How to Register as a Freelancer in Bulgaria?

Accounting firm “Elan Consulting” is your reliable partner in the world of finance and accounting, offering professional services to self-employed individuals and freelancers in Burgas, Sofia and throughout Bulgaria. We understand the unique challenges and opportunities this sector offers and are here to support you every step of the way.

Who submits annual tax return under Art. 50 of the Personal Income act of Bulgaria? This question often excites numerous professionals practicing freelance. The answer is clear- anyone who generates income from a freelance profession is obliged to declare this income through the annual tax return. In our practice, we ensure complete compliance with the requirements of NRA, including by polling ready-made forms for withdrawal from the NRA.

It is important to emphasize that accounting of income from the freelance profession requires a thorough understanding of legislation and precise implementation of regulatory requirements. The declaration under art. 50is a key tool in this process, and our experts are at your disposal to help you with its correct filling and submission.

What happens if you don't file a tax return?The omission of this critical aspect can lead to undesirable consequences, including financial penalties. Our team offers proactive accounting solutions and tax planning to avoid any difficulties with the tax authorities.

We understand the specifics of work under a freelance contract and how this affects accounting of income and insurance costs. We offer the preparation of income reporting documents according to the ZDDFL (Personal Income Taxes Act)and we keep updated information about the liberal professions and insurance calculator to provide you with the best possible advice and support.

The issuance of an invoice from a freelance profession is also an important element of your financial management. We offer customized solutions that meet your individual needs and provide legal compliance of all operations.

Accounting firm “Elan Consulting”is here to provide you with the necessary support and expertise in managing your accounting and tax obligations. We are committed to providing high quality accounting services to help you focus on what you do best - developing your professional practice.

Why trust Elan Consulting for accounting and registration as a self-employed person?

We at Elan Consulting understand the challenges faced by self-insured persons in Bulgaria. Accounting and tax procedures can be complex and confusing, especially when it comes to specifics such as legally recognized expenses, VAT registration and management of social security contributions. Our mission is to provide clear, accurate and personalized accounting solutions to facilitate the conduct of your professional activity.

Our many years of experience in the field of accounting allows us to offer our clients best practices and advice tailored to their individual needs. We provide full support in all aspects of accounting and taxation to the self-employed, including:

1. Tax and accounting consulting: We offer personalized consultations to understand the unique needs of each of our clients. This allows us to draw up an optimal plan for their accounting and tax obligations.
2. Registration of a self-insured person: We assist in the registration process as a self-employed person, as well as in the management of insurance contributions and tax returns, ensuring compliance with all legal requirements.
3. Taxation and optimization of legally recognized costs: We are experts in interpreting and applying legally recognized costs, which is critical to optimizing tax liabilities.
4. Optimization of costs and tax liabilities: Our services include the development of individual tax optimization strategies to meet the specific needs and goals of our clients.

For us at Elan Consulting, your trust is our priority. We are committed to providing high quality services to provide peace of mind and confidence in your business. With our support, you can focus on developing your professional activity, knowing that your accounting is in reliable hands.

To learn more about how we can help you, please contact us. We are here to answer all your questions and provide you with personalized support. With Elan Consulting, you are always one step ahead in managing your accounting and tax obligations.

What is a self-insured person according to Bulgarian law?

Self-employed persons are individuals who exercise a freelance profession or are freelancers, and conduct their professional activities on an independent basis. That is, they do not work for a specific employer, but provide their services to different clients. According to § 1, item 29 of the additional provisions of the Personal Income Tax Act (ZDDFL), this type of professionals includes expert accountants, consultants, auditors, lawyers, notaries, private bailiffs, jurors, experts to the court and the prosecutor's office, licensed appraisers, representatives by industrial property, medical professionals, translators, architects, engineers, technical managers, cultural, educational, art and science workers, insurance agents and others.

To qualify as a self-insured person, an individual must meet Simultaneously on the following criteria:

1. Carries out his professional activities at his own expense.
2. Not registered as a sole trader.
3. Self-Insured

Such persons are obliged to pay their insurance contributions and taxes themselves. They must also keep a record of their income and expenses, self-insuring according to the applicable legislation.

It is important to note that persons carrying out activities in the field of folk artistic crafts, as specified in Appendix No. 1 to the Handicrafts Act, are not considered to be persons exercising a liberal profession within the meaning of the ZDDFL - part of these crafts include casting, painting on glass, stonework and many others.

