How can an Umbrella Company Help with Contracting in Bulgaria?
Most freelance workers aren’t superheroes who successfully tackle these issues all on their own. There are companies who specialise in helping workers make the most out of their contracts.
They’re called Umbrella Companies (or, contractor management companies).
Basically, an Umbrella Company acts as your full-time employer, even though you maintain your independence as a contractor. They collect and filter payments from your clients, filtering out the necessary social security and fees. You send them your timesheets, and they send you payments.
Because they act as your “employer,’ they can sponsor you and provide a single work permit for multiple contracts in Bulgaria. Even better, most are experts in Bulgaria and expat tax law, meaning they’ll also help you optimise your earnings in Bulgaria.
Although the Umbrella Company is technically your “employer,” you’re essentially freeing yourself to work even more independently. You still dictate your contracts, your hours, your schedule. The Umbrella Company simply filters out the time-consuming admin and immigration issues, allowing you to focus on your new contract.
Can I Organise My Taxes and Work Permit Myself?
Generally, you need to have an employer sponsor in order to secure the appropriate work permit and work visa for Bulgaria.
If you’re working independently, it can be difficult to find clients willing to sponsor you. Moreover, even if your client can do this, you’ll need a new sponsor each time you decide to take on a new contract. Of course, every new sponsor will mean more paperwork.
Also, are you familiar with the intricacies of the tax system in Bulgaria, as well as your own country’s laws on overseas earnings? If so, good on you!
However, if you’re like the rest of us, figuring out (much less reducing) your tax liability in Bulgaria and your home country can seem like full-time work in itself.
A Contractor’s Guide to Taxes in Bulgaria
One of the most consistently challenging aspects of contracting in Bulgaria is complying with the country’s tax system. As well as paying tax in Bulgaria, you might also still be eligible to pay some tax in your home country, and understanding the legislation behind this can be a challenge.
How do I calculate my taxable income in Bulgaria
If you’re working in Bulgaria under a permanent contract, many employers will handle your tax under the PAYE (pay-as-you-earn) system. This means that they calculate and process your taxes in Bulgaria for you and then send you a net wage. Your income tax, public health insurance, social security and other deductions will all be covered by this payment. This is the easiest way to handle your income tax in Bulgaria, but contractors may not be offered this service because of their short stay with each employer.
Anybody who can’t pay their tax in Bulgaria through PAYE is left with the prospect of doing everything themselves.
Do you know much about Bulgarian Tax Law? Does Bulgaria have a tax treaty with your home country? You will need to find out or find someone who can help! Income tax for salary in Bulgaria is 10% but this rate may vary for other sources of income.
Tax Filing as a Contractor in Bulgaria
|When Do You Need to Lodge Your Tax Return?||After the end of the tax year (31st December)|
|Tax Filing Deadline||30th April is the final deadline. However, if your tax return is filed before 31st March, you may receive a discount on your tax liability.|
|Can you file it online?||Yes, https://inetdec.nra.bg/eservices.html|
How to File Taxes in Bulgaria as a Contractor
Individuals who receive only employment income during the year and do not have any liabilities or tax relief are not required to file a tax return. Tax on your income from employment is assessed in advance by your employer during the year. If you disagree with your tax assessment, you can appeal to the tax office(link is external).
The process of filing tax returns for all other individuals involves:
Step 1: Install the basic certificates of StampIT here(link is external). To do this, you first install the StampIT Global Root CA and then the Global Qualified CA.
Step 2: Attain a Qualified Electronic Signature(link is external) (QES) that is required to access the electronic services of the NRA. Check that you have fulfilled all the requirements to use the electronic service here(link is external).
Step 3: Once you have an electronic signature, you must submit an application to the NRA for the use of electronic services. The application must be sent online and signed with an electronic signature.
Step 4: Once all the requirements have been fulfilled, you may access e-services(link is external).
Step 5: File your tax return. Tax deductions include:
- Donations: deductible up to 5% of the annual tax base.
- Child benefits: BGN200 per child for up to 3 children.
- Mortgage interest: Interest paid on the first BGN100,000 of a mortgage loan is tax deductible for married couples if certain conditions are satisfied.
- Mandatory social security and health contributions.
- Voluntary social security contributions: deductions equaling up to 10% of the annual tax base.
Step 6: Pay any tax liabilities. Late filings and tax payments result in administrative fines and penalties.
