obligation) to purchase certain amount of stock shares, on a fixed price (so called strike price), within a limited amount of time. The most appealing part here is the strike price: once you get your options with strike price e.g. 5 USD, you can purchase shares on 5 USD each, regardless of what the current market price for those shares is. So if the market value is e.g. 50 USD, you could buy shares for 5 USD and immediately sell them for 50 USD, thus making an instant 10x profit. That's the idea anyway.
Generally when you have stock options, there are 3 possible events related to them:
- Vesting: You get a new portion of options vested (meaning, you can now exercise them). The schedule at which this happens totally depends on the company, but a common case is to have them vested every month (typically after the initial “cliff” of e.g. 6 months);
- Exercise: You exercise some of your options (meaning, you buy shares using your options strike price, which is supposedly lower than the current market value);
- Sale: You sell some of your shares.
To my knowledge, Vesting is not a taxable even in any of the countries I'm familiar with (as per freelancers from many countries that I happened to talk to).
The Sale is obviously a taxable event: you sell shares and potentially get some taxable profit (however there are a few countries where even Sale part is not taxable; from what I know, Arab Emirates is one such country).
Now this gray area, Exercise, is an interesting part. In a lot of countries (at least in USA and majority of Europe), Exercise is a taxable event too: whenever you exercise options, they see it as if you made profit since you bought shares on a discount, and you pay the tax on that discount value (current market value minus the strike price you paid). To me, it's highly annoying and doesn't make sense: first of all, when I'm purchasing a stock, nobody knows if I'll make a profit or a loss in the end. So effectively I'm paying tax on an unrealized profit. Also, paying the tax upfront means having to have cash not only to do the actual exercise (pay for the shares), but also find extra cash to pay the taxes. And if we're talking about stock of a private company, selling shares (e.g. to get some cash for taxes) might not be an easy task at all. In certain cases one might need a lot more cash to pay the post-Exercise taxes than to pay for the actual shares. So overall, to me that practice to treat Exercise as a taxable event doesn't make any sense, yet this is how majority of countries treat them.
In Bulgaria though, things might not be as bad for you. I say “might” because it depends on a bunch of details in every particular case, and I'm not familiar with all the possible cases, but at least let me share what I do know.
So from what I know from the lawyer I spoke to, when you buy shares by exercising options (using your strike price), there are two possible ways it could be done by the options-issuing company:
- The company pays the remainder of the current market price for you to purchase the shares in the market (it can only be the case when the company is public and is being traded on a regulated exchange). In this case, this remainder amount that the company pays on your behalf, is treated as your regular income for consulting, so yeah Exercise is a taxable event in this case, but at least a bit of good news is that the same “recognized expenses” take effect and your tax is evectively 7.5% of that remainder. The share purchase price is considered to be the current market price (so not the price you actually paid, but higher); it will be important later on when you sell shares.
- The company just gives shares to you in any other way, without explicitly paying any remainder on your behalf (and if the company is private, that's the only way). In this case, it's not a taxable event: it's treated as if you just bought your shares on this low price, so the share purchase price is the actual strike price you paid.
Then later on, when you finally sell your shares (which might be right after the purchase or 30 years later, doesn't matter), the difference between sale price and the purchase price is considered your profit, and if it's positive, you'll have to pay 10% tax after the sale.
So as you see, depending on circumstances, Exercise could be considered a taxable event in Bulgaria, but it's often not. Since those stock options are still a relatively rare occurrence here in Bulgaria, better check with the lawyer about your particular situation, to make sure (see the small section on accountants and lawyers below).
Final Notes
Other small expenses
While the calculations above provide a very good estimation, there might be other small expenses, like those:
- Unless you receive payments in EUR from another European country, banks usually take a small percentage for the incoming wire transfers, like 0.1%;
- Accountants may charge something extra once in a while, like 150 BGN once a year to put together an annual report of some sort;
- As mentioned above, when working as a company, loans will also somewhat reduce your net.
Rate of BGN to other currencies
For every incoming payment from your clients (or any other taxable event, really), what matters for taxes is the amount in BGN. If you get paid in EUR, that's easy, because as mentioned above, BGN is pegged to EUR with a fixed rate of 1.95583, so this exact rate is used all the time. However if you receive e.g. USD, we need to figure which rate to use for every particular payment. Two key points here:
- For every working day, Bulgarian National Bank ( https://www.bnb.bg/ ) publishes its official rates of foreign currencies to BGN. Historical values are also available. This official rate is fixed for the whole day. If some particular day is a holiday, the rate from the last working day prior to the holiday should be used.
- What matters for your income is the date and amount in your invoice, not the date of actually receiving the payment, and the actual amount received (which might be a bit smaller due to whatever fees the banks take).
As an example: 23.07.2021 you created an invoice for 10000 USD, and then a few days later, 27.07.2021 you actually got the payment for 9990 USD (after bank fees). In this case, the amount used for income calculations should be 10000 USD, and the USD-BGN rate should be taken for the 23.07.2021, which is 1.66213. So for tax purposes, this income is considered 10000 * 1.66213 = 16621.30 BGN.
Freelance tax is paid every quarter
Most taxes in Bulgaria are only paid once per year, but for some reason (I've no idea why, really), freelance taxes must be paid every quarter instead (so called advance tax, or “авансов данък” in Bulgarian). So if you decide to go the freelance route (i.e. without registering a company), a simplified tax schedule will be as follows:
- For profit received Jan-Mar, tax must be paid until Apr 30;
- For profit received Apr-Jun, tax must be paid until Jul 31;
- For profit received Jul-Sep, tax must be paid until Oct 31;
- For profit received Oct-Dec, tax must be paid until Apr 30 of the next year (but if you pay it until Mar 31, you'll use 5% discount on the taxes for the whole year)
Paperwork required
Working as an individual requires somewhat lighter paperwork than companies.
Opening a company using an accountant will cost you about 300-400 BGN (or about twice as less if you want to do it yourself), and then if you decide to close it, it's a long process which lasts about 6 months and costs twice as much as the opening.
For individuals it's a lot cheaper, both opening and closing, but opening requires an education document translated to Bulgarian. This kind of translation will cost you perhaps 30-40 BGN and a few days of waiting; after that's done, you just go to the Registry Agency (Агенция по Вписванията), pay 10 BGN fee, and you get registered same day. Closing is equally easy.
In either case (company or individual), you might also need to do the VAT registration. As per my limited experience, VAT registration is required by law if (a) your clients are EU-based, or (b) your turnover during the last 12 months is more than 50 000 BGN (100 000 BGN since 2023). Doing this registration with the help of your accountant is something like 150 - 300 BGN once. And also, to make it clear, being VAT-registered does not necessarily mean that you'd have to charge VAT. As per my accountant, for our line of business, at least in my exact case, I don't need to charge any VAT. For more info about VAT, check out these couple documents (prepared by the accountant that I work with):
- VAT implications for freelancers, short summary: freelancers_vat.pdf
- Different types of VAT registration for freelancers: freelancers_vat_registration_types.pdf
Once the initial paperwork is done, every month you'll need to download bank statements (online), and send them to your accountant, together with the invoices for this month.
Also at some point you might need to translate your Service Agreement with your clients to Bulgarian, but not necessarily, it depends.
That's about it. Not too much really.
How company is more burdensome
So apart from the difference in taxes:
- The most annoying issue is that the money I receive is not my money. I might want to use them for investments or buy other things, and I can't do that without making a loan first, which means more paperwork and slightly more taxes.
- All key financial information (at least, revenue and earnings) of all Bulgarian companies is public, and anyone can look it up in the original source, i.e. Registry Agency. For the Registry Agency though, a Qualified Electronic Signature is required; so even though anyone could look it up, at least they'd have to set up that signature and leave some digital footprint of getting this data. But as of recently, there are some 3rd party websites which expose this info 100% openly, accessible even to search engines. In my opinion this whole situation is terrible, but it is what it is, so we just have to be aware of that.
- It's just an extra thing to think of and maintain. Separate accounting, separate possessions, not too easy to get rid of later on, etc etc.
If you go the freelance route, none of those issues exist. The received money can be spent right away on your personal needs, financial info is protected, and overall a low-maintenance option, in my opinion.
Historical values of min and max social security base
Just in case you're interested:
- 2024: min 933 BGN, max 3750 BGN
- 2023 since August 1: min 780 BGN, max 3400 BGN
- 2023: min 710 BGN, max 3400 BGN
- 2022 since April 1: min 710 BGN, max 3400 BGN
- 2022 until April 1: min 650 BGN, max 3000 BGN
- 2021: min 650 BGN, max 3000 BGN
- 2020: min 610 BGN, max 3000 BGN
- 2019: min 560 BGN, max 3000 BGN
- 2018: min 510 BGN, max 2600 BGN
- 2017: min 460 BGN, max 2600 BGN
- 2016: min 420 BGN, max 2600 BGN
The min social security base is usually the same as the minimal salary, and you can see more historical data there: https://kik-info.com/spravochnik/mrz.php
Get an accountant
And finally, let me reemphasize again that this info is only intended for a reasonably accurate estimation and planning; it's not enough for the actual accounting and tax reporting. If you actually move to Bulgaria, get yourself an accountant.
