Tax Treatment of Freelancing

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General tax obligations

As pointed out in our article “How does Bulgarian law treat ‘modern professions’?” (the full text of the article can be viewed here), Bulgarian refers to freelancers as “self-employed professionals” or as persons carrying out “patent activity“:

  • Self-employed freelancers are obliged for the first three quarters of the year to declare and pay advance tax on the income generated during the relevant quarter before the end of the month following the relevant month.
  • Freelancers carrying out patent activity are obliged to declare it before the relevant municipality according to the place where this activity takes place before commencement of the activity. This declaration shall also be submitted after the activity has commenced, each year by 31st January of the year following the year during when the activity was conducted. Depending on the specific type of patent activity, annual local tax is also due.
  • All freelancers are taxable on the income derived from freelancing activity at a rate of 10%;
  • All freelancers are entitled to a 25% reduction of the tax base by the amount of the expenses incurred in connection with the freelance activity, and the tax payable is calculated after the taxes and social security contributions due have been accrued.

 Are freelancers subject to VAT registration?

When the amount of taxable turnover generated from freelancing in the preceding 12 months reaches BGN 50 000, the person carrying out such activity is subject to mandatory VAT registration with the National Revenue Agency (NRA). Registration shall be completed within 7 days as of the expiry of the tax period during which the aforementioned amount of turnover has been reached.

VAT registration is also mandatory in the case of freelancing of services to residents within the European Union. The registration period is 7 days as of the date when the tax became due.

There is also voluntary VAT registration, applicable when the conditions for mandatory registration are not present. Under certain conditions, voluntary registration is applicable for remote sales executed by foreign persons, regardless of the amount of the supplies, where the place of performance is on the territory of the country. It should be noted that in such cases registration becomes compulsory when the total amount of remote sales generated during the current year exceeds BGN 70 000.

Once registered, the freelancer (regardless on which of the grounds above) is obliged to submit a monthly VAT return (which on the other hand might entitle the freelancer to tax credit).

Failure to comply with the deadlines for registration, declaration and payment of VAT results in fines ranging from BGN 500 to BGN 10,000.

Insofar as the above registration procedures are accompanied by administrative procedural specifics related to the novelty of this particular market niche, you can reach out to our team for assistance so as to ensure efficient implementation un manner which guarantees quickly and legally compliant performance of such professional endeavours.

 

This series of topical articles and current materials aims to address the practical and legal aspects related to the gradual entry of “modern professions” in the Bulgarian employment market. In line with the more general tendency of modern law to form a regulative framework and instruments for its practical application afterwards, i.e., after the actual emergence of regulated social relations, the same trend is observed with “modern professions”. Thus, with the progressive development of technology, the entry of blockchain technologies and social networks, unconventional new professions – independently carried out, on full responsibility of the provider, completely or partially within an online environment – are emerging in the state for the first time.

This series of informational materials aims to regularly inform readers – consumers and service providers – about the contemporary implementation matters related to the provision of services by freelancers, influencers, bloggers/vloggers, dropshippers, and others, as well as the main issues that users of such services face.

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