Who are the individuals practicing a Freelance profession?

Individuals practicing a Freelance profession independently must secure their registration in the BULSTAT register. As per § 1, item 29 of the Additional Provisions of the Personal Income Tax Act (PITA), the term "freelance professionals" encompasses a range of professions including but not limited to: expert accountants, consultants, auditors, lawyers, notaries, private enforcement agents, court reporters, judicial and prosecutorial experts, licensed appraisers, representatives of industrial property, medical specialists, translators, architects, engineers, technical managers, cultural, educational, artistic, and scientific actors, Social insurances agents.

Such individuals should satisfy the following criteria concurrently:

• They perform professional activities independently;
• They are not registered as Sole Proprietors (ET);
• They are self-employed.

The text further elaborates on the responsibilities for individuals who have successfully registered a Freelance profession. You can refer to our article "How to register as a person practicing a Freelance profession?" for more details.

 

Alternative pathways for conducting business activities present opportunities for tax optimization strategies.

 

In the process of practicing as a Freelance profession, in 99% of cases, you have two primary options for conducting work in Bulgaria, each offering its specific advantages and constraints, as well as different tax planning and payment options.

The opportunity to operate as a self-employed  individual: This is an option where the individual is registered in the Bulgarian Commercial Register (BULSTAT register) as a Freelance profession. This allows individuals to work independently and provide their own insurance. This option offers a great deal of flexibility and independence, but it may also include increased risk, as all administrative responsibilities fall on the individual person.

The registration of a company (sole proprietorship with limited liability or EOOD in Bulgarian) and practicing as a Freelance profession through this company: This is an alternative approach that provides additional protection and structure. Registering a Sole Proprietorship with Limited Liability (EOOD) allows the individual to operate as a freelance professional but within the structure of a registered company. This reduces personal liability and can provide more protection in case of legal or financial troubles.

The choice between these should be made after careful consideration of all aspects of the corresponding profession and the individual's personal circumstances.

Social insurances as a self-employed

For individuals operating as self-employed entities in Bulgaria, there are specific thresholds that outline their insurance obligations. For the year 2025, these thresholds were determined as BGN 1077 at a minimum and BGN 4130 at a maximum. This means that the contributions of self-employed individuals couldn't be less than BGN 1077 and more than BGN 4130

This self-insurance model can be adopted by individuals who are owners of a Single-Member Limited Liability Company (also known as EOOD) or those engaged in freelance work. One significant advantage of this system is the relative affordability of the insurance contributions. The contributions start from as low as BGN 299.41, but were slightly increased to BGN 337.10 starting from April 1, 2025.

This approach can be particularly beneficial for individuals or professions that have relatively lower monthly earnings, as the insurance contributions are relatively lower and manageable. Furthermore, it's important to note that for the year 2024, there have been no changes to these insurance thresholds, implying that they remain the same as those set in April 2025.

Upon initiating your activity, you're required to submit a registration declaration to the NRA (National Revenue Agency), specifying your preferred Social insurances risk coverage. You're obligated to file a monthly 'Form 1 declaration', providing advance contributions between the minimum and maximum Social insurances income parameters. The final calculation of Social insurances contributions is outlined in the appendices to the Annual Tax Declaration under Art. 50, implying additional Social insurances payment at year-end if your income exceeds your predetermined monthly Social insurances threshold.

Remember, the deadline to submit 'Form 1 declaration' is the 25th of each month for the prior month. It's your responsibility to declare and pay due Social insurances on time.

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Tax residency

In Bulgaria, tax residency is primarily based on the following criteria:

Stay Duration: If you stay in Bulgaria for more than 183 days in any 12-month period, you are considered a tax resident. These do not have to be consecutive days.

Permanent Home: If you have a permanent home in Bulgaria, available to you at all times, you can be considered a tax resident.

Center of Vital Interests: If your personal and economic ties are stronger to Bulgaria than to any other country (for example, if your family or main occupation is in Bulgaria), you can be considered a tax resident.

