Running Payroll in Bulgaria

Bulgaria offers one of the most business-friendly environments in the European Union, with some of the lowest labor costs and highly competitive tax rates on both personal and corporate income. The country allows full foreign ownership of local entities, making it easy for international businesses to establish a presence.

The country has also emerged as a key hub for sectors like software development and business process outsourcing (BPO), thanks to a skilled workforce and growing digital infrastructure. Additionally, compared to many other EU countries, payroll and compliance processes in Bulgaria are relatively straightforward—making it an attractive destination for companies looking to expand or hire across borders.

While there is no explicit legal requirement to establish a local legal entity before employing workers and processing payroll in Bulgaria, it might be necessary depending on the company’s individual circumstances. Even if they don’t establish a local legal entity, employers must still register with several local authorities, including:

• Obtaining a tax registration number,

• Registering with the National Revenue Agency (NRA), and

• Setting up a Bulgarian bank account (recommended for smooth operations).

When registering with the National Revenue Agency as an employer, the registration for social security purposes is done automatically. New entities further need to be registered with the Commercial Register, which is administered by the Registry Agency.

As of June 1, 2025, Bulgaria will implement a unified electronic employment register maintained by the NRA. Employers are required to register employment contracts with the NRA before the employee commences work. This registration must be completed no later than three days after the employment contract has been signed. Employees are not legally permitted to begin work until this process is completed.

Payroll tax and social security contributions in Bulgaria are relatively easy to calculate. A flat tax rate applies to all types of personal income, and social security contribution rates show only minor variations.

Tax Considerations

Employment income in Bulgaria is subject to a flat personal income tax rate of 10%, applicable to wages, salaries, bonuses, and other additional payments such as overtime pay or fringe benefits.

Mandatory social security and health insurance contributions are deducted from the employee’s gross income before tax calculation. Beyond these, available deductions are limited. Charitable contributions to certain organizations are deductible up to defined limits, and voluntary pension and unemployment contributions, as well as certain health and life insurance contributions, are deductible up to specified thresholds.

Tax incentives are available for taxpayers with children. For the tax year 2025, one parent can reduce their annual taxable income by BGN 6,000 for one child, BGN 12,000 for two children, and BGN 18,000 for three or more children. Additionally, a deduction of BGN 12,000 is available for each child with a disability.

Individuals are considered tax residents in Bulgaria if they have a permanent address in Bulgaria and their center of vital interests lies in Bulgaria, or if they reside in the country for more than 183 days in any 12-month period. Tax residents are taxed on their worldwide income, while non-residents are taxed only on income earned from Bulgarian sources.

Tax Withholding and Reporting

Employers are responsible for withholding personal income tax (PIT) from employee salaries and wages. The PIT is withheld at the time of salary payment and must be remitted to the tax authorities by the 25th day of the following month.

At the end of each tax year, employers are required to provide employees with an annual income certificate detailing the total amount of wages paid, as well as the amounts of income tax and national insurance contributions withheld from the employee’s gross earnings. Additionally, employers must submit an annual declaration on paid wages and salaries to the tax authorities by the end of February of the following year.

Individuals who have earned income from sources other than employment during the tax year are required to file an annual tax return by April 30 of the following year. Joint filing is not permitted. The tax year in Bulgaria aligns with the calendar year.

Social Security Contributions

In Bulgaria, social security contributions—referred to as National Insurance Contributions—are mandatory for both employers and employees. As of April 2025, the total contribution rate varies between 32.70% and 33.40%, depending on the occupational category and risk profile. Employers contribute between 18.92% and 19.62%, while employees contribute 13.78% of the gross income.

These contributions provide coverage for various social risks, including illness, unemployment, maternity, work-related accidents and occupational diseases, and retirement. They are divided into two main components:

• Social Security Contributions: Totaling between 24.7% and 25.4%, with the employer paying 14.12% to 14.82% and the employee contributing 10.58%.

• Health Insurance Contributions: Fixed at 8%, split between the employer (4.8%) and the employee (3.2%).

The calculation base for these contributions is the employee’s total gross income, including bonuses and other additional payments, but is capped at BGN 4,130 per month as of April 2025. Additionally, depending on the employee’s position and the industry sector, there may be minimum income thresholds for contributions.

Employers are obligated to remit the social security contributions for each employee to the National Revenue Agency on a monthly basis, along with the withheld income tax. Following the payment, employers must submit two monthly declarations for reporting purposes: Declaration 1 and Declaration 6. Both declarations must be submitted electronically by the 25th day of the month following the reporting period.

Employees in Bulgaria are entitled to various benefits. These include:

• Annual leave and public holidays: at least 20 days of paid annual leave; plus 14 public holidays

• Maternity leave: 410 days of maternity leave (of which 135 days are paid); maternity benefits equal to 90% of normal salary provided by Social Security 

• Paternity leave: 15 days of paternity leave paid at a rate of 90% of the father’s usual salary

• Parental leave: mothers and fathers can go on childcare leave until the child is 2 years old

• Sick leave: 3 paid sick days during which pay is provided by the employer at a rate of 70%; thereafter, sick pay is provided by Social Security at rates of either 80% or 90% (for up to 18 months)

For more information on employee benefits and other employment requirements in Bulgaria (including severance pay and termination procedures), check out our Global Hiring Guide.

Bulgaria’s national minimum wage currently stands at BGN 1,077 per month, which equals an hourly minimum wage of BGN 6.49. Overtime work in Bulgaria is compensated with wage supplements, as mandated by the Labour Code. On regular working days, overtime must be compensated with a 50% wage supplement. On weekends, overtime pay is 175% of the employee’s normal wages. Work on public holidays must be paid at double rates. There is no legal requirement to pay employees a 13th salary.

In Bulgaria, employees are generally paid on a monthly basis, with salary payments issued on the last working day of each month. At the end of each pay period, employers must provide employees with payslips, either in paper form or electronically. If sent electronically, employees are required to confirm receipt. In addition to issuing payslips, employers must maintain detailed payroll records. Certain payroll documentation must be retained for up to 50 years in compliance with Bulgarian labor regulations.