Unfortunately it can be hard to find a good accountant though. From my own experience, and the experience of some people I know, there are a few common problems with accountants here:
- First, they often don't have much experience with freelancing. Most of their clients are running companies, and it's very common for the accountants to be confused about what's the right way to go about actual freelancing. E.g. as you can find out from the comments below, some people were told they need to register as a Sole Trader, which is total nonsense for our use case. Others simply push for registering a company without good reasons for this; just because this is the only thing they know how to handle.
- Second, they often don't try to optimize taxes of their clients: they just make sure that the activity is legal and you don't get in trouble with the law, but if you end up having to pay much more taxes than you could have, they don't care. Even worse: when you tell them “hey but what about XYZ, isn't it possible to legally save on taxes this way?”, they can get kinda defensive. It happened that I had to fight with my accountant over one tax event: they were saying I have to pay a few thousand EUR in VAT, while another accountant I happened to consult with was saying that this particular kind of events is actually free of VAT.
- Third, they cause more issues with the paperwork than needed, I guess out of being overly conservative and rigid. Another anecdote from my own experience: I got an invoice from a US company, and that invoice didn't mention the actual word “invoice”. It had everything an invoice should have, but instead of the word “invoice”, they used some other word. My accountants at the time demanded that I get a different document from the US company, which does mention the word “invoice”. As per another accountant, a demand like that is just nonsense. There are other examples too, like having to print and sign and scan every invoice that I make (even though my actual clients couldn't care less about this paperwork), and having to translate invoices to Bulgarian.
Eventually I had to just switch to a different accountant that I was lucky enough to meet, and having worked with him, I can definitely recommend him now: Hristo Marinov. He solves all the issues I described above: his primary focus is freelancing, he goes out of his way to make sure clients don't overpay taxes, and he removes the burdens instead of creating them. Before actually making the switch, I've been discussing various accounting questions with him and my old accountant for about a year, and I see such a difference in their approaches.
As you can tell, I highly recommend him.
- Email: info@insurebulgaria.com
- Google Maps link: Hristo Marinov Accountant (There are also reviews that you can check. If you end up working with him, consider leaving yours!)
- Facebook group: Expats in Bulgaria - Taxes and Legal aspects
He speaks English and can work with clients from any part of Bulgaria. And as a really nice bonus, if you're into privacy and security, he has no issues using PGP-encrypted emails! It always bothered me when I had to send some sensitive documents to an accountant via email, because we have no control over how those emails are gonna be stored, and having them encrypted gives me some nice peace of mind. Go find another accountant in Bulgaria who knows how to encrypt emails.
And if your situation is not straightforward (e.g. involves stock options as discussed above), I'd also recommend talking to a lawyer first. I had a chance to speak with a number of lawyers at this point, and I found these guys to be the most helpful for freelance-related cases, as well as for cases involving trading stocks and other types of assets: https://www.taxmonkey.bg/en/home/. They also speak English. (fwiw I'm not paid by them to advertise them here, just genuinely like their services)
Conclusion
Taxes in Bulgaria, while not being the lowest in the world, are still pretty low. However if you're considering moving here, taxes should probably not be the only reason, as there are plenty of other things to consider. My own primary reasons to move here back in the day had little to do with the taxes, actually.
So, do your own research. I like a lot of things about Bulgaria, despite the fact that many locals tend to hate it, but it's definitely not for everyone.
Discuss on Hacker News.
Discussion
Hi Dmitry,
just to say that for about 2 months i was looking for a detailed tax explanation for freelancers, as just started working with a company out of Bulgaria and needed to. The article is BRILLIANT, thank you for putting all together.
Kind regards, Adrian
Hi Adrian, thanks for the comment! Oh I'm really happy to hear that it helped, I wasn't really sure if it's worth writing all this, so glad to know it was useful.
Hi Dmitry,
another question popped. It's the first time and even my accountant seems experienced, there is something else that maybe you can assist with as well.
All my invoices, one per month, will be to a Danish company (i actually have a contract with days off, yearly salary and everything, just they're not located here), and i've been told i dont need to charge VAT. Just that when i reach the 50k threshold i will need to register and “charge” 0%.
Job is literally “consultant”, and there is only one line about VAT in your article. I assume this is right as VAT doesn't appear in any of your calculations, but any additional light would be super super welcome.
Thank you a lot once again and kind regards,
Adrian
Hi Adrian,
So first of all, yes, regardless of whether you're VAT-registered, you don't need to charge any VAT: as you said, even when you register, you'll just be reporting zero VAT (well at least that's what my accountant told me in my case, but yours seems to be very similar).
Regarding this one though:
I'm confused because Denmark is a part of EU, and when I was working with a client from EU, my accountant told me that I have to do the VAT registration right away when I started working with them.
When the client is not part of the EU, then yeah, no need to do the registration until you hit the 50k BGN threshold (during the last 12 months).
Hi Dmitry,
Great article - well done! Well-structured and well-explained for both models, company and self-employed. I am also a software engineer/consultant and I am looking to relocate from Greece to Bulgaria to work as a freelancer for EU clients.
I contacted a couple of accounting services companies in Bulgaria but they highly recommend to go with the company option, where they sell ready made companies (Limited liability), to start with and speed up the process. However, I feel that this option is more profitable for them hence they recommend it - not sure. The main risk they highlighted is that the tax office (until we get the permanent ID card - as an EU citizen) may refuse the tax registration at some point, as you have to do that every year due to not being a permanent resident in Bulgaria (we get temporary ID card for the first 5 years if I am correct).
May I ask if you can recommend an accountant with some experience for my situation (inbox me please if needed)? EU citizen to provide his freelancing services to EU clients, from Bulgaria.
Many thanks
Hi Oscan, I'm not sure why exactly accountants keep suggesting the company option; maybe because that's just the most popular way that everyone is familiar with, so it's much easier for them; or probably there are actually some legit reasons in your case, since laws are hard and I obviously know nothing about it, except for my exact case. You mention one point:
First time I hear about repeating tax registration every year tbh. By “tax registration” do you mean the registration in the Registry Agency, to get the BULSTAT number? I've made this registration before I even had a permanent residence permit here, and I did not have to repeat this registration every year. I'm actually not a EU citizen, so maybe that's the crucial difference; however I would assume that it must be easier for EU citizens, not harder. Also something might have changed since I was doing it first time, I don't know.
Anyway, I just emailed you with the details of my accountant, you can try talking to them too if you want.
Hi Dmitry,
Thank you for preparing such a great guideline. I'm considering relocation to Bulgaria as non EU citizen and registering as freelancer is the best option for me because this is how I work with my clients now.
I have to say that all other resources insist that freelancing is not possible without permanent residence. I even paid for a consultancy from immigration / business registration agency and they told me the same.
I took a closer look at documents which are needed to register as a freelancer: 1. Residence card 2. Diploma or license 3. Payment confirmation 4. This application: https://www.bulstat.bg/uploaded/files/46-RB2.pdf - good that it allows to enter “ЛНЧ” as alternative to “ЕГН” 5. This declaration: https://www.bulstat.bg/uploaded/files/24-decl.pdf - and here you have to specify “ЕГН” which you don't have without permanent residence… do you remember whether you filled this declaration at the time of your registration and what did you put in “ЕГН” field?
Thanks, Oleksandr
Hi Oleksandr, I was doing freelancing without permanent residence just fine, so it's definitely possible (I had “prolonged” residence). It's incredible that even that immigration / business registration agency says that it's not possible while it clearly is (or it has changed since, but I seriously doubt that).
I don't remember the exact forms I had to file, but in general in Bulgaria it's quite common that a form only says “ЕГН”, but you can just put an “ЛНЧ” there (I'd also scratch the word “ЕГН” and write “ЛНЧ” next to it) and it'll work in practice just fine. I've done that countless number of times in many different places.
I'll ask if Hristo (an accountant I recommend in the article) has anything to say on this.
Hello Olexander,
Based on my experience with registering clients at the Registry Agency, as long as you have an ЛНЧ (Bulgarian Unique Civil Number), a Bulgarian ID card, and any document labeled as a “diploma” or “certificate” with your name on it, you should be all set. The type of residency doesn't really matter in practice.
Great! Thank you for confirming this
Oleksandr
Hey Dmitry!
Congrats for the article. Great stuff! Quick one: If register myself as an individual how do I go about invoicing my client? Mind you I have subcontractor agreement and in order to get paid, I need to invoice.
Thank you in advance,
E
Hey Eddie, thanks. Not sure what's the issue: I also need to invoice my clients every month, so I just create an invoice, print it, sign it with blue pen (yeah my accountant says it has to be blue), scan it, and email it as a pdf to my client as well as to my accountant. That's it.