How is registration as a self-insured person carried out in the Registry Agency (BULSTAT Register) and the National Revenue Agency?

The registration of a self-insured person in Bulgaria involves several steps, which we have described in detail below. Every professional performing freelance activity or practicing a freelance profession is obliged to register with both the Registry Agency and the NRA. Almost any profession that falls into this category - doctor, lawyer, notary, medical specialist, etc., often requires the self-employed person to hire employees, maintain an office, incur expenses related to the activity, etc. It was the special legal status of self-employed persons that dictated the need for such a regulation - registration in the AV/Bulstat Register provides a separate identifier (Bulstat number) to freelancers and thus a clear distinction is made between their identity as a natural person and their identity as a freelance professional.

Registration of a self-insured person with the Registry Agency (BULSTAT register):

1. This registration must be carried out within 7 days from the start of the activity.
2. An identity card, an application (submitted on site or online), a declaration of the veracity of the data, a note on the fee paid and a document proving your right to practice the profession (for example, a diploma of secondary/secondary special/higher education or a certificate of passing a course, a certificate of aptitude, etc.) are required.
3. After registration, a single identification code (EIC) is obtained.

In order to register in the AB/BULSTAT register as a self-insured person, it is necessary to prepare and submit the following documents:

• ‍Application form RB-2- This is an application for registration of circumstances, which concerns a natural person under Art. 3, para. 1, item 9 or an insurer under Art. 3, para. 1, item 11 of the BULSTAT Registry Act. The sample application can be found and downloaded from the official website of the Registry Agency.‍
• Declaration under Art. 9 para. 4 of the ZRB- This is a statement from the applicant, which confirms the veracity of the specified circumstances in the application. The declaration form can also be found and downloaded from the Registry Agency's website.‍
• Certifying documents- You must present a document that certifies the performance of the requested activity on the territory of the Republic of Bulgaria. This can be a document of ownership or other certifying documents, where such are required by law.‍
• Proof of paid state fee- The registration fee is 10 BGN. It is necessary to present a document on the fee paid.

The registration can be requested by the person himself, by a lawyer with an explicit power of attorney or by a proxy with an explicit notarized power of attorney, as specified in Art. 9 para. 3 of the BULSTAT Register Act. The application can be submitted in paper form at any territorial unit of the Registry Agency, which is the seat of a district court, or online with an electronic signature. The preparation of these documents and compliance with the procedures is an important stage in the process of registration as a self-insured person.

Registration of a self-insured person with the National Revenue Agency (NRA):

1. This is done after registration in BULSTAT, also within 7 days from the start of the activity.
2. A declaration of registration of a self-insured person must be submitted to an NRA office, through the NRA's Electronic Services Portal, by e-mail or through the Secure Electronic Service System (SSEV).
3. The declaration shall indicate the date of commencement of the activity and the type of insurance.

The registration of a self-insured person with the National Revenue Agency (NRA) includes the following steps and requirements:‍

• Deadline for submission: - Within 7 days of the occurrence of the circumstances for the commencement, interruption, resumption or termination of the work activity.‍
• Method of submission- The declaration can be filed at an NRA office, through a licensed postal operator or online through the NRA's electronic services portal.‍
• Competent authority: - The relevant territorial directorate/office of the NRA at the permanent address of the natural person.‍
• Submission process: - The acceptance of the declaration is carried out by the relevant NRA body, issuing an incoming number. Refusal of admission is made only in the case of unsigned documents, not submitted by an authorized person or in the absence of identification data.‍
• Submission by electronic means: - The sender receives an automatic message with an incoming number, and the result of processing the declaration is received at the e-mail address.‍
• Result of submission: - Accepted or rejected declaration. The beginning of the period for making insurance contributions is declared.‍
• Penalties for failure to comply with the deadline: - A fine of 50 to 500 BGN for individuals who are not traders, or a property penalty of 500 to 5000 BGN for sole traders and legal entities. In case of repeated violation, fines increase.

This procedure ensures that self-insured persons are properly registered and insured according to legal requirements, which is key to managing their professional and financial obligations.

What is a patent tax for an individual/self-insured person, how is registration carried out in the municipality and what are the types of patent tax?

