Bulgaria Freelance Tax: The Complete Guide

Freelancing comes with a lot of advantages. You can have your own working schedule or set up your office anywhere. Additionally, many companies are looking for outside workers for different kinds of projects, making the world we live in today especially inclined for freelancers to find success. 

Bulgaria offers a particularly beneficial environment for freelancers, above all when it comes to Bulgaria freelance tax. And, partly, this is due to the Bulgaria freelance tax. 

Deciding to move your tax residency to Bulgaria may be the result of a variety of conditions and circumstances. It may be related to the beautiful landscape of Bulgaria, or its rich culture, or maybe it is due to other personal reasons. In recent years, Bulgaria has become a popular destination for professionals looking to maximize the profit from their business and activities. And this may be a very good reason to relocate to Bulgaria.

Must be mentioned that in order to take advantage of the many financial benefits for freelancers In Bulgaria, like the 10% flat rate of tax on income and social security, one must be a resident. 

It is also highly recommended that freelancers look into engaging the services of an accountant in Bulgaria, because It doesn’t matter how much you think you know about taxes: the burden of having to fill out reports, mostly in a different language, will take away the energy and time you could be dedicating to grow your business. 

So, trusting an accountancy company in Bulgaria with your bookkeeping, tax reports, and financial advisory will prove vital. And there is no better than Accountancy Bulgaria, a company with years of experience and an excellent reputation to take care of your freelancing accounting needs.

Now let’s dig deeper and find out more about Bulgaria freelance tax and all the requirements needed to take advantage of all the benefits Bulgaria offers to freelancers.

Costs, taxes and fees for a Freelancer in Bulgaria

As a freelancer in Bulgaria, there are a variety of business-related expenses that we will list below. 

• Income tax: Bulgaria has a 10% flat rate on the profit generated through business activities. 
• Social Security: it may look like these fees are high when talking about percentages, but actually they are calculated on different thresholds based on your income as an individual. 
• Bank fees: These are minimal, but still to be taken into consideration.
• Accounting services: The costs related to a professional accountant are set fees and are independent of your income.

Read also: How much is Bulgaria Dividend Tax? All the information you need

How to pay Bulgarian Freelance Tax and requirements

Bulgarian freelance tax must be paid every quarter. Additionally, annual reports are required.

As we have mentioned, the income tax for freelancers in Bulgaria is a 10% flat rate on the income generated from their freelancer activities (after operational expenses and social security contributions). 

This flat rate is of particular interest to freelancers, as the taxable income is lowered by 25% before applying the 10% tax rate on income as stipulated in the PITA (Income Taxes on Natural Persons Act). This is because of the “operation expenses”, basically a generalized average of work-related expenses.

There is another article on the PITA that states that in some cases, these operating expenses could be considered as high as 40% of the total freelance income, in cases of author’s and license remuneration.

Social Security for Freelancers in Bulgaria 

Freelancers are obliged to pay social security contributions based on the Bulgarian Social Security Code (SSC). An insured person will receive benefits in the case of injury for disability due to general sickness, old age and death. Additionally, thay may add insurance for general disease and maternity. The declaration for social security must be done no more than 7 days after the start of the activities, and can be modified each year before the end of January.

Self-insured workers must pay the contributions by the 25th of the month following the month on which they relate. 

How are social security contributions calculated for freelancers?

Social security contributions are calculated as follows (for people born after 1959):

• Social Security Funds: 14.80%. However it goes up to 18.30% if the person chooses for total coverage, including general sickness and maternity leave. 
• Additional mandatory pension insurance fund within the Universal Pension Fund: 5.00%
• Health Insurance: 8.00%

In order to calculate the social security contributions, freelancers must calculate the average gross income received monthly. To that, the 25% is deducted as operating expenses, therefore only the 75% gross income is subject to social security contributions and then freelance tax. 

The total rate of compulsory social security contributions is 27.8% (without coverage for general disease and maternity leave). As an example, if a person has a gross monthly income of 4.000 BGN, the income that is insurable is only 75% of that, meaning 3.000 BGN. So 3.000BGN * 27.8% of social contributions comes to 834 BGN. 

The freelance tax of 10% flat rate is applied only to the remaining 2.166 BGN. So 2.166 * 10% results in 216,60 on taxes.

Start and company in Bulgaria

To take advantage of the tax system, freelancers don’t need to start a company in Bulgaria. However it may be a good option for some to create a separate judicial entity under which to undergo all business activities. The main advantage of starting a company in Bulgaria is that the liability shifts to the company and it is not centered on the freelancer.

In any case, an individual does not need to open a company in the country to be a freelancer. If the reporting of the income tax and social contributions are taken care of, any Bulgarian resident can be a freelancer. 

It’s important to note the “resident” part, as it is required for an individual to be at least 183 days per year in the country to qualify as a resident. Also worth mentioning, the process to obtain a Bulgarian residency is a lot easier for European citizens, while for other countries it may be a lengthier process. 

There is some debate about the advantages and disadvantages of working as a freelancer or looking into company registration in Bulgaria. Make sure to contact your trusted accountant in Sofia Bulgaria to ensure you’re opting for the best possible option for you, your line of work, and your goals in the future. 

Read more about When and how to ask for Bulgaria tax refund

Conclusion

We broke down the different parts of Bulgaria Freelance Tax. 

Relocating to Bulgaria as a freelancer is an interesting option, and not too far fetched given the freedom to work from anywhere that freelancer professionals already have.

While there may be many reasons for freelance workers to move to Bulgaria, either the vibrant cities, the landscape, the cheaper lifestyle, or the culture, there is no doubt that the freelance tax is a very attractive aspect that has placed Bulgaria among

Engaging the services of a trusted accountant in Bulgaria is imperative to best benefit from the Bulgaria Freelance Tax.