Hey Dmitry,
first of all thanks so much for this great article. It has been really hard to find such high quality information with clear examples. your article has been a massive help.
So regarding the invoice. Lets say I have a German Client. And my hourly wage is say f.ex. 100euro/hour. When I send an invoice as german tax resident I normally send an invoice with the hourly vage + 19% VAT, so in total what the client will pay is 119euro/hr.
How would that change if i become freelancer in Bulgaria in that case? How would i have to change the total price charged including VAT now? thanks so much!
Hey, glad it was helpful.
As to VAT, as I mentioned in the article and in some other comments, as per my accountant, at least in my case, I don't need to charge any VAT, due to Reverse Charge. But definitely check with accountant and/or lawyer about your exact case.
Hi could you email your accountant to me as well? I am interested in going with the self employed option
Is there any way to reduce the social contributions? as it seems like a lot, but I guess the more you make the more the tax will go towards the 7.5% numberltfu
Hi Adam,
I'm not aware of any ways to reduce the social security part, other than what's mentioned in the article. As to the accountant, you can use any accountant in Bulgaria, all of them should be able to help you. In fact, communication with my accountant might be hard unless you know Bulgarian.
That said, I just emailed it to you.
HI nice to find some good advice.Can you send me your accountant email address also
Hi John,
As said in the thread above, you can use any accountant in Bulgaria, all of them should be able to help you. In fact, communication with my accountant might be hard unless you know Bulgarian. But I just emailed it to you.
Really incredible guide. I wish there was something like this for other countries I have researched (Romania, Slovenia, Croatia). Kudos. Can I ask also ask you the accountant details?
Hi Vito, glad it was helpful. Sorry for not responding here before, but we already exchanged emails re: accountant.
Hi Dmitry, awesome article! I still have one doubt regarding the Income Tax for Individuals: it is not clear to me if the right tax rate is 10% or 15%. I have found some articles saying that the Income Tax for Sole Proprietorship (Едноличен Търговец) is 15%. Am I overlooking something? Thanks!
Hi Guido, the short answer is: yes the tax for Sole Trader (Едноличен Търговец) is 15%, but freelance software engineers are not considered Sole Traders; as mentioned in the article they are considered Consultants. And for consultants, the income tax is 10%, and due to the recognized expenses 25%, the income tax effectively becomes closer to 7.5%.
An example of a Sole Trader activity is e.g. stock trading as a primary occupation, or cryptocurrency mining, this kind of stuff.
Hi Dimitry,
Does website building, API integration and video editing classify as software engineering?
Thanks,
Dimitar
Hi Dimitar,
I believe it does, but as I was saying a few times in the article, I'm not a lawyer, so better consult with one for your exact case.
Best of luck!
Hi Dmitry, perfect article, thanks a lot. I did decide to work as individual (before I read your article) and agree with your calculations.
One point only: maybe one argument pro ООД could be buying property or a car (from company's revenues, before taxes)? Even if both are used mainly privately. I do not know how it is regulated in Bulgaria.
You wrote, bulgarian taxes are “not the lowest in the world”. Maybe, in the world, but I think in EU there is no better settlement from tax point of view (based on real end-o-end calculations)? Or can you suggest other country?
Hi Sergei, thanks for the feedback.
As I mentioned in the article, VAT registration is required in most cases with our line of business; and my accountant advised strongly against buying anything personal on a VAT-registered company, since those companies are being watched strictly, and buying personal things on it is not gonna be appreciated.
Funnily enough, I actually had to buy a car as a company (since being a non-EU citizen I can't get license plates for a car as an individual), but again as per my accountant it's wiser to open a separate company, which does nothing, just for this purpose of owning a car or a land. So that's what I did, and therefore it doesn't serve as a “pro” for freelancing as a company.
I haven't studied taxes in all EU countries thoroughly, so can't speak of that; at the moment I don't know if there are EU countries with lower end-to-end tax. As I mentioned, my own reasons to move to Bulgaria back in the day were not powered solely by taxes; there are a lot of other things to consider too.
Hi Dmitry!
Awesome article I have been getting so much mixed information since arriving in Bulgaria but your article answers it all. I just have a few questions if you can help it would be great. For the individual option, the agreement i have with the foreign company has to say “consultant”? The education document has to be linked to the iob? I am working as a sales consultant but studied finance…. Thanks a lot!!
Hi Simon, glad to hear the article was helpful.
I don't have a definitive answer to that; my current agreement does say “consulting agreement”, but I imagine if it was saying something like “service agreement”, I would easily sign it and wouldn't expect problems to arise.
It has to be relevant indeed, but having studied finance and then working as a sales consultant does sound relevant enough to my untrained ear. For example, my education document says “information security engineer”, but my current consulting agreement is much more broad than just information security.
I don't think all this is clear-cut too much, but as I was saying a few times in the article, it's best if you talk about your specific situation with an accountant and/or a lawyer.
Good luck!
Thank you for this extremely informative and helpful article. I have a son (aged 22) who is currently living with us in the UK and wishes to move to Bulgaria and work as a freelancer there. His work would come in via his father who is a translator and passes some of it on to our son. In the long term he might work directly with the agencies which send work. We have two concerns - one is to keep taxes and social security contributions to the minumum, and the second is to obtain the D visa for him and his wife (they aren't married yet, but will get married before making the move to Bulgaria). How did you get your visa? And do you have any advice for us. Thank you!
Hi Petra, glad to hear the article was useful.
As to visa, sorry that's a whole lot different topic, and I'm not sure if I can be helpful, since from what you described, your situation is pretty different from mine. Try to find a professional who specializes in immigration to Bulgaria.
Thanks for this awesome article!
I'm also a developer and I currently live in Belgium but I'm planning to relocate in Bulgaria very soon. I recently got hired as a contractor by a US company and I need to create a company to invoice them.
Your accountant seems to be well experienced for this specific case, could you send me his contact informations please?
I also have a few questions for you: When you say as an invidual, which status did you choose ? EOOD, ET or Freelance ? I guess that it's freelance but I'd like to be sure.
What other costs/requirements are involved in the process of creating a legal entity? Do I just go to the Registry Agency and set up a bank account to be ready to operate ?
Best,
Hi Hux,
Yeah I meant Freelance (“Свободна Професия” in Bulgarian).
If by legal entity you mean a company, then I don't know much detail since back in the day I just hired an accountant to do the registration, and it cost me a lot more than it would if I did that myself (iirc I paid about 350 BGN, but again it was a few years ago, I imagine prices would be different today)
If you mean register yourself as a freelancer, then yeah you just go to the Registry Agency and you get registered the same day (at least it was like that in my case), and the fee is very low, 10 BGN or some such.
As to the accountant, let's chat via email, I'll message you soon.
Good luck!
Hello, I have a few questions: 1) Do social security contributions have to be paid monthly? 2) If I have a Company (eood), is the income tax (10%) paid only once a year (relative to the previous fiscal year)? When?, in what month? 3) If I have a Company (eood) and I pay (to me) only one dividend a year, for example, in January, of 40,000 bgn, as regards social security contributions, I will pay 27.8% of 3,400 bgn (14.8%+5%+8%, as an EU citizen) in January and will I pay 27.8% of 710 bgn each month for the remaining 11 months (where as an individual I will earn nothing)? Thank you and congratulations for your article.
Hi Stefano,
Shortly yes, but in some cases it's possible to only pay the minimal amount monthly, and pay the rest at the end of the year. But I personally don't split it like this, and so I don't know details.
Yes, once a year; iirc the tax for a fiscal year (ending at Dec 31) should be paid from January until the end of April of the next fiscal year.
Dividends don't add to the amount for social contributions, so if you have a Company (eood), and you're only getting dividends from it, then you'll just pay 27.8% of 710 bgn for all 12 months. You won't have to pay 27.8% of 3,400 bgn at all (provided that you don't have some other incomes, obviously).
Hello, great article with so much information.
I need help , i have bulgarian citizenship but not living currently in Bulgaria. Is it legal to open a bank account and receive money from usa made from affiliate marketing. Do i only need to pay tax and that’s it or there’s something else to do to be clear with the law?
Thank you
Hi Natasa, as mentioned above, this article is based purely on my personal experience paying taxes in Bulgaria, while being a resident here and getting paid for consulting services from abroad. Your case is totally different from mine, and so I can't help sadly, since I'm not a lawyer. I suggest you talk to a lawyer, e.g. those guys https://www.taxmonkey.bg/.
Hi Dmitry,
Awesome article, really helpful! Im a dutch guy and working as a freelance software engineer (consultant) for a belgian client. Im thinking about moving to another country since I can work fully remotely :)
Sofia (bulgaria) is one of my options and your breakdown of taxes helps a lot. To be clear, as a consultant (software engineer) you pay close to 7.5 % in total?
Is there any threshold on how much you can earn to still pay this amount of tax?
Is there anything else to be aware of or just get a good accountant and let him take care of most of the stuff?
Hi Jordi, glad to hear that the article was helpful.