According to Art. 61z ZMDT, every natural person, including sole proprietor, who carries out patent activities is taxed with an annual patent tax on income from these activities, if Simultaneously the following conditions are present −the person's turnover for the previous year does not exceed BGN 50,000, face is notregistered under the Law on Value Added Tax, with the exception of registration in the case of supply of services under Article 97a and for intra-Community acquisitions under Art. 99 and Art. 100, para. 2 of the VAT. For the patent activity carried out, all natural persons taxed under the procedure of Art. 61z ZMDT are not taxed under the procedure of the Personal Income Taxes Act. However, these persons apply the provisions on taxes withheld at source and on taxation of expenses under Article 204, item 2 of the Corporate Income Tax Act. Bulgarian legislation clearly states that every person carrying out patent activity must file a patent declaration under Art. 61 of the Local Taxes and Fees Act in the respective municipality.

What is the taxation for patent activity for individuals and self-insured persons?

Persons carrying out patent activities should file a declaration with the municipality of the location of the commercial establishment or the object from which they carry out the activity. The declaration can be downloaded from the website of the respective municipality. Please note that the costs of your activity and insurance are at your expense. Also, when within 12 consecutive months an individual has terminated patent activity and/or formed a new enterprise that carries out patent activity, and the total turnover of both enterprises is more than BGN 50,000 for 12 consecutive months, the newly formed enterprise is not taxed with patent tax in accordance with Art. 61z ZMDT, but for in the current tax year it is taxed under the general procedure of the Personal Income Taxes Act. When within the current tax year the person's turnover exceeds BGN 50,000 or the person is registered under the Value Added Tax Act, it is taxed under the general procedure of the Personal Income Taxes Act.

Again, when within 12 consecutive months an individual has terminated patent activity and/or formed a new enterprise carrying out patent activity, and the total turnover of both enterprises is more than BGN 50,000 for 12 consecutive months, the patent tax for the current year is due until the end of the quarter preceding the quarter in which they arose these circumstances (i.e. the natural person has ceased the activity or has formed a new enterprise) and the tax due, accordingly paid, is deducted from the annual tax liability in accordance with the Personal Income Taxes Act. At the request of the person, the municipality issues a certificate of the amount of patent tax due, for which no fee is paid. When, within the current tax year, a person deregisters under the Value Added Tax Act, he or she is taxed under the general procedure of the Personal Income Taxes Act for the entire tax year.

Important! Patent tax is payable for each of the patent activities carried out separately, and persons who carry out patent activities in more than one object are liable to tax for each subject separately.

Part of the patent activities within the meaning of the ZMDT are:

Operation and management of accommodation with no more than 20 rooms, categorized one or two stars or registered under the Tourism Act, catering and entertainment establishments, retail up to 100 sq.m net commercial area on the site, paid parking lots. Carpentry, tailoring, leather, fur and knitting services, trade, manufacture and services of precious metal products, shoemaking and hat services, metalworking services and many others

How is a patent tax return filed in the municipality?

According to Art. 61n. ZMDT, the persons subject to patent tax, file a tax return according to the model, in which they declare toJanuary 31 of the current yearcircumstances relating to the determination of the tax. In the case of starting the activity after that date, the tax return shall be submitted immediately before the start of the activity. All persons who, by January 31 of the current year, submitted this tax return and within the same period paid the full amount of patent tax determined in accordance with the declared circumstances, enjoy a 5 percent discount (i.e. 5% discount on the patent tax due). When there are any changes in the circumstances related to the determination of the tax, all individuals and sole proprietors who are engaged in patent activity are obliged to do so within 7 days of the occurrence of the relevant circumstance. When transferring the enterprise to a sole trader, a declaration is submitted by both the transferor and the acquirer within 7 days from the date of the transfer.

Tax returns of individuals and sole proprietors who are engaged in patent activity are filed in the municipality on the territory of which the object in which the patent activity is carried out is located, and when the patent activity is not carried out at an object or is not carried out from a permanent place - in the municipality where the permanent address of the individual, including the sole trader, is located.When the tax return of a foreign natural person is filed through a proxy with a permanent address in the country, the filing is made in the municipality where the permanent address of the representative is.

When the locally competent municipality cannot be determined - that is, the activity carried out and/ or the object from which the activity is carried out cannot be attributed to the above hypotheses (e.g. the individual is a foreigner with a permitted right of long-term residence in Bulgaria, but does not yet have a permanent address and there is no proxy who can file it instead), the tax a declaration is filed inSofia Municipality, regardless of the fact that the patent activity may have been carried out in Burgas. The law assumes that the activity is not carried out from a permanent place, when a change in the year of the location of the object from which the activity is carried out leads to a change in the amount of tax.