NOTE: The Bulgarian income tax law provides for a 5% discount on an individual’s outstanding tax liability (but no more than BGN1,000) if the following conditions are satisfied:
- The individual has no other outstanding public liabilities subject to public enforcement.
- The tax return is filed online by 31 March of the following year.
- The tax is paid by 30 April of the following year.
- National Revenue Agency: https://portal.nap.bg/en/(link is external)
Tax Figures in Bulgaria
|Currency||Bulgarian Lev (BGN)|
|Tax-free Threshold in Bulgaria||None|
|Income Tax Rates|
The rate of income tax is a flat 10%, except for dividend income, which is taxed at a rate of 5%, and the income of sole entrepreneurs, which is taxed at a rate of 15%.
Tax Residency in Bulgaria
When do you become a tax resident in Bulgaria
You become a tax resident in Bulgaria when:
- You have spent more than 183 days in Bulgaria in the previous 12 months.
- Your centre of vital interests is considered to be in Bulgaria. In order words, if your personal and economic interests are tightly connected to Bulgaria based on actual facts and circumstances such as family residence, real estate owned or place of work.
Does the 183 day rule apply in Bulgaria
Am I taxed on my global income in Bulgaria
Yes, if you are a tax resident in Bulgaria. Non-residents are subject to tax on Bulgaria-sourced income only.
Can you set up your own Limited Company in Bulgaria?
|How long does it take to set up||23 days.|
|How much does it cost||Approximately BGN 345|
|Is it easy?||Starting a Business Rank: 95|
Tax Calculator in Bulgaria
If you are a contractor and want a calculation on your tax and net retention in Bulgaria, we can supply it to you free of charge.
Using an Umbrella Company for Income Tax in Bulgaria
Contractors in Bulgaria are faced with masses of paperwork and numerous wasted hours filing a tax return unless they find an alternative option. A Bulgarian umbrella company can act as your employer during your stay in the country whilst still allowing you the freedom of a contractor. The only difference is that you submit your timesheets to them; they’ll calculate and pay your taxes as you earn, and then you receive a net wage (as well as documentation for your records).
The companies are experts in Bulgarian taxation, and they’ll ensure that you keep the largest proportion of your earnings whilst complying with local laws. They can deal with any issues with the Bulgarian tax office or tax department directly including processing your tax refund if you are eligible.
How We Can Help You with Tax in Bulgaria
We work with numerous umbrella companies in Bulgaria, many of whom are experts in tax and immigration laws. If you have any questions about tax in Bulgaria, we’ll get the answers from them directly so you can rest assured you’ll be getting accurate information. We have comprehensive knowledge of the different services they provide, and can help you find the right company to handle your income tax. We help oil and gas workers, software developers, IT project managers, testers, business analysts and telecommunications contractors get tax efficient payments and sponsorship for their Bulgarian work permit.
Our advice is 100 percent free, and comes with no obligations. You will be paying taxes in Bulgaria but without the overhead of directly dealing with the Bulgarian tax authorities. Get in touch with us today for some reliable advice on tax in Bulgaria!
A Contractor’s Guide to Work Permits in Bulgaria
Immigration is one of the primary concerns for any contractor hoping to start working in Bulgaria. Permanent employees will find it easy to get their Bulgarian work permit because they’ll receive “sponsorship” for their entire stay from their prospective employer.
The Bulgarian work permit, known more commonly as the Type D visa, is dependent on this sponsorship because it confirms that you’ll be earning money during your stay in the country. Contracting in Bulgaria is more difficult because the work permit is tied to one employer, so you have to change it to suit each new contract. Thankfully, umbrella companies provide a convenient and effective solution to this issue.
How Does an Umbrella Company Work?
Most people want to do their work, earn their money and enjoy their spare time without taking on loads of admin in a new country. That is why an umbrella company can help.
When you’re working through an Umbrella Company, you’ll essentially be outsourcing the admin and tax issues to specialists.
While the umbrella company will charge a fee, you’ll likely end up saving more money in the long run: you’ll be able to focus on your work, expertly reduce your tax liability, and comply with all laws and regulations in Bulgaria (which means avoiding fees, fines, or even worse penalties).
How Can We Help You?
There’s a huge variety of Umbrella Companies with different specialities and advantages in Bulgaria. How do you find the right one for your circumstances?
We work closely with Umbrella Companies all throughout Bulgaria and match contractors with the right company for them. If you’ve already secured a contract in Bulgaria, we can help you find your best match (for free). Or, we can simply give you feedback on your situation (for free).