Income tax is 7.5%, that's right. But since you're asking “in total”, let me clarify that, as the article explains, other than the income tax there is also Social Security. So the total amount of all the taxes you'll have to pay will be larger than 7.5%, and the exact percentage depends on how big your income is. The more you make, the smaller the tax percentage would be. I think the charts in the beginning of the article visualize that pretty well.
There's no threshold as far as I'm aware.
Not that I know of. I tried to make this article as comprehensive as possible, to make it the kind of article that I myself would like to read when I was moving here back in the day.
So yeah, get a good accountant, let them know that you want to be a freelancer (so no company), follow their guidance with the paperwork, and you should be good to go.
Good luck!
thank you!
so below calculation would be reasonable correct if one would earn around say 25000 BGN per month?
gross income = 25000 social security +3400 * (0.148+0.05+0.08) = 0.278 = 945.20 tax base: 25000 - 25000*0.25 = 6250 - 945.20 = 17804,80 income tax 10% = 17804,80*0.10 = 1,780.48 fixed expenses: 155 net income = 25000 - 945.20 - 1,780.48 - 155 = 22119,32 BGN
which would mean you would pay around 11.5% taxes
To start as a Individual do you also need a lease contract for rent?
Calculations look correct, yeah.
I don't think so, but not entirely sure.
Hello.
I am accountant in Bulgaria. I would like to congratulate you for the article. It is amazingly correct and I confirm the info. There are some specific steps/activities that needs to be considered in the different scenarios - living/not living in Bulgaria, income coming from EU VAT registered company OR EU non VAT registered company/individual OR company/person outside EU. However the calculations and other info are correct. If someone needs advice I would be happy to help: info@insurebulgaria.com
Regards, Hristo Marinov
Hello Hristo, thanks for dropping by and for confirming that the info is correct.
There are multiple comments above trying to find an accountant for a reasonable price, and since you're an accountant willing to offer services, do you mind sharing what's the monthly fee that you're charging your clients?
Hello Dmitry, I apologize, I have missed to reply to your comment on time.
My accountancy fee is in between 150 to 250 EUR per month. The exact amount depends mainly on the income sourse - number of invoices per month.
In case the business/freelance provide online services to individuals (B2C) in EU it will require VAT registration in OSS (European VAT system - One Stop Shop), that needs detailed reporting and calculation/paying VAT depending on client location. In such cases I quote individually.
Hi Dmitry,
very great article. Good to see somebody is taking the time to put all this together.
I'm a freelancer and currently planning on moving to Bulgaria working as a consultant.
1. Can you recommend a lawyer or a website to find one?
2. How long does it take to get registered and everything before I can start working as an individual freelancer?
3. How often do you need an accountant over the course of 1 year, like every month, every two months…? I reached out to a few accountants and some of them charge you up to €250,- / month.
Thanks
Hi Lucas, thanks.
As I mentioned in the article, from the lawyers that had a chance to talk to so far, I personally liked these guys the most https://www.taxmonkey.bg/en/home/ , so yeah definitely recommend them.
As also mentioned in the article, for individuals, you'd need an education document translated to Bulgarian. This kind of translation will cost you perhaps 30-40 BGN and up to a few days of waiting; after that's done, you just go to the Registry Agency (Агенция по Вписванията), pay 10 BGN fee, and you get registered same day (you probably need to know Bulgarian for that though; or you can pay something extra to the accountant and they'd do this for you).
So in total it's likely going to be a few working days, should be less than a week; and most of that time is spent on waiting for the translation of education document. Btw I can recommend this translator globus07@abv.bg ; she's working faster than most others, and the price is good too.
If you're going to be VAT-registered here (which is likely; for details see the section Paperwork required in the article), then the accountant will have to put together some paperwork for you every month. So yeah gotta pay them monthly. I agree that a monthly fee of €250 is a little too much, so keep looking and try to find a cheaper one. I pay less than €100 per month at the moment; I can share the contact with you, but they don't speak English for the most part, so communication might be a bit hard (via a translator) unless you know Bulgarian.
Also btw, apparently the comment right above yours is posted by an accountant (Hristo), so might also check with them what they are taking monthly. Too bad Hristo didn't share the prices.
Thanks for your answers. I keep looking for a account who charges about €150,-
In the meantime I've reached out to a few lawyers and some of them shared there fees.
The lowest fees so far are a total of €1460,- which are made up as follows:
700 EUR - Bulgarian Residency
110 - social contribution
150 - service fee for setting up a freelancer status
500,- Tax residency fee
What do you think?
I have another lawyer who wants to charge €2000,-to €2500,- which I find quite expensive.
Tbh I'm not sure what exactly those lawyer services entail.
Residency-related ones (“Bulgarian Residency” and “Tax residency fee”) are very specific to your circumstances so I can't speak of those at all.
The “150 - service fee for setting up a freelancer status” - I guess that's more or less fair when a lawyer is doing it for you, however I can't help but think just how much cheaper it is if you do it yourself (when I was setting up that status myself, the administrative fee was 5 EUR. Might be tough if one doesn't speak Bulgarian, but most likely still doable. If you're gonna be doing it in Sofia, I'm almost sure the officials do speak at least some English).
The “110 - social contribution”, I'm not sure what this is. Is it some one-time payment? I'm confused because social contributions aren't one-time payments, they need to be made every month, and as the article explains, the amount of it depends on the income.
What the lawyer said was prior to getting tax residency status I would have to:
1. Get a Bulgarian residency card 2. Pay for social contributions
Both of these points need to last 6 months.
about those fees:
€700,- (service fee) = to obtain Bulgarian residence card for EU citizens valid for 5 years incl. all state & legal fees, and mandatory health insurance.
€110,- (monthly social fee) = my monthly social contribution rates
€150,- (service fee) = helping me to register as a freelancer
€500,- (service fee) = providing assistance with tax residency (after 6 months)
If you say this could be done without a lawyer then why not hiring a translator instead? :)
Oh if it's all-inclusive even with the health insurance, I'd say it's reasonable. That said, I've no idea what are the actual administrative fees that you'd pay if you do it yourself.
€110 sounds like it's about the minimal amount of social contributions; as the article explains, the exact amount is the percentage of the income, and the minimal amount from which the percentage is taken is 710 BGN at the moment. So 710*(0.14+0.08+0.05) = 191.7 BGN, which is about 100 EUR. If you're gonna be registering a company, then indeed that's the amount you'll be paying every month regardless of the income, but if you'll be a freelancer, and your income is larger than 710 BGN per month, then the social contributions will also be higher.
It's a valid option, but it will obviously require a lot more time and effort from you to do all this. If you can afford the lawyer, it probably makes more sense to use one, and think about optimizing the costs later on, when you have gained some experience.
700€ to have Bulgarian residence card ??? This is scam. If you are UE citizen,you just need a local translator and some documents (and you will have to translate and notarize a part of them). I probably paid less than 100 euros for all of that. About the health insurance, your european health insurance card is ok; but you will probably have bulgarian residency based on the expiry date of your card (depends of the country that give you the european health insurance card : it can be 2 years, 4 years, 5 years…). If it is a problem for you to regulary update your residency, you can pay for a cheap private insurance anywhere and this will be sufficient as proof for immigration. There is no “mandatory health insurance” to pay to obtain Bulgarian residency if you are UE citizen.
Be careful, there are a lot of positive things in Bulgaria but also a lot of profiteers…
I second that, as EU citizen, the process to register is quite straight forward. I did without any assistance and I went “just” twice. Once to ask which info they needed and once to bring the documents. I had to translate something. Sure if you get assistance is easier (I got assistance for other steps like changing my wife driving licence and register her as non-eu), but 700 for registering a EU citizen seems a lot.
Thanks Huck and Vito for sharing. could you please be more specific about the exact documents to provide. I'm a software developer /EU citizen and looking to move to Sofia and register as a self employed. Which documents need to be translated/notarized ? do you have to provide a long term tenancy agreement ? etc. Thanks in advance.
Hi Dmitry,
Thanks for putting this all together. I wish I had had it in 2021.
I did some freelance work for an American company and got talked into doing the company route.
I made a company and everything to basically send 3 invoices.
I'm now looking at freelancing again (I want to stay in my village house with my dogs, and options are slim), and I am dreading delving back into this.
I have two questions, just incase you might know.
1) Do you know /why/ we /must/ use an accountant. If you are already established in your field it is less daunting, but I'm loathe to start with fixed costs off the bat. Especially every month, regardless of actual work.
2) We decided to 'pause' my company, and I left it at that. My bank is slowly nibbling away at the account in fees, but as far as I'm aware it has ceased operations. The accountant was very clear that this was a 'get out of jail free card' in terms of avoiding fixed costs without turnover.
Have you heard anything about that?
Also, I would recommend www.ibank.com/ to people annoyed with fees. I started out with Raiffeisen and the fees were clearly unsustainable. ibank personal account is free (and I can top up my phone with it), and the business account is 2.50/month
Hi John,
Sorry to hear you're struggling.
