Payroll Accounting Services in Bulgaria: Managing payroll in Bulgaria can be a complex process, particularly for businesses that engage different types of workers – employees, managers, contractors, and freelancers. From calculating the right tax deductions to ensuring social security compliance, each form of engagement comes with specific legal and financial requirements.
In this article, we will discuss some key considerations regarding taxation and social security in Bulgaria, outline essential payroll reporting obligations, and highlight how professional Payroll Accounting Services in Bulgaria – such as those offered by our firm, Accountly, based in Sofia, Bulgaria – can benefit your business.
1. Payroll Accounting Services in Bulgaria – Taxation and Social Security
Taxation and social security in Bulgaria are primarily regulated by several laws, most notably the Personal Income Tax Act, the Social Security Code, and the Health Insurance Act. Although Bulgaria applies a flat tax rate of 10% on personal income, the calculation and reporting process varies depending on the contractual relationship between the company and the individual.
1.1. Employment Contracts (Labor Contracts)
Employers are responsible for registering employees with the National Revenue Agency (NRA), deducting both the employee portion of social security from the gross salary, and making the total payment (employer and employee shares) to the relevant authorities. Deadlines for paying the social security and income tax usually fall in the month following the relevant payroll period.
Social security contributions typically cover pension, general sickness, maternity, unemployment, health insurance, and occupational injury or professional disease funds. The overall percentage is split between employer and employee at rates established by law. These rates may change slightly over time, and there is a maximum monthly insurance threshold (known as the maximum contributory income), which is also subject to periodic updates.
- Taxation
- Bulgaria uses a flat 10% personal income tax (PIT) rate, which is withheld at the source by the employer.
- Employers must deduct the income tax each month and remit it to the National Revenue Agency (NRA) within the statutory deadlines.
- Social Security Contributions
- Social security contributions cover several funds, including pension, health insurance, unemployment, and occupational injury.
- Both the employer and the employee contribute, with the specific percentages determined by law and subject to an annual maximum insurance threshold.
- Employers deduct the employee portion from the gross salary and pay the total contributions (employer + employee shares) to the NRA.
1.2. Management Contracts
Individuals performing managerial duties may be engaged under management contracts. Although the flat tax rate of 10% still applies to income under these contracts, specific allowances or deductions might be permitted, depending on the structure and clauses in the contract. Social security obligations for managers are usually very similar to those for standard employment, which means that contributions must be calculated and paid in accordance with the Social Security Code. It is important to verify the exact classification of the person under management to ensure correct tax and insurance treatment, and to maintain proper documentation that supports the contractual arrangement.
- Taxation
- Individuals working under management contracts are generally subject to the same 10% PIT rate.
- Depending on the structure of the contract, certain expenses can be deducted before calculating the taxable base.
- Social Security Contributions
- Management contracts often require social security contributions in a similar way to employment contracts, though specific rates or caps may differ slightly.
- Proper classification and calculation are crucial to avoid penalties.
1.3. Civil Contracts (Contractors and Freelancers)
Bulgaria also recognizes civil (service) contracts, where a person is engaged to perform a specific task or service for a set fee. The 10% personal income tax applies to income derived from such contracts, but the calculation can differ slightly if legally recognized expenses can be deducted from the gross amount before tax. In many cases, 25% of the gross income from civil contracts is allowed as recognized expenses, although some fields and professions have different rules.
Freelancers who are self-insured individuals are required to pay their own social security contributions for pension and health insurance. These contributions are calculated on a monthly income base that can be chosen between legally defined minimum and maximum thresholds. Self-insured individuals must also register with the NRA and submit monthly or quarterly declarations of their income and social security obligations. If freelancers or contractors are not self-insured, it might become the payer’s responsibility to withhold the necessary social security contributions and taxes.
- Taxation
- Individuals working on civil (service) contracts or operating as freelancers are taxed at the 10% flat PIT rate.
- Freelancers who are registered as self-insured persons may deduct recognized expenses (e.g., 25% for certain activities) before applying the 10% rate.
- Social Security Contributions
- If a freelancer or contractor is registered as a self-insured individual, they are responsible for paying their social security contributions.
- Contributions typically include pension and health insurance, and the base can be chosen within legally defined minimum and maximum thresholds.
2. Payroll Accounting Services in Bulgaria – Reporting Requirements
- Monthly Declarations
- Employers must submit two main declarations to the National Revenue Agency:
- Declaration Form 1: Provides detailed information on insured persons (employment start date, insurance income, etc.).
- Declaration Form 6: Summarizes the total amounts due for income tax and social security contributions.
- These forms are generally due by the 25th of the month following the month of payment. Any late submission or inaccuracies can result in penalties, so it is essential to review the data meticulously before filing.
- Employers must submit two main declarations to the National Revenue Agency:
- Annual Reporting
- At year-end, employers may have to provide additional statements (e.g., employment income certificates) to employees and to the NRA.
- Any corrections or reconciliations for the year must also be finalized as part of the annual process.
- Record-Keeping and Document Storage
- Payroll records, including contracts, payslips, and related documentation, must be maintained for a specific period (usually 50 years for employment records and 10 years for accounting documents) in compliance with Bulgarian legislation.
- Proper, systematic storage ensures that businesses can provide evidence during inspections or audits by the authorities.
3. Partnering with Accountly for Seamless Payroll Solutions
Navigating the complexities of Bulgarian payroll can be time-consuming and challenging, especially if you manage an international workforce or hire individuals under various types of contracts. At Accountly, our mission is to simplify these processes and help your business stay fully compliant with Bulgarian tax and social security regulations.
Here’s how our Payroll Accounting Services in Bulgaria can benefit you:
- Accurate Payroll Calculations
- Our team ensures that salary, tax, and social security contributions are calculated correctly every month. We stay updated on legislative changes, so you don’t have to.
- Timely Reporting and Compliance
- We prepare and submit monthly and annual reports (Declaration 1 and Declaration 6, among others) on time, reducing the risk of penalties and ensuring flawless interaction with the NRA.
- Versatility Across Different Contract Types
- Whether you engage employees, managers, contractors, or freelancers, we tailor our payroll services to match the specific legal requirements of each. We also offer advice on the best contractual structure for your workforce.
- End-to-End Administration
- From preparing payslips and employment documents to handling new hires and terminations, we manage your entire payroll lifecycle. This frees up your time to focus on your core business operations.
- Personalized Support
- We pride ourselves on delivering personalized services and proactive advice. We take the time to understand your company’s structure, goals, and challenges, so we can offer solutions that truly align with your needs.
Contact Us
If you need professional, accurate, and proactive support for your Bulgarian payroll operations, Accountly is here to help. From initial consultations to day-to-day payroll administration, our goal is to free you from the complexities of managing multi-layered payroll requirements, allowing you to focus on your core business activities.
Get in touch with us to learn more about how our Payroll Accounting Services in Bulgaria can ensure you meet all statutory obligations and optimize your employment and contracting strategies.
Accountly
Sofia, Bulgaria
Phone: +359895443792
Email: info@accountly.bg
Let us handle your payroll burdens so you can focus on growing your business.
