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18.92% - 19.62%
Bulgarian Lev (BGN)
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This country guide is for general informational purposes only and should not be construed as legal advice, nor as binding based on your relationship with Lano. When using Lano's solutions, the specifics may depend on your EOR and Payroll setup with our partners. Although we update this guide regularly, it may not reflect current legal developments. Lano Software GmbH disclaims any liability for any actions you take or refrain from taking based on the content contained in this country guide.
With the cheapest labor costs in the EU and low tax rates on personal and corporate income, Bulgaria offers international businesses attractive conditions to set up a local branch or subsidiary and gain access to the European market. The absence of legal limits on foreign ownership of local entities and the country’s strong growth in industries such as software development and business process outsourcing (BPO) are further reasons for foreign businesses to choose Bulgaria as their next hiring destination, especially as payroll processing is considered to be a lot less complex than in other European countries.
Although there is no explicit legal requirement, it is recommended to set up a local legal entity before employing workers and processing payroll in Bulgaria. New entities need to be registered with the Commercial Register, which is administered by the Registry Agency.
When hiring employees in Bulgaria, it’s necessary to register the employment contract with the National Revenue Agency, which is the authority in charge of handling tax payments and social security contributions. The registration with the National Revenue Agency must be completed no later than three days after the employment contract has been signed.
It should be noted that, from a legal point of view, employees are not allowed to start working for their employer until the process is completed. Payments to local employees and authorities can be made from a foreign bank account.
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Calculating payroll tax and social security contributions in Bulgaria is a straightforward process. There is one universal tax rate applicable to every type of personal income, and the variation in social insurance contribution rates is minimal.
Income tax on employment income is levied at a flat rate of 10%. Employment income consists of wages and salaries, bonuses as well as other additional payments such as overtime pay or fringe benefits.
National insurance contributions are deducted from the employee’s earned income before tax calculation. Other than that, there are only very few deductions available. In fact, available deductions are limited to mortgage interest expenses and charitable contributions. However, there are tax incentives for taxpayers with children, which allow employees to reduce their annual taxable income by BGN 6,000 per year, per child – capped at BGN 18,000 even if the employee has more than 3 children. Tax deductions are higher for employees with disabled children.
Residents are taxed on their worldwide income, while non-residents are taxed on income earned from economic activities performed within Bulgaria. Individuals are considered tax residents in Bulgaria if they have a permanent address in Bulgaria and if their center of vital interests lies in Bulgaria; or if they reside there for more than 183 days per year.
Employers are responsible for withholding income tax from employee salaries and wages. Income tax must be withheld at the moment of the salary payment. The withheld amount must then be remitted to the tax authorities until the 25th of the following month.
At the end of each tax year, the employer must provide the employee with an annual income certificate detailing the total amount of wages paid as well as the amount of income tax and national insurance contributions withheld from the employee’s gross earnings. Furthermore, an annual declaration on paid wages and salaries must be submitted to the tax authorities by the end of February of the following year.
Individuals are required to file an annual tax return until 30 April if they earned income from other sources than employment during the respective tax period. Joint filing is not permitted. The tax year is the calendar year.
Social contributions in Bulgaria are called National Insurance Contributions. The total contribution rate for employers varies between 18.92% and 19.62%. The employee share amounts to 13.78% of the earned income. The national insurance system offers protection in case of illness, unemployment, maternity, work-related accidents and diseases, and retirement.
The payable contributions comprise a general social security contribution levy and a health insurance levy. Social security contributions are levied at an aggregate rate of 24.7% to 25.4%, of which 14.12% to 14.82% is paid by the employer and 10.58% is paid by the employee. Health insurance is levied at a rate of 8%, which is also divided between employee (3.2%) and employer (4.8%).
The calculation base for national insurance contributions is the employee’s total income, including bonuses and other additional payments, but is capped at BGN 3,400 per month (was BGN 3,000 per month until April 2022). Depending on the employee’s position and the industry in which he or she is employed, there might also be a minimum income threshold for contributions.
The employer must pay the national insurance contributions for each employee to the National Revenue Agency on a monthly basis, along with the withheld income tax. After the payment, the employer must file two different social security declarations, one detailing the social contributions paid by the employer (known as “Declaration 1”) and one detailing the social contributions paid by the employee (known as “Declaration 6”). The deadline for submitting both the payment and the two declarations is the 25th of the following month.
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 paid maternity leave; 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 can extend maternity leave until the child is 2 years old; extension is paid at national minimum wage rates
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 710 per month, following a 17% increase in January 2022. Overtime on regular working days must be compensated with a 50% wage supplement. On weekends, overtime pay is 175% of the employee’s normal wages, and work on public holidays must be paid at double rates. There are no legal requirements to pay employees a 13th month salary.
Employees in Bulgaria are generally paid on a monthly basis, with payments being issued on the last business day of the month. At the end of each pay period, employers should provide their employees with payslips which can be distributed either in paper form or electronically. In addition, employers are required to keep detailed payroll records. Some payroll reports must be kept for up to 50 years.
This country guide is for informational purposes only and should not be construed as legal advice. The content of this guide contains general information, and although we update this guide regularly, it may not reflect current legal developments. Lano Software GmbH disclaims any liability for any actions you take or refrain from taking based on the content contained in this country guide.
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