freelancer-in-Bulgaria-taxation

Freelancer in Bulgaria Taxation

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Freelancer in Bulgaria Taxation

Freelancer in Bulgaria Taxation: Bulgaria has emerged as a top destination for freelancers and digital nomads seeking low taxes, affordable living, and easy access to the EU market. Whether you’re working through platforms like Upwork, Fiverr, PeoplePerHour, FreeUp, or 99designs, understanding the freelancer in Bulgaria taxation system is essential. This guide outlines the key aspects of freelancer registration, taxation, and the advantages of freelancing in Bulgaria, while introducing our expert legal and accounting services to support your journey.

Freelancer Registration in Bulgaria

To operate as a freelancer in Bulgaria legally, you must register as a self-employed individual. This process applies to both Bulgarian nationals and foreigners intending to establish themselves here.

Steps to Register as a Freelancer in Bulgaria

  1. Decide on Your Legal Status:
    Most freelancers register as sole proprietors, known as self-employed individuals. This status is simple, affordable, and suitable for working with international clients or platforms.
  2. BULSTAT Registration:
    • Register at the Bulgarian Commercial and BULSTAT Register to obtain your unique identification number.
    • This is required for invoicing clients and complying with tax regulations.
  3. VAT Registration (if applicable):
    • Mandatory registration: Required if your income exceeds 100,000 BGN annually.
    • Voluntary registration: Useful for freelancers with clients in the EU or businesses requiring VAT deductions.
  4. Social Security and Health Insurance Registration:
    Freelancers must register with the National Revenue Agency (NRA) to contribute to Bulgaria’s social security and health insurance systems.

Freelancer in Bulgaria Taxation of Income

Freelancer in Bulgaria taxation depends on your residency status and income source.

1. Personal Income Tax (PIT):

  • Bulgaria has a flat 10% personal income tax rate, one of the lowest in the EU.
  • Tax is applied to your net income (gross income minus deductible business expenses).
  • 25% of your income is automatically recognized as deductible business expenses so you will not need to prove that you had business-related expenses, but they are automatically applied and the effective tax rate is actually 7.5% of your income, and with social security deductions it even gets lower. 

2. Social Security Contributions:

  • Freelancers must pay contributions for pensions, health insurance, and social security.
  • Contributions are based on your declared income, with a minimum threshold of 933 BGN per month in 2024, which means that the social security contributions that need to be paid monthly is around BGN 250. At the end of the year when the Annual Tax Return is submitted the freelancer needs to pay the rest of the social security contributions, but not on the whole income as there is a CAP amount for the income up to which you need to pay social security, e.g. if your annual income is more than BGN 45 000 you do not need to pay social security for any income above this amount. In 2024 the highest amount that you can pay for social security is BGN 12 500.

3. VAT (Value-Added Tax):

  • For Bulgarian clients: You must charge 20% VAT.
  • For EU clients: The reverse charge mechanism or zero-rated VAT may apply.
  • For non-EU clients: Exports of services are typically VAT-free, depending on the country.

4. Tax Filing Obligations:

  • Freelancers must file an annual tax return by April 30 of the following year.
  • Social security declarations and VAT reports (if applicable) must also be submitted periodically.

Tax Residency in Bulgaria

Tax residency is crucial for determining your tax obligations.

  • Who Qualifies as a Tax Resident?
    You are considered a tax resident in Bulgaria if:
    • You spend more than 183 days in Bulgaria during a calendar year.
    • Your center of vital interests (e.g., family, permanent home, or economic ties) is in Bulgaria.
  • Why Tax Residency Matters:
    Tax residents in Bulgaria must report their global income, while non-residents are only taxed on income earned within Bulgaria.

Importance of Tax Consultation

Before starting your freelancing journey, it’s highly recommended to consult a tax expert to:

  • Determine your residency status.
  • Optimize your tax structure based on your income sources.
  • Avoid double taxation by leveraging Bulgaria’s tax treaties.

Benefits of Being a Freelancer or Digital Nomad in Bulgaria

Bulgaria offers several advantages for freelancers and digital nomads, including:

  1. Low Tax Rates:
    The 10% flat income tax is one of the lowest in Europe, enabling freelancers to keep more of their earnings.
  2. Cost of Living:
    Bulgaria provides an excellent quality of life at a fraction of the cost in Western Europe, making it ideal for digital nomads seeking affordability.
  3. EU Membership Perks:
    As an EU member state, Bulgaria allows seamless trade and collaboration with clients across the bloc.
  4. Growing Freelancer Community:
    Cities like Sofia, Plovdiv, and Varna host co-working spaces, networking events, and communities tailored to remote workers.
  5. Easy Access to Global Platforms:
    Platforms like Upwork, Fiverr, PeoplePerHour, and others provide a steady income stream, and Bulgaria’s tax regime ensures these earnings are handled efficiently.
  6. Residency Options for Non-EU Nationals:
    Bulgaria’s straightforward visa processes and digital nomad-friendly policies attract freelancers from around the globe.

How We Can Help

Navigating the complexities of freelancer taxation in Bulgaria can be daunting, but our team of legal and accounting professionals is here to simplify the process.

Our Services Include:

  • Freelancer Registration:
    • BULSTAT, VAT, and social security registrations tailored to your needs.
    • Assistance with setting up a business bank account.
  • Tax Consultation:
    • Expert advice on tax residency, double taxation treaties, and income reporting requirements.
  • Monthly Accounting Services:
    • We handle bookkeeping, tax compliance, and invoicing to ensure you meet all legal obligations.
  • VAT Management:
    • Guidance on whether to register for VAT, filing VAT returns, and reclaiming VAT on eligible expenses.
  • Tax Optimization Strategies:
    • We help you reduce tax liability legally while maximizing deductions.
  • Annual Tax Return Filing:
    • Hassle-free preparation and submission of personal income tax returns.

Why Work with Us?

  • Tailored Solutions:
    We understand the unique needs of freelancers working with platforms like Upwork, Fiverr, and others.
  • Expertise in Bulgarian Law:
    Our team stays updated on all tax laws and regulations, ensuring your compliance.
  • Save Time and Money:
    Focus on your work while we handle the legal and accounting aspects.

Get Started Today

Bulgaria is an attractive destination for freelancers and digital nomads seeking tax efficiency and a high standard of living. By understanding the freelancer in Bulgaria taxation system and seeking expert guidance, you can establish a thriving business while avoiding unnecessary stress.

Contact us today for a consultation and let us help you start your freelancing journey in Bulgaria!

You can reach us at:

tel.: +359895443792

email: ivanov@bi-lawfirm.com