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SELF EMPLOYMENT AND TAXATION OF PERSONAL INCOME IN BULGARIA

Self employment

 Stefanova law offices can advice you about the possibilities of self-employment and perform the registration procedure.

In order to register in Bulgaria as self-employed you are required to comply with the requirements laid down in the Commercial Act or BULSTAT register Act. Registrations are currently handled by the Registration Agency.

Who can register as self-employed?

Craftsmen. Practicing a craft is the manufacturing of items or the provision of services by a natural person entered into the Register of Craftsmen where the respective person is not registered as a sole trader. The register is kept by 25 regional craft chambers.

Freelance professionals – accountants; consultants; auditors; lawyers/advocates/; notaries; private enforcement agents; jurors; experts court witnesses registered with the courts and the prosecution service; licensed valuators; industrial property representatives; medical practitioners; translators; architects; engineers; technical supervisors; professionals in the field of culture, education, science and the arts; insurance agents and other natural persons

As self-employed can register natural persons who simultaneously meet the following requirements:

  1.  carry out professional work at their own account;
  2. are not registered as sole traders;
  3. are covered by the definition of self-employed professionals laid down in the Social Insurance Code.

Self-employed professionals must register with the National Revenue Agency (NRA)

Some freelance professionals (inter alia, architects, engineers carrying out investment design work and lawyers) are also required to register with the respective chamber/bar association in order to obtain a full license to practice their profession.

Farmers and tobacco growers are a particular category. They must register with the corresponding Municipal Agricultural and Forestry Service (within the Provincial Agricultural Directorate) responsible for the area.

Taxation of personal income

 The requirements for the payment of income tax in Bulgaria by natural persons are stipulated in the Act on the Income Taxation of Natural Persons. The rules apply to all local natural persons, persons who reside permanently in Bulgaria or reside in the territory of the country for more than 183 days within any 12 month period and whose center of life interest is in Bulgaria, and foreign nationals.

Local natural persons are liable for the payment of tax on income received from sources within Bulgaria and in other countries whereby foreign nationals are liable for the payment of tax on income received from sources in the Republic of Bulgaria. Any income received for work carried out in the territory of Bulgaria or for services provided in this country are subject to taxation as income received from a source in Bulgaria.

The tax rate of 10 percent was levied on the income of natural persons since 2008. There is a  possibility for tax benefits for example, the income of persons whose capacity for work is reduced by more than 50 percent, donations to healthcare organisations, as the Bulgarian Red Cross, childcare facilities, cultural institutions, young families, etc. The entitlement to a tax benefit arises at the time of filing an annual tax return.

The general income tax rate in Bulgaria, tax on the income received from employment, is deductible from the monthly remuneration and paid by the employer, workers are not required to file any documents with the National Revenue Agency. Where they have received income from other sources, they must file an annual tax return with the Agency. There is no non-taxable subsistence minimum but a statutory threshold of recognized expenses applies which is 25% of the income, which is deducted for the purposes of calculating the annual taxable base.

An annual corporate tax rate of 15 percent is levied on the income of sole traders and the taxable base is calculated by taking into account any tax deducted or paid during the tax year under the applicable tax headings.

In accordance with the Bulgaria Corporate Income Tax Act, tax is levied on the income of local legal persons, local legal persons who are not registered as traders, including the organizations of religious denominations, income from the rental of real and movable property, and the income of legal persons registered outside the territory of Bulgaria which has been generated in Bulgaria. Persons who conduct business as traders within the meaning of the definition laid down in the Company Act, including sole traders, declare any tax due or paid on expenditure pursuant to the Corporate Income Tax Act in the annual tax return. The tax return is accompanied by a financial report certified by an auditor.
The rate of corporate tax shall be 10 per cent.

The standard value-added tax rate in Bulgaria is 20 percent. A reduced tax rate of 9 percent is levied on hotel accommodation when it is part of organised travel and a zero tax rate is levied only on deliveries expressly stipulated by law.

Tax return deadlines in Bulgaria

  • The deadline for submitting the annual tax return as per Art. 50 of the PITA is April 30th of the following year.
  • the deadline for paying the tax for additional payment, which is declared in the annual tax return, is also April 30th of the following year.

The persons, who submit their annual tax return electronically by April 30th, are entitled to a 5% discount on the paid within the same deadline portion of the tax for additional payment under the annual tax return, provided that they don’t use the 5% discount stipulated for the February 10th deadline. The discounts can be used if the individuals, who must pay tax in advance, did pay the full amount of the tax due within the statutory deadlines.

The annual tax return must submitted by resident and non-resident persons who have received income during the fiscal year which is:

  • subject to taxation on the common annual tax base including income from employment contract;
  • subject to taxation with tax on the annual tax base for the income from economic activity as sole proprietor and from other economic activity as per Art. 29a of the PITA;
  • subject to taxation with patent tax under the Local Taxes and Fees Act.

 The resident individuals are obliged to declare:

The foreign types of income received during the year and having a foreign source:

  • income from dividends, liquidation quotas and interest from deposits in commercial banks;
  • taxable income from supplementary voluntary social security, voluntary health insurance, and life insurance;
  • taxable income received from exchange of shares and equity with regard to the conversion of commercial companies abroad.

Shares owned and shareholdings in companies, place of business and real estate properties located abroad.

Loans/borrowings provided, as follows:

– the outstanding balance of the loans provided during the year, if their total amount exceeds 10 000 leva;

– the outstanding balances  of loans provided during the same year as well as within the previous 5 fiscal years, if the total amount of these balances exceeds 40 000 leva;

-the outstanding balance of loans received if their total amount exceeds 10 000 leva, excluding bank loans received from credit institutions;

-the outstanding balances of loans received during the same year as well as within the previous 5 fiscal years, excluding bank loans received from credit institutions as per the Credit Institutions Act, if the total amount of these balances exceeds 40 000 leva.

Non-resident individuals, who for taxation purposes are considered residents of EU member-states or a country, which is a to the Agreement on the European Economic Area, are entitled to choose to recalculate the final income tax pursuant to Art. 37 of the PITA. The choice can be exercised by submitting an annual tax return pursuant to Art. 50 of the PITA, whereas the tax return includes all other income that are subject to declaring by a non-resident person.

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