What are the features of the accounting of self-insured persons?

The accounting of self-insured persons in Bulgaria has its own specifics, which are key for the proper management of their finances and fulfillment of legal obligations. This sector includes a wide range of professions, ranging from lawyers to artists and freelancers who manage their activities independently. The main distinction of self-insured persons from other business entities is the way of insurance and taxation. They must pay compulsory insurance contributions and file annual tax returns, and their taxation is based on the income earned from their professional activity. This imposes a special emphasis on accounting procedures and keeping accurate documentation.

An important element in the accounting of self-insured persons is the legally recognized expenses. They represent a percentage of the annual income that is used to reduce the tax base, thus affecting the amount of taxes and insurance due. The ongoing debate on changes in the percentages of these costs underlines the importance of their analysis and planning. In the context of modern economic conditions and changing legal requirements, the accounting of self-insured persons requires precision and updating of knowledge to comply with all legal norms. It is important that they are aware of their financial and legal obligations in order to successfully manage their business.

What are legally recognized expenses and why are they important for the accounting of self-insured persons?

Legally recognized expenses generally represent a percentage of revenue that the law accepts as an expense incurred. That is, if a person has earned BGN 2000 income, and the rate of expenses recognized by law for his category of activity is 25%, it is assumed that BGN 500 of the earned BGN 2000 are necessarily spent by the person for the performance of professional duties and to prove this expense, an invoice or other document is not needed, but is recognized directly under the law (i.e. There is a presumption). They are a key concept in Bulgarian tax legislation, especially for self-employed persons who exercise a freelance profession or conduct another type of independent economic activity. They are an important tool for determining the tax base of these individuals and have a significant impact on the final amount of their tax liabilities. According to Art. 29 of the Personal Income Taxes Act (ZDDFL), the legally recognized expenses constitute a percentage of the total income of the individual, which is automatically deducted from this income in order to form the tax base. They serve as virtual expenses that are adopted by law for taxation purposes, without requiring proof of their real existence.

The difference between commercial companies and self-insured persons is that in the former the tax is taxed on profits, while in the latter - on the total income from the activity. Legally recognized expenses were created to compensate for this difference by providing a way to reduce the tax base of self-insured persons.

Percentage of legally recognized costs- usually this percentage is about 25% of earnings, but it may vary depending on the profession and changes in legislation. For example, journalists and actors of science, culture and education, as well as lawyers, may have a higher percentage of the recognized expenses. The introduction of these legally recognized expenses facilitates self-insured persons in the calculation of their tax obligations. They provide a uniform and fair approach to income taxation without having to separate personal and professional costs, which can be complex and unclear. These costs are a significant part of the taxation of self-insured persons in Bulgaria and are an essential tool for fair and efficient taxation.

Taxation of self-insured persons

In Bulgaria, freelancers - or also known as self-employed persons registered as exercising a free profession, are subject to specific taxation, regulated by the Personal Income Taxes Act (ZDDFL). After the mandatory registration in the BULSTAT Register and the NRA, they are engaged in declaring and paying taxes and insurance, guided by the taxation rules characteristic of their type of activity.

The state provides relief for freelancers by setting legally recognized expenses, which are a fixed percentage of income - 25% for most professions, exceptions are provided for a certain type of specialists. For example, for lawyers, individuals who are NOT registered as farmers, but are engaged in the production or processing of agricultural products, persons who develop forestry or fisheries, cultural, scientific and artistic workers who receive royalties and licensing fees, including income from the sale of inventions, works of science, culture and art by their authors, as well as artists and performers and all craftsmen whose activity  IS NOT subject to patent tax under the procedure of the Local Taxes and Charges Act, are treated under the valid rate of 40% of the legally recognized costs. For registered farmers - individuals, the legally recognized costs are 60%.‍

It is important to know that the State has established the percentage of legally recognized expenses so that it reflects the typical costs associated with the liberal profession, without the need for individuals to prove these expenses with specific documents.After deducting these “legally recognized expenses”, the taxable income is determined, on which the standard 10% income tax is charged. For freelancers, taxation also includes advance declaration on a quarterly basis, which is carried out through a Declaration under Art. 55, para. 1 of the Personal Income Taxes Act. An exception is made for the fourth quarter, for which such a declaration is not required. At the end of each year, freelancers file an Annual Tax Return by April 30, including their total annual income. It is important that they deduct the contributions paid in advance when calculating the annual tax.