As a tax resident in Bulgaria, you are obliged to pay taxes on your worldwide income. Non-residents, on the other hand, only pay taxes on their income earned in Bulgaria.

It's important to be aware that these rules can be affected by tax treaties that Bulgaria has with other countries, and different rules can apply to certain types of income.

How the taxes are calculated ?

If the activity is not patented, the tax is 10%. It is determined after deducting the normatively recognized expenses for the activity and the Social contributions paid during the quarter. The tax is paid quarterly. Respectively the month following the quarter, i.e., April, July, October and a final installment with the annual tax return. The normatively recognized expenses are 25%, except with the exceptions described in Art. 29 of the PITA.

Declarations that must be filed in compliance with Personal Income Tax regulations

 With a declaration under Art. 50 of the Personal Income Tax Act (PITA), incomes, loans from individuals, allowances are declared, etc., which are not related to your Freelance profession, but the income earned from the Freelance profession should be filled in Appendix No. 3 to the annual tax declaration under Art. 50 of the PITA, respectively table 6 or table 7 for equalization of the due Social insurances, according to the taxable income during the year. The deadline for submitting the declaration is from January 10th to April 30th of the following year you submit annually. If the activity is not patented, taxes under the PITA will be due. In this case, on a quarterly basis (by April 30th, July 31st and October 31st), you must submit a Declaration under Art. 55 (form 4001) and pay an advance tax of 10% on the actual income acquired after deducting 25% of recognized expenses and due Social insurances. This means that the tax is paid quarterly in advance and with the Annual Tax Return under Art. 50 the final size. It is important to know that an individual who does not submit a declaration under Art. 55 of the PITA in time is fined or sanctioned up to BGN 500. Tax size The taxes you will pay on your income will be based on the Local Taxes and Fees Act (LTFA), if the activity is patented, or based on the PITA - the Personal Income Tax Act, if the activity is not patented. (Check out our article: Patent tax for a Freelance profession and am I obliged to pay patent tax?)

VAT registration

 In most circumstances, the obligation to register for VAT (Value Added Tax) comes into effect once a taxable income threshold of BGN 100,000 has been reached within the previous 12 months. This threshold triggers mandatory VAT registration, and you must act within seven days from the end of the tax period in which you hit this turnover. To do this, you should submit a VAT registration application as prescribed in Article 96, paragraph 1 of the VAT Act.

However, the VAT Act also offers an allowance for discretionary registration. As outlined in Article 100, paragraph 1, individuals are permitted to voluntarily register for VAT even if they haven't yet met the conditions that mandate such registration. This flexibility can be advantageous in certain scenarios, particularly for businesses planning for growth or interacting regularly with VAT-registered businesses.

For all taxable individuals, including those engaged in freelance professions, there is a unique stipulation. If these individuals are not VAT-registered but receive invoices from VAT-registered entities in the European Union (EU) – for instance, for services like domain registration, web hosting, or advertising through platforms like Facebook or Google – they are obliged to register for VAT. This obligation, according to Article 97a, paragraph 1 of the VAT Act, mandates the submission of a VAT registration application at least seven days prior to the due date of the tax. This requirement aims to ensure that tax responsibilities are adequately met even in the context of cross-border transactions within the EU.

Hiring Staff

An individual practicing a Freelance profession, registered in the BULSTAT register, can hire persons under a labor contract.

Advantages

Easy and quick deregistration procedure - the deregistration is done by submitting an application form. Unlike sole traders and especially single-member limited liability companies and limited liability companies, the procedure is exceptionally light and quick.

Disadvantages

This option is not suitable for activities with a large relative share of expenses.

Similar to sole proprietors, at the end of the year, we have an annual equalization of the due tax and additional Social insurances contributions.

Unlimited liability for obligations to suppliers, creditors, the state, etc. The individual is responsible with all their property for settling their obligations.

For tax consultations related to your activity, you can contact us at office@schetitoti.com