Well it's not true that we must use an accountant. If one knows enough to do all the paperwork on their own, it's definitely a valid option to go without accountant. And for sure it's easier to do on the freelance route, not the company (since the accounting is simplified for freelancers).
As to pausing the company, I'm not sure what the question is. Yeah it is possible to pause the activity of a company, and then the accountant won't have to do any paperwork for you except maybe once a year (not sure if this is still required), and if your bank is able to stop charging you as well, then yeah that's a valid option.
And thanks for the recommendation of http://www.ibank.com/ ; I haven't heard about it.
I reached out to several lawyers and accountant but I get different answers when it comes to registering as a freelancer (consultant). One said I have to register as a sole proprietor. But you mentioned in your article as a consultant I can work as an individual. Could you please tell me precisely how you register as an individual to avoid any misunderstanding?
Thanks, Lucas
Ugh there's so much confusion about it among lawyers and accountants, apparently.
No, you don't have to register as a sole proprietor. In fact, if you do, then your taxes would be much bigger since you won't be getting the 25% “recognized expenses” (“признати разходи” in Bulgarian).
You need to register as a freelancer (in Bulgarian, “лице, упражняващо свободна професия”). Just copypaste it exactly and give to a lawyer, to avoid misunderstandings.
Fyi I just added this info to the Working as an individual freelancer section, to try and avoid any misunderstandings for the future readers.
Hi Dimitry, can confirm everything you wrote!
As per dividends, I have EOOD and I pay them in USD which is perfectly legal
Hi Georgi, alright thanks for the info. I guess my accountant was also confused back in the day when I was trying this. I'll correct the artice.
1. Can you tell me which documents you submitted when you applied for BULSTAT as individual freelancer? I was going to include my university certificate but when I reached out to a translator that person told me it is not reqired.
2. Did you register online? 3. Any of the documents require apostille?
Tbh I don't remember the full list, but a translated university diploma definitely was one of them. Maybe the rules have changed already, I don't know.
Nope, I went to the Registry Agency (Агенция по Вписванията) in person.
I didn't have it and nobody asked for it.
Hi Dmitri! As everyone already stated, thank you for this post. Helps a lot. You're the top 1 search result for a reason
There's one thing I don't quite get. The maximum monthly social contribution is limited, so if one month you invoice 20k you pay maximum for 3400k, and if the next month you invoice 0, you pay for the minimum.
Does this mean that if instead of invoicing 10k per month, I invoice 20k each 2 months, I will efectively reduce the amount of social security payments? Hence optimizing my profits.
Hi Jose, glad to hear it helps.
Good question re: invoicing 20k each 2 months instead of 10k each month. My knowledge is actually limited in this area, but as far as I know: no, I don't think it's possible to optimize taxes this way, since there is also this thing called “annual equalization” (in Bulgarian, годишно изравняване). What it means is: if you invoice each 2 months, initially you'll indeed pay less social contributions, but in the end of the year, you'll need to spread the income equally across all 12 months (if you were registered as a freelancer during all those 12 months), and pay the remaining social contributions eventually.
If you're really interested in that though, better talk to a lawyer or accountant; I don't know all the fine details here.
Thanks for the good question, I guess it might be worth to add it to the article.
That's pretty insightful. It felt too easy to be true haha. I've read about “annual equalization” and yes, is what you said. More people asked this question around the Internet, although I was not able to find the correct Google query to find those questions before knowing the “annual equalization” name btw.
Good blog you have here. Kudos.
Hi again!
I have made it to Bulgaria. I'm currently trying to figure out what it takes to apply for a long-term stay work visa? I heard the public health insurance is not sufficient. I would need an additional health insurance for 1 year. Did you get an additional health insurance? Where can I find one?
Hey, congrats on making it!
As to visas and all this stuff though, I'm sure your setup is tremendously different from mine, so unfortunately I can't really be helpful here. You're better off getting a professional advice.
Hi Dmitry, thanks for the great article. I was wondering if you could write about the situation of using a Bulgarian EOR (Employer of Record) compared to a freelancer or registering a BG company. I'm an EU citizen but have a non-EU company and think that appointing a BG EOR could be easier than the other solutions in my situation. Would you have any idea how much this would cost (for the EOR service itself and the tax situation)?
Hi James, unfortunately I don't think I can be helpful here. As I mentioned, I'm not an accountant, and this article is based purely on my experience paying taxes in Bulgaria, and I haven't even heard the term EOR before. I guess you'd need to talk to lawyers / accountants.
That's the best how-to article about taxation in Bulgaria that I've seen so far. Outstanding job, thank you very much!
I have a situation just like yours (with a few minor exceptions). Everything is very clear except for the VAT part, and that 20% could be a dealbreaker for me. I definitely will exceed the 100k BGN threshold, and as I understood, I better consult with accountants to figure it out 100% sure.
I wonder if it'd be possible to get the contacts of the two accountants you've consulted with.
Hey Paul, glad to hear it was helpful.
As to accountants/lawyers, in the article I've mentioned those guys https://www.taxmonkey.bg/ , I think if you check with them about VAT in your case, that'd be a good start.
This is an asweone blog post Dmitry. Thanks for sharing. do you know the best way to deal with receiving payments in GBP or USD in Bulgaria ? does banks in Bulgaria offer multi-currency account and do they charge for receiving GBP or USD if they do offer multi currencies account ? are we required as EU citizens to have an account in Bulgaria ? can we use bank account in another EU country ?
Hi Ben, thanks for dropping by, glad to hear it was helpful.
I think I described it in the article. If I receive payments in GBP, I would just have a GBP account. The same for USD. It's technically not necessary: one could have account in any other currency (e.g. BGN), but then it sucks that the incoming payments will be autoconverted using whatever exchange rate at the day of receiving the payment, and it's obviously not very flexible.
Yes it is possible to open multiple accounts (denominated in different currencies).
Again as mentioned in the article, most Bulgarian banks do take a small percentage (like 0.1%) for the incoming wire transfers in any currencies other than BGN or EUR. So yeah if you receive like 5000 GBP, a typical fee for it would be 5 GBP (0.1% of 5000). Same for USD etc.
I know one bank who doesn't do this: https://www.procreditbank.bg/ , but instead their other fees are generally higher than what most other banks offer.Unfortunately, starting from Jun 2023, ProCredit bank started taking this fee as well.As a side note, I personally do like this ProCredit bank overall, at least because they don't force you go to the office too often. E.g. if you want to open or close an account in a new currency (while already having some existing account with them), with most banks you'd have to go to their office and spend time on paperwork; in ProCredit this is done online in minutes. Same story for “actualization”: most banks would force you to go to the office every year just to check that your documents are up to date, and to take new copies of them. In ProCredit, this is also done online.
That I don't know for sure, I never tried to use an account from another country, but even if it's technically allowed, my personal opinion is that it's just simpler to have an account in Bulgarian bank. When it comes to dealing with governments, extra complexity often hurts.
Thanks Dimitri, that was clear and concise. self employed accounting seems to be simple. just doing simple math and pay the tax agency online/bank transfer. we don't charge VAT when client is abroad. why we still need an accountant in this case apart from the annual return ?
It's true that self-employed accounting might be doable without an accountant (the numbers which the accountant gives to me match my own calculations precisely), however I wouldn't recommend doing it from the very beginning. At the very least, you should also know when and how to report the incomes and to pay taxes. Fyi freelance taxes must be paid not only once per year, but every quarter (so called advance tax). So after each of the first 3 quarters of the year one has to fill certain declaration and pay tax for that quarter. Then after the whole year, one has to fill another kind of declaration (which may include things other than freelance, if you had some other income during that year), and pay the remaining tax. All this can be done by yourself online, but I'd say it's a good idea to at least start by letting your accountant do this (and ask them to explain how to fill the declarations etc, so that you'll learn doing it yourself).
Also, even though we indeed don't need to charge VAT in many cases, we still might need to be VAT-registered (see the section “Paperwork required” for details). And if one is VAT-registered, it means having to do extra paperwork every month (normally, accountant takes care of it completely).
Also, one has to pay the right amount of social contributions every month. As mentioned in the article, the exact amounts are subject to change once in a while, so one has to keep tabs on what is the right amount, to avoid getting in trouble.
Also, as we know, laws aren't set in stone; literally anything can change, so if you go by yourself, you'd have to keep an eye for whatever changes, to avoid getting in trouble.
Overall, I think that might not be a minor undertaking. This stuff isn't covered by the article for a good reason: it's a much wider topic, and I am not too proficient with this myself, since I'm not an accountant. The article's point is to help you with some very reasonable tax estimations, not with the actual tax reporting.
Another reason to keep the accountant (unrelated to freelancing) is that sometimes one might have some other kind of taxable events (e.g. sale of a house, a car, stocks, etc), and it's just very convenient to have someone to help you with your extra questions with no overhead: instead of trying to find whom to ask, negotiating the price of their advice, arranging some kind of meeting etc, you just shoot an email to your accountant, and they help you out, at no extra costs.
