Bulgaria payroll and tax overview.

Bulgaria is located in south eastern Europe and is bordered by Romania to the north, Serbia and North Macedonia to the west, and by Greece and Turkey to the southwest and southeast. Bulgaria’s eastern coastline meets the Black Sea, offering trade links with the rest of Eastern Europe and the Near East. A parliamentary republic, Bulgaria is an industrialised developing country, with a large private sector and an economy that has grown significantly since the early 2000s. While agriculture is the historic backbone of Bulgaria’s economy, in the 20th century the country industrialised rapidly: today, important industries include energy, mining, metallurgy, machine manufacturing, and tourism. In 2019, Bulgaria’s economic performance saw its GDP reach $66.25 billion and economic growth rise to 3.4%. Bulgaria is a member of the EU and businesses operating within the country enjoy tariff-free access to trading partners in other member states. Bulgaria is also a member of NATO, the Council of Europe, the UN, and the OSCE, and was ranked 61 on the World Bank’s Ease of Doing Business Survey 2019.

Foreign Direct Investment in Bulgaria

Bulgaria is a growing economy and the government has taken steps to present Bulgaria as an investor friendly destination. As well as the 10% flat corporate tax rate, the government offers reduced corporate tax for investors that are investing in backward regions (less industrialized) or regions that have high unemployment.

Registering a Company and Establishing an Entity in Bulgaria

Companies must have a legal entity before processing payroll.

Companies must be registered with the Trade Register at the Recording Agency. The Trade Registry Act allows a two-day term to complete the registration procedure, counted from the moment of filing the application for registration together with the respective documents at the Trade Register.

All employees and labor agreements must be registered with the Tax Office within 1 day of starting work.

Business Banking in Bulgaria

It is not mandatory to pay the authorities or employees from an in-country bank account; however, it is mandatory that they are paid from an account held by the employer.

Working Week in Bulgaria

The working week in Bulgaria is Monday to Friday, with the weekend usually being Saturday and Sunday. In Bulgaria, Sunday is a mandatory day off.

Basic Facts about Bulgaria

General Information:

Full Name: The Republic of Bulgaria

Population: 6.927 million (World Bank, 2020)

Capital: Sofia

Major Language: Bulgarian

Major Religion: Christianity

Monetary Unit: Lev

International Dialling Code: +359

The tax year in Bulgaria runs from the 1st January to 31st December each year.

Income Tax in Bulgaria

Income tax is payable in Bulgaria, regardless of whether or not they are a local or foreign employee. Those who have a permanent residence in Bulgaria, spends more than 183 days in Bulgaria over 1 fiscal year from 1 January to 31 December, who resides abroad on assignment of the Bulgarian State and who has his/her center of vital interests in Bulgaria are liable to pay income tax.

Local natural employees have an obligation to pay taxes on income originating from sources located either within the Republic of Bulgaria or abroad. Foreign employees shall have an obligation to pay taxes on income originating from sources located within the Republic of Bulgaria.

There are tax reliefs in place (there will be a reduced tax rate). Examples include young families, income not exceeding the minimum salary and for persons with reduced capacity for work.

All income earned in Bulgaria is taxed at a flat rate of 10%.

Taxes must be submitted by the 25th date of the month for the previous month. Late submission can result in a penalty of €250.00 - €500.00 and interest on the amount owed.

Corporate Income Tax in Bulgaria

The entities liable to pay corporate tax are:

• The local legal entities –trade companies;
• The local legal entities that are not traders;
• The local unincorporated entities and the insurance funds established
• The foreign legal entities that carry out economic activity in Bulgaria from a permanent establishment;
• The foreign unincorporated entities that carry out economic activity in Bulgaria from a permanent establishment.

Corporate tax is not paid by entities liable to alternative taxes. These are the enterprises funded by the budget, the organizers of the gambling games, and the entities engaged in ships’ operation activities.

The tax rate for the corporate tax is 10%.

The returns must be submitted and paid (if there are no advance returns) by 31st March of the next calendar year. The return must be submitted to the Office of National Revenue Agency (NRA) where the taxable entity is registered via post or the internet. The return is paid via the bank using a payment order, internet or postal order.

Advanced returns are applicable under the following circumstances;

• Monthly advance payments – they are made by taxable entities whose net sales income for the previous year exceeds BGN 3 000 000.
• Quarterly advance payments – are made by taxable entities that have no obligation to make monthly advance payments. Notably, these are the taxpayers whose net sales income for the previous year is in the range between BGN 300 000,01 and BGN 3 000 000 inclusively. Quarterly advance payments can be also made by taxpayers that are released from paying in advance.

The deadlines for advanced returns are as follows;

• Monthly advance payments: for January, February and March – paid by April 15th, and for the months from April to December – paid by the 15th day of the current month;
• Quarterly advance payments: for the first and second quarter - paid by 15th day of the month following the quarter, and for the third quarter – until December 15th. No quarterly advance payment is made for the fourth quarter.

Social Security is applicable in Bulgaria. It is a form of protection for employed persons in the case of loss of income. The National Social Security Institute (NSSI) is the public institution that manages the state social security in Republic of Bulgaria.

Persons subject to state social insurance are insured in:

• "General (Non-occupational) Disease and Maternity" fund for common diseases and maternity, which includes insurance for temporary incapacity for work, temporary reduced working capacity and maternity;
• "Pensions" fund for disability due to general (non-occupational) disease, old age and death;
• "Labor Accidents and Occupational Diseases” fund for labor accidents and occupational diseases, which includes disability, death, temporary incapacity for work and temporary reduced working capacity due to labor accident or occupational disease;
• "Unemployment" fund for unemployment.

Contributions must be made by the 25th of the next month. The maximum social security income is BGN 3,000 (EUR 1,530) per month.

More information can be found here.

Reporting Tax in Bulgaria

Monthly

There is a monthly submission of Declaration 1. This is information for the social contributions of the employee. It is submitted electronically to Tax Office (NAP) and a Proxy can do this. The deadline is the 25th of the following month.

There is a monthly submission of Declaration 6. This is information for the contributions which the employer is obliged to pay electronically to the Tax Office. Again, a Proxy can do this. The deadline is the 25th of the following month.

Yearly

There is a yearly submission of Information under Art. 73, para. 6 of the Personal Income Tax Act for the incomes paid during the year under labor legal relations. The deadline is the end of February of the following year.

When the employee has other incomes and they have an obligation to declare it to the authorities. The employee needs a certificate of income employment for the previous year. The certificates need to be issued by the employer.

New Employees in Bulgaria

Once the Labor Agreement has been finalized with the employee, there is a three-day term for the Agreement to be registered with the National Revenue Agency. Failure to register the Agreement can result in severe penalties for the employer.

Regardless of the three-day term, the agreement should be registered prior to the employee starting of work. For example, if an agreement is concluded on January 3rd, 2019 and the employee is to start performing his/her functions under the agreement on this same date, the labor agreement must be registered with the National Revenue Agency first and only after that the employee may start legally to follow his/her obligations under the agreement.

Leavers in Bulgaria

When there is a leaver, there is a seven-day term to send notification for the termination to the National Revenue Agency.

Payroll in Bulgaria

It is legally acceptable to provide employees with online payslips in Bulgaria provided that they confirm that they received the payslip. Usually, payslips are provided on paper and the employee would sign the payslip.

Payroll reports must be kept for 50 years. If the company goes into liquidation, the payroll reports must be archived with the National Social Security Institute.