Working in Bulgaria you will obviously have to deal with and know something about taxes in Bulgaria. We will focus on taxes as an employee. At the end we will give a short introduction on taxation regarding a business.
The minimum wage in Bulgaria is currently set at € 235/month, the average income is around € 400/month. An expat earns an average salary of around € 1000/month.
When working for a Bulgarian company, your employer will take care of all social security and tax payments for you. To be able to pay these deductions you need a social security number. Usually your employer takes care of this for you upon your arrival.
Note: Beware that when you apply for a Bulgarian ID it can happen that the Immigration Service also issues a social security number. You will need to go by your local municipality to combine these two numbers. Otherwise you get in trouble when for example you fall sick and you need a doctors declaration for the sick leave contribution.
Social security payments in 2017 are divided into:
6,14% – Pension
1,40% – Common Diseases & Maternity
0,40% – Unemployment
2,20% – Supplementary Mandatory Pension
3,20% – Health
Total deduction: 13,34%
After the social security deduction a 10% monthly income tax deductions is effective.
Added to this your employer also contributes for you to the pension fund, the health insurance, the unemployment fund and a holiday fund. Your employer takes care of all these payments.
Monthly Gross Income: BGN 2000
-/- Social Security 13,34% = BGN 266,80
Taxable Income: BGN 1733,20
-/- Income Tax 10%: BGN 173,32
Monthly Nett Income in your bank account: BGN 1559,88
Find here a gross/nett calculator for your personal situation.
Income Tax in a Business Situation
When someone owns a business a minimum amount of income taxation applies for the owner/manager. For employees of your business the above applies, with the obvious difference that the business owner is responsible for the monthly contributions.
Minimum Amount Social Securities
A business in Bulgaria in 2017 is expected to pay a minimum of BGN 460/month to its owner/manager. Even if this money does not change hands income taxation and social securities apply on this amount. This is the minimum amount that is used to calculate the monthly contributions.
The social security and related percentages are slightly different: General 17,3%, Health 8% and Pension 5%. The minimum amount payable for social securities for a business owner in 2017 therefore is BGN 139,38/month.
It goes without saying that the absolute amount of social securities is higher with a higher income. However this does not mean the service or pension you will receive are any different. Whether you pay BGN 10.000 in social securities or BGN 139,38 a month does not matter. The fact that you pay your social securities is of importance here.
The income tax of a business is divided in two components: the revenue component and the personal income component. The personal income component works pretty much as for an employee. The revenue component is set at a rate of 20% over nett revenue. Nett revenue means that a business is permitted to deduct business expenses for which there are proper invoices and which of course are indeed deductable expenses. The income tax is calculated annually over a fiscal year running from January to December. A discount of 5% applies if you pay the full amount in 1 payment.
In many cases the nett revenue of a company is considered the income of the owner, in that case the 20% applies. However an owner cvan decide to take an income fromt he company, then a separation in taxes would apply. These technicalities should be asked an accountant.
Income or revenue tax does not apply in case of a zero or negative revenue. In this situation your business did not generate revenue, the mandatory income is a debt your business has to its owner. This situation is obviously not advisable for a business, however a business still has some advantages int his case, eg. for the school point system of your school-going kids in Bulgaria.
Paying social securities as a business owner works differently too. Your payments are considered “Payments to Budget”, they are related to your Bulgarian ID number and business registration. If you are a sole owner without employees, you are allowed to make these payments from a personal bank account, when your business employs staff, you are required to make these payments from a business bank account.
In all cases it is advisable to hire the services of an accountant to guide you through these fiscal technicalities. And depending on what type of business registration you have an accountant is actually mandatory. An accountant will cost anything from BGN 120/month depending on the accountant and the number of monthly transactions. When setting up a business we advise you to ask thorough questions on the consequences of each type of possible business entity.
For those willing to retire in Bulgaria and curious about the pension you build, the state pension is currently around BGN 150/month. The amount of a state pension is related to a 40-year work period in Bulgaria and a percentage of this amount according to your productive years. Although the pension can be increased through private income insurances, the state pension is not a lot for most expats.
The percentages for social securities and any amount in this article are changed yearly. As you might expect they increase each year. These percentages are related to the situation in 2017. The percentage for actual income tax will probably not change as this is a trivial factor to attract foreign investors. For accurate information ask your HR or consult an accountant.
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