Thanks Dmitry, that was clear. I know now what do to : find a good accountant :)
Hi Dmitry, thank you for putting the time and effort into writing this post! I've been searching online for days now and nothing I've found was nearly as demistifying and complete. I would also like to join the many readers who have asked for your accountant's details, if possible. Thanks again!
Hi Mariona, glad to hear it was helpful.
As to the accountant, I'll send you an email.
Hey Dmitry,
great blog post. I also like to play with numbers and can confirm that past a monthly salary of 8.000 €, a salary payment is more tax efficient than the corporate tax + dividend route.
It’s actually very easy:
Since social contributions are capped (max calculation basis of 3.400 BGN) and the rest of it is only taxed with 10% income tax, the overall tax burden converges towards 10%, the more you earn.
Whereas with dividend payments, you still have a minimum salary (and therefore some social contributions), and the rest is the taxed with 10% corporate tax (+ 5% dividend tax on the rest). So basically your overall tax burden converges towards 14,5%, the more you earn.
And that threshold is at around 8.000 € total salary costs (incl. employee + employer contributions).
Here is a graphic that shows this (feel free to include this in the article, but please leave a credit under the photo):
https://www.dropbox.com/scl/fi/2zz00smo8d3kfbtz0g1tw/Tax-burdens-of-salary-only-vs.-lowest-possible-salary-dividends.png?rlkey=4j05zs55kukvwmxtdz97iqk7i&dl=0
Best regards,
Dennis
Thanks Dennis, yeah I think you're right. I might include it in the article. Do you actually confirm it in practice, I mean, are you working as a company and paying yourself a salary and your net income is what this chart shows? (just wanted to make sure that nothing is overlooked)
Still though, if one is making enough to make the salary option cheaper than dividends (i.e. more than 8K EUR per month as of 2023), then I don't see any reason to keep working as a company in the first place, since individual taxes will be much lower at this point.
I am still doing the lowest possible salary (780 BGN from August 2023) + dividend route right now. My pay slip for the salary shows same social contribution numbers (14.8%, 5% & 8%, I'm an EU citizen) that you pointed out in the article. However, I may change my strategy to high salary payments from next year onwards (didn't know about it until recently). So yes, I am working as a company and paying myself a salary right now. The x-axis on the graphic shows the salary amount or profit (revenue minus expenses).
I think there are several reasons to go for a company instead of doing the work as a freelancer. My actual expenses are higher than 25% of my revenue, first of all. When I travel for work, I get daily allowance from my company (these are basically tax free). Lastly, the limited liability may be an argument as well for some.
BTW: My calculation is based on being an EU citizen. Here is an updated graphic that states this in the headline: https://www.dropbox.com/scl/fi/srtq1k53cpmu0ve2jqkq0/Tax-burdens-of-salary-only-vs.-lowest-possible-salary-dividends.png?rlkey=tiq1xk3d9q4sjbk4h7z0qpj7t&dl=0
Yeah, I see. I take it back that I don't see reasons to use the EOOD; I was too narrow-minded and only considered cases similar to mine, where the business-related expenses are nearly zero, and service agreement doesn't put any liability on the freelancer in the first place.
Good points, thanks.
Hello Dmitry
Thank you for all your details
1/ Do you have any recommendation for company that provides help for registration as freelancer & accounting (bonus if the company also provides support for getting tax residency without living in)
2/ Is BG bank is mandatory ? (Professional or Personal) ?
3/ Does BG bank support SEPA transfer ?
4/ Do you know if the tax are based on date of invoice billed / date of due date / date of real transfer completed
Thank you
Hello Theo,
Yeah the article does mention a recommendation of the accountant: Hristo Marinov, I believe he can help with both registration as freelancer and accounting. As to the “tax residency without living in”, tbh I don't think it's possible, unless I'm missing something. If you don't plan to actually live in Bulgaria, then I don't think you can register as a freelancer here; your only option is to use the company, and also at least the dividend tax will then depend on your actual country of residence. But I'm sure Hristo knows more than I do, so talk about those details with him, and/or with the lawyer (I can recommend the TaxMonkey guys).
I don't know for sure; I never tried to use non-Bulgarian bank for business in Bulgaria. So maybe there are options to use non-Bulgarian bank, but I don't know any details.
Yes.
It is explicitly mentioned in the section “Rate of BGN to other currencies”. The invoice date is what matters for taxes.
Hi Dmitry
Thank you a lot for your answers
1/ For the “residency without living in”, as viewable in the PWC tax summary of Bulgaria, tax residency is either 183 days residing in Bulgaria “OR” having his center of interest (employment, income) in Bulgaria My case is while being tax resident of nowhere else (living less than 6 month in any countries)
2/ It is explicitly mentioned in the section “Rate of BGN to other currencies”. The invoice date is what matters for taxes. Which means the tax could be payed as provision before receiving the payment (60 days or whatever client is late)
Thanks again
Hi Dmitry,
thanks for an amazing article! May I ask you a question about expenses for a freelance person, are those always 25% flat or can a person file more? For example, can a freelancer hire another freelancer or a company to provide services and put these as a expense?
Thank you
Hi Anton, to my knowledge, they are always 25% no matter actual expenses. So if your actual expenses are higher than 25%, then you'll probably want to work as a company instead.
Hi Dmitry, Really great article! I've got some question regarding my Ltd ( EOOD) and
Might be you could clarify based on your experience..? And may be someone from your subscribers could comment and put some light..
Although my Q is not directly related to taxes..
I'm In Bulgaria, on the status of a temporary residence permit.. The status does not give me legal opportunities for employment (this is not the Blue Card) for Bulgarian Employer..
But I found a Bulgarian Company (we'll call it ABV for simplicity) who needs my services: IT consulting .. s.a. system configuration, some code development.. etc.
Therefore, I am going to register an EOOD on my name. And to sign off a contract between my EOOD and ABV Inc.
But what warnings me is the moment that, in fact, It will be me who will provide the consulting services (remotely or in an office) as a private person, and to whom formally is prohibited to work in Bulgaria.. Could it cause an issue ? if yes, how to bypass it?
However, as I can see from the forums, many people successfully work through EOOD.. and I think not all of them already have permanent residence..!? Please kindly share your experience/advice if any..?
Thank you in advance, Vadim
Hi Vadim,
First of all, regardless of what I say here, I'd still suggest you talk to a lawyer (you can check the one I recommend in the article or any other lawyer), at least for your own peace of mind. I'll share my experience, but I don't know all the details about your status and I'm not a lawyer.
But shortly, it sounds like you shouldn't worry at all, and you can actually work as an individual freelancer too, if you want (so EOOD is not your only option). Let me explain.
By “temporary” residence permit I'm assuming you mean a “prolonged” one? (Разрешение за продължително пребиваване) I had this status myself for a number of years.
Re: not being able to get employed, first of all let me clarify that this ban is about literally employment, not freelancing. What this article is talking about has no relation to employment at all (it is mentioned in bold at the top). So, I think you should be totally fine working as either EOOD or an individual freelancer. I was doing both of that while having this status “Разрешение за продължително пребиваване” for years, and not a single accountant or lawyer had any concerns with it.
Also just a fyi, let me mention that, to my knowledge, even that restriction about not being able to get hired is not 100% strict: if you're a highly skilled expert and an employer really wants you, they can do some extra paperwork to prove that they weren't able to find an equally skilled Bulgarian candidate, and still hire you as a regular employee, even though you're not a permanent resident. I don't necessarily recommend doing that: doing the EOOD or individual freelancer sounds simpler and might be more tax effective, but just a fyi that even an employment is technically possible.
In your case, my personal recommendation would be as follows:
Good luck!
Hi Dmitry, Thank you so much for the response.. Just another short Q where I'm sure you're aware of.. I've learned some details and started to think off moving to freelance option instead of EOOD.. So my Q is: after registration in BULSTAD and NAT to start my business shall i either: a) open additionally the Business account to issuing Invoices to it, or b) i can use my personal current\checking account (in my case already opened with BulBank) ? I guess its b) but would like to confirm Thank you in advance, Vadim
I think (b) is a valid option, but I'm personally doing (a). It's just easier to keep this stuff separate. Accountant will also appreciate not having to browse through a lot of your personal transactions on the bank statements that you'll be sharing with them.
Hi Dmitry, I decided to move along “freelancers path” and put the option with EOOD on hold.. 🙂 at least for now.. So, Could you Please clarify a couple of points:
- Is my guess correct that to conduct freelancers business I do not need to open a business account, instead I could use your personal checking\current account (Bulbank in my case..) and payments on invoices will come to it?
- While working via EOOD it is more or less clear of how with the signing of a contract should looks like: f.e - ABS Corporation enters into a contract with EOOD XYZ for the provision of consulting services in the field of IT.. etc So what about freelancing case, i.e What we have to write in the contract then: My full name.. my VAT #, list of providing services,.. But What else?..