Thus, the system gives freelancers flexibility and at the same time ensures that they comply with their tax obligations, ensuring transparency and fairness in the tax process.

For some professions, such as carpenter, tailor, hairdresser, beautician and others, which are considered patent activities, it is necessary to file a Patent Declaration under Art. 61 of the Local Taxes and Fees Act (ZMDT) in the respective municipality.

1. Differences in taxation depending on the activity: Depending on whether the activity is patented or not, taxation differs. Patent activities are taxed under the Local Taxes and Fees Act, while fornon-patent activities (all others)the provisions of the Personal Income Tax Act apply.
2. Method of calculating the tax: Personal income tax is usually fixed at 10% of the annual tax base. This basis is determined after subtracting the legally recognized costs of the activity and the insurance paid during the relevant time. Legally recognized expenses can vary, usually being around 25% of income, but can also reach 40% for certain professions.
3. Practical examples of tax calculation: An example of calculating the tax might involve looking at different professions and their specific legislatively recognized costs. For example, a person with an income of BGN 1500 per month should calculate his advance tax by subtracting from his total income for the quarter the expenses legally recognized and the insurance paid.
4. The importance of legally recognized costs: Legally recognized expenses play a key role in the taxation of self-insured persons. They represent a percentage of income that reduces the tax base and thus determines the amount of tax due. This system facilitates the calculation of taxes for freelancers, while ensuring fairness in taxation.

When should we perform VAT registration as a self-insured/self-employed person?

Freelancers in Bulgaria exercising a freelance profession become subject to mandatory registration under the Value Added Tax Act (VAT) in specific circumstances. One of the hypotheses, for example, is reaching a turnover of BGN 100,000 for a period of 12 consecutive months. Another case in which VAT registration would be required is also the interaction with foreign counterparties, such as Facebook, Google and others, which may impose a registration obligation regardless of turnover. After registration, freelancers are required to issue invoices for the services performed by them, thereby documenting their activities in accordance with legal requirements.

Understanding the different tax categories that affect self-insured individuals is critical to optimizing their financial strategies. This includes both the understanding of the mechanisms behind the patent tax and the taxes under the Personal Income Taxes Act (ZDDFL) and the assessment of the need for registration under the VAT. It is important to emphasize that self-insured persons, depending on the specifics of their activity, may face different tax regimes.

One of the key features of accounting for self-insured persons is the absence of the right to a tax credit, especially when they are registered under the VAT. This fact can significantly affect their financial efficiency and impose different approaches in business management. For this reason, detailed understanding and strategic planning are crucial to minimizing tax and insurance obligations. In this dynamic financial environment, consulting qualified accountants and tax experts, such as those at Elan Consulting, is critical. They can provide specialized help and guidance to help self-insured individuals make informed and effective decisions to support their financial stability and business sustainability.

1. Lack of entitlement to tax credit: This means that self-insured persons cannot deduct the VAT they have paid on their business expenses from the VAT they have collected from their customers. This leads to an increased financial burden and can negatively affect the pricing and competitiveness of their business.
2. Compulsory and voluntary VAT registration: Self-insured persons are obliged to register under VAT if their turnover for the last 12 months exceeds BGN 100,000. They can also opt for voluntary VAT registration, even if they do not reach this threshold. However, they must take into account the absence of a tax credit when making this decision.
3. Maintaining accounting and reporting requirements: After VAT registration, self-employed persons must maintain accurate accounting, file monthly or quarterly VAT returns and comply with all legal requirements related to VAT.
4. Assessment of the need for registration: Sometimes, avoiding VAT registration may be more advantageous for self-insured persons, given the lack of entitlement to a tax credit. They should carefully assess their annual turnover and the potential consequences of registration.
5. Consultation with experts: Given the complexity of tax and accounting requirements, it is advisable for self-insured persons to consult the experts of Elan Consulting. They can provide valuable guidance and advice on best practices and strategies to help SOL minimize their tax and accounting obligations and avoid potentially unnecessary VAT registration.
6. Strategic planning: It is important that self-insured individuals develop and follow a strategy that reduces their financial obligations and increases the efficiency of their business, while remaining in compliance with legal requirements.

The accounting of self-insured persons is a complex and multi-layered field, requiring a thorough understanding of Bulgarian tax laws and regulations. Key aspects such as legally recognised costs, taxation and the lack of entitlement to a tax credit must be carefully considered in order to ensure compliance and optimisation of tax obligations.