My problem is that my Counterpart (as well as me) didn't not have such experience yet.. and questions/concerns might arise with “freelancing” scenario.. And I scaring because don’t want to loose this my 1st potential contract and I need to somehow convince them that I can legally provide such services.. and that everything within scenario is legal!?.. I'd highly appreciate if you can share some extract ( beginning part ) of one of your real the contracts (of course, wipe the real data/figures).. and kindly sent it to my email..
Thank you in advance, Vadim PS. And, could i use my personal checking account ( rather than Business account ) for freelancers scenario ?
Responded in the comment above. I personally think it's better to keep this stuff separate, instead of reusing the same bank account for personal and business stuff. So I'd suggest you just open another account as an individual, and use it for the freelancing stuff.
Not sure what makes you worried. The contract would look pretty much the same for the company or individual, just instead of the name of the company and its BULSTAT number, there will be your name, your VAT# as you said, and that should be enough. Everything else (the services, the compensation, etc) is the same in both cases.
Actually one part in your case is different from my experience: I never had clients from Bulgaria; only from other countries. I'm almost sure it should still be a perfectly valid option, but since you'll need to get an accountant anyway, why don't you get it right now, and ask him/her all those questions? After all, if you then talk to your potential clients and say that you had a chat with an accountant and he said it's all good, it'll be much more convincing than if you say “this random guy on the internet says it's all good”.
Tbh I'm not sure if I'm gonna get the time to do this soon. I would again suggest you talk to the accountant, and ask them if they can help with the Service Agreement template. I'm sure they should be able to help. If you're struggling to find an accountant, check the recommendation in the article above.
Hi Dmitry and all,
i posted back in time and first of all i would like to thank you for the super detailed post. My industry is similar to yours and was really helpful to get started.
I moved back to my country so im no longer self-employed but im glad to leave my mail if anyone needs advice. Im not sure if i will be able to give more than what you did here, but an extra hand is always welcome.
n o r e w 0 n z@gmail.com (just remove the spaces)
PS: not looking to sell anything or get any business with it. I just was so lost when i started that i would like to return help to whoever needs, if on my scope.
Thanks Adrian!
Thank you so much for this information.
My idea is to register as freelancer and write fewer but higher invoices of at least 20.000 bgn. If I only write f.e. 3 of these invoices per year, would I need to pay the social security in the end of the year on the average monthly income (which would be based of 5000 bgn per month) or could I get away with paying only 3x social security each with the highest, capped amount and thats it?
My accountant tryed to explain - if I understood it right - that in the end of the year I would need to balance out the social security based on the monthly income and recommends doing an EOOD.
What are your thoughts?
Hi Matt, yeah your accountant is right in that the trick of doing fewer but higher invoices isn't gonna work because of the “annual equalization”. You're not the first one who came up with this idea, e.g. check this comment thread above. I guess I need to add it to the article as a kind of FAQ.
If the average monthly income is less than the tipping point as outlined in the beginning of the article, then EOOD is indeed a better fit in this case.
Hey Dmitry,
Thank you for creating this website. I'd like to ask you something and would be very grateful for your answer based on your experience.
I trade stocks, crypto, etc beside my current job and I'm planning to move to Bulgaria to live off of solely trading, so I'll register as a Sole Trader. Do you think I will still need to hire an accountant on a monthly basis although the exchanges/brokers I use provide me with all the tax info I need?
Thanks a lot in advance
Hey Chris,
Tbh I've never had any experience particularly with Sole Trader, so I'm not sure how hard it is to figure the taxes without an accountant. But at the very least, you'd have to know not only how much taxes to pay, but also when to pay them, and how to fill all the paperwork properly. Long story short, I believe that it's not a minor undertaking. At the very least, it's worth starting with an accountant, and then it's never too late to go on your if you feel comfortable doing so.
Might want to also check this comment above where I provided more details on that, answering to a similar question.
Hello Dmitry,
first of all thank you very much for your article and all the information shared on it. After analyzing different options/factors and reading your article, I decided to move to Sofia as a freelance (свободна професия) asap. If possible I would like to ask you for two things: 1. Your accountant contact (the one that jst speaks bulgarian), if you can mail it me, I will really appreciate 2. Steps to become a freelancer in Bulgaria as an EU Citizen, if I am not wrong are the following: a.find an accountant (well, not mandatory but I will do it with an accountant) b.go to the Registry Agency (Агенция по Вписванията) with a translated diploma to get the freelance (свободна професия) status c.something else? like an address in Bulgaria (rent contract)
Thank you in advance for your time and support.
Hi Marc, re: steps to become a freelancer in Bulgaria as an EU Citizen, off the top of my head I don't remember other details, but still your best bet is to call Registry Agency or ask the accountant.
About the rest, I'll email you soon.
Hi Dmitry
Excellent article, thanks alot for taking the time to detail so comprehensively. Im looking to setup as freelancer / EU citizen - could you recommend me your accountant by PM if he/ she would have time to cover my case and ill get in contact
Thanks Bryan
Hi Bryan, glad it helped. I'll email you soon.
Thanks for a the explanation regarding tax for freelancers (consultants). Do you maybe have any information on how to get residency for non EU? Is there any particular procedure?
Hi Karina, that's a whole lot different topic and I know very little about it overall. Sorry, can't be of much help here.
Hello Dmitry, I wanted to ask you a questions about taxes, I am from Macedonia, I have double identity my first is Macedonian and my Second is Bulgarian, I am working online as affiliate marketer on CopeCart and I have received my money on online banking account- Wise. Since my account on copecart and on wise is bulgarian, I have sent my money to a bank jn Bulgaria, it was a bigger sum of money sent at once, my bank allowed it and I have sucesfully received the money, but since I don’t spend more than 183 days in Bulgaria I am not a Bulgarian resident I just have bulgarian identity, passport and ID. Now how should I declare this money, how can I pay taxes on this money
Hello Michael, as I was saying in other comments, I'm not an accountant, so I don't know anything outside of my own experience of paying taxes while being a resident of Bulgaria, and your case is definitely very different.
Hristo, do you have anything to share here?
Hi Michael.
I have discussed such case with a Macedonian client in absolutely the same situation - citizenship Macedonian/Bulgarian; living in Macedonia, receiving an income in Bulgarian bank. The situation for me based on the information provided looks like this:
1/ Your are tax resident in Macedonia. Since you reside in Bulgaria less than 183 day, do not owe property in Bulgaria (I assume) do not have other “interest in Bulgaria” (I assume), for example marriage/partnership with Bulgarian or some business here.
2/ The fact that the income is received in Bulgarian bank do not make it taxable in Bulgaria. Unless it is received because of work in Bulgaria (that is not the case I believe). It is the same as having a account in Revolut, Stripe, PayPal, Other – it is just an account in foreign provider.
3/ You need to declare the income and pay tax (eventually also social insurances) in Macedonia.
If you want to be a tax resident in Bulgaria that can be arranged but you need to set up a company. No social insurances will be due (you reside in Macedonia), the total tax paid will be around 15% (10 in Bulgaria plus 5% in Macedonia as per the tax treaty between these two countries). Of course there are some specifics that needs to be discussed and arranged.
If you need more info info or want to discuss it (WhatsApp/Meet/Zoom) please contact me.
Regards
Hello Hristo, and thank you for your valuable time, please contact me via email [redacted] so we can arrange a zoom meeting
Fyi I removed your email from plain sight just in case, and forwarded it to Hristo.
I have mailed you. If email not received please check you spam folder.
One question, if I go the freelance route and make 4k euros a month, how much will I keep clean? Hristo I need someone to do the taxes for me, how much is your fee and can we do all remotely? Thanks.
Hi Manuel.
I will send you (on your email) standard introduction email that consists of important information, calculations, accounting offer and other various useful info. After you give a look, we can discuss your tax matters in detail. The email should arrive in a minute or two, if not received please check your spam folder.
Regards.
Hi Hristo,
Can you send me the standard introduction as well so I can have your contact details? I have quite similar situation and I need assistance.
Hi Eemeli, I just sent you an email, if not received in a minuter or two please check your spam folder
Hello Dmitry,
do you know a way to find out how much bulgarian pension someone did earn after N years of work as “свободна професия”-freelancer, paying all years maximum contributions?
Hello Sergej, I don't; Hristo do you wanna take this one?
Hi Sergej, I am afraid I can not answer, it is a separate branch of the accounting that I do not specialize in. Recently I found that company (https://www.ecsoconsult.com/en), they may answer your question. However, assuming you pay social insurances on the maximum base 3,750 BGN (1,042.50 BGN social insurances per month) you should receive the maximum pension 3,400 BGN.
assuming you pay social insurances on the maximum base 3,750 BGN (1,042.50 BGN social insurances per month) you should receive the maximum pension 3,400 BGN.
Maybe yes, if you do it 40 years
I mean temporary employment, in my case two years, maybe a few more to come.
Normally, when you work in a “foreign” country, you get some pension rights. I don't think it's different in Bulgaria, especially for EU citizens. Many Bulgarians work and pay pension contributions abroad, but only for a few years. And so they will get a partial pension from this country.
I'm looking for a pension calculator, under дзпо.бг or something like that, where I can calculate with my ЛЧН the pension rights. Or the amount to be paid out if I leave Bulgaria.
Further to comment from Chris, 2023/12/23 14:38, he mentioned that he would register as sole trader (for trading stocks and crypto as main source of income, I assume those are done outside of EU). Is sole trader(as CHris stated he'd use) considered same as freelancer or is it some other form of business registration?
How do they differ in terms of amount of tax and times of reporting i.e. annually vs quarterly?
Would that allow for exclusion of social insurance payments?
Is it not possible in BG to trade stocks as an individual instead of registering as some business/freelance?
If one makes >120k lv/yr, does one need to register for VAT, even though they don't collect it in trading stocks? Can one be exempt and thus not do any unnecessary in this case paperwork? I'm also assuming that if one does not collect VAT one does not pay VAT in BG (still w regards to trading stocks), right?
When you trade stocks, you don't know what your income is until the yr ends, in reality you can't even guesstimate what that income will be, then how do you pay taxes quarterly?
If your tax is estimated based on previous yr's income and in the current yr you have not made anything close to last yr, or worse lost money, are they going to repay the tax you have advanced (based on freelance and I don't know if that is the way to do it)?
Hi John, I don't know a lot here, but I know someone who does: the lawyers from TaxMonkey (whom I mentioned in the article above).
First of all, definitely check their Guide to Taxes on Income from Shares and Financial Instruments (it's in Bulgarian, but you can google-translate it). This is a really great guide on the topic of trading, in my opinion.
After that, if you still have questions and want to clarify something about your particular situation, hit them up and get their advice.
That's really the best I can suggest here. But just to add a tiny bit of info that I know re: your questions:
Sole Trader is definitely a very different form of business registration; has nothing to do with freelance really.
Re: reporting, I think it's reported and paid annually, but not sure about all possible cases, so again, check with the lawyers.
Re: taxes: one huge thing is that Sole Traders don't have the recognized expenses, so the taxes are much higher than for freelancers. I don't know much details though since I've never been a Sole Trader.
It is for sure possible, but I believe that depending on circumstances, one might want to register some sort of business to optimize taxes. I'm not gonna do into details here since the article I just linked does a better job explaining them than I could.
The “Solo Trader” is an individual (like the “freelancer”) that has requirement for accounting and is tax treated like a company. I can call it a ”mix” between both. The “Solo Trader” is forming his tax base like the company - income munis expenses (actual expenses, not 25% or 40% recognized expenses as the freelancer). The profit is taxed with 15% which is similar to the company tax (10% corporative tax + 5 dividend tax, effectively 14.5%). The “Solo Trader” is liable with all his assets same as the freelancer and opposite to the limited liability company.
NRA is treating the Freelancer and Solo Traders trading exclusively with shares and/or other financial instruments the same (in case the trade is main activity and no other regular income). The tax is 15% on the PROFIT. “Profit” is the income minus expenses. The 25% recognized expenses DO NOT apply for Freelancer and Solo Trader trading exclusively with financial instruments, they form their tax base as a company (profit minus expenses proved by documents).
Freelancer and Solo Traders trading shares exclusively pay social insurances on base between 933 and 3750 BGN per month (as the freelancer). They do not declare and pay quarter tax; it is pay ones a year till 30th April after the financial (equal to calendar) year ends.
Practically the trade with financial instruments (as main activity) no matter as Freelancer or Solo Trader is the most “expensive” in terms of taxes and social insurances. The alternative is a company. In that case the manager will pay social insurances on the minimal base of 933 BGN a month, and 14.5 % tax. The shares must be transferred from personal name to the company capital (legal process that will invoice certain procedures and expenses).
Thanks a lot Dmitry for putting in all that work - this piece is so helpful and insightful. Very much appreciated!!
And hi Hristo, would you mind sending me also your details and the standard introduction? I'm already living in Bulgaria and thinking of starting to freelance, and could use some advice and accounting services. Cheers!
Hi Dora. Yes, of course, please contact me at my email: info@insurebulgaria.com
Somewhere around 13.000€ per month is where salary gets more attractive than paying out dividends.
Thanks for sharing; curiously, Dennis shared that his number is 8K EUR. I still haven't done my own math for this; been wanting to add it to the top charts, but at the same time I'm hesitant adding info which I haven't confirmed in practice myself.
Did you just do the math, or did you yourself use both the dividends and salary? Just wanted to make sure that nothing gets overlooked.
Just did the math. Here is the calculator for salary: https://sb-bg.com/calculators-and-tax-guides/gross-to-net-salary-calculator/
With salary, i assume you also get a high credit score if you want to buy property or something else.
Hello,
First of all, what a joy to know that there are people like you who support us in this way, I wanted to ask you something.
My tax consultant suggested me to create an EOOD now to accumulate the income that I will generate this year (I am in a EU country but I am going to Bulgaria in December) my question is.
1) My manager suggested me to dissolve the company when I arrive to bulgaria (as it is done to obtain legal residence and to be able to generate income this year already from bulgaria and not from my country) and operate as self employed and offshore companies, for example as self employed and having a US LLC and a UK LLP to manage payments from abroad and to be transparent entities, these would tax their income to me at the end of the year, so, at the end of the year when I legally must declare that income, when the normalization of the monthly income is done, I would pay at most the 6100 euros of social security and 7.5 of the remaining income)?
2) If not operating as an autonomous, the truth is that I would prefer to operate as an EOOD since being honest I am only interested in withdrawing dividends on a monthly basis (1200€ each month of the income generated that month and that the rest stays in the company), I investigated and saw that there were people saying that it was a crime to do this because you can only withdraw dividends from the profits already declared but in your article you mention that since 2023 this is allowed, I understand that at this point the math is simple, 1100€*12=13200€ where 660€ of dividends would be paid, I understand that to be able to distribute dividends to me monthly at the end of the year the company has to have in the bank account minimum 15400 outside of other expenses, because it would be like this:
Annual Distributions of Dividends: 13,200 euros
Tax on Dividends (5%): 660 euros
Necessary Net Profit: 13,860 euros
This is the sum of the dividends (13,200 euros) plus the dividend tax (660 euros).
Corporate Tax (10%):
The net profit of €13,860 should be after paying the corporate tax of 10%. To obtain this net profit, the gross profit must be higher.
Calculation of Necessary Gross Profit:
To determine the required gross profit, you must consider that after deducting the 10% corporate tax, you should still be left with €13,860.
In other words, the gross profit must be high enough so that, after deducting the 10% tax, the necessary net profit of 13,860 euros remains.
Necessary Gross Profit: 15,400 euros
So that, after paying the 10% corporate tax, you have 13,860 euros available, the gross profit must be 15,400 euros.
My main question here is, is it possible to distribute dividends monthly in this way? Is it allowed and legal? I understand that there would be no problem as long as at the end of the year the income is enough to pay the corresponding taxes as I showed in the calculation.
I saw that it is allowed to withdraw dividends from profits of the current fiscal year (not from profits of previous years) but, is it allowed with a monthly frequency? being so in this case my expenses for this operation would be the calculations I made + minimum contribution to social security for being the unpaid administrator of the EOOD?
3) And finally, knowing that this year income is generated and that the same (no longer provisional dividends) can be withdrawn in 2025 as dividends without the calculations shown above, in this case I have read that the dividends of previous years must wait until April 1 of the following year to officially withdraw them and pay 5% tax, is this so? could I not for example withdraw the dividends of the profits of 2024 in January 2025?
I ask these questions because I see that they are gaps that were missing in the comments and I am sure there are thousands of people with this doubt, the laws are confusing and can cause that more than one does not sleep from stress and anxiety, so if rather with this we help to clarify doubts and gain mental health. :)
Have a nice day.
Hi, my name is Hristo Marinov, certified accountant. I will try to answer your questions. If you need more info please do not hesitate to contact me.
1/ Your calculations are correct (almost). Say annual income of 150,000 EUR, annual social security 6,396 EUR, tax calculations: ((150,000 – 25%) - 6.396) x10% = 10,610 EUR or the tax will 7.3883% on the net income minus social insurances. That percentage varies depending on the gross income that is flexible while the social securities are limited up to 6,396 EUR per year.
2/ Yes, it is allowed to withdraw dividend on monthly base. It is so called “advance dividend”. The dividend tax is due on quarters (but can be paid monthly as well). The corporative profit tax of 10% is paid when the financial (equal to calendar) year end. To reach 1100 EUR monthly net dividend (received in shareholder account) The calculation will look like this: Gross annual profit 15,438.60 Corporative tax: 1,548.86 Net profit 13,894.74 Dividend tax 694.74 Dividend 13,200
Annual social security:1,591.40 EUR
3/ The dividend from profit in 2024 can be distributed any day in 2025 starting from 1st Jan. The date 1st April (or any other specific date) doesn't make amy sence for me.