Do I have to quit my job if I register a company?

Do I have to quit my job if I register a company?

Question:
Hello!
I am currently on an employment contract for one month and on a civil contract to provide a service to a Bulgarian company. What interests me is whether I can conclude another civil contract with other Bulgarian companies. If I want to work with foreign companies, as far as I understand, I have to register as an EOOD or a freelancer. In this case, I do not wish to interrupt the employment contract, therefore, is it possible to be on an employment contract at the same time and to register an EOOD or a freelance profession? In this case, what is required as taxes and insurances? What exactly does 25 recognized costs mean?
Thanks in advance!

Answer:
Hello,
There is no obstacle to carrying out activities as a self-employed person or as the owner and manager of an EOOD and at the same time being on an employment contract.

From a tax point of view, things look like this:
- in the case of self-employment, you declare the amount of income for the year. From the amount received in this way, you deduct 25% of legally recognized expenses and the insurances paid during the year, and you owe 10% tax on the amount received in this way.
- with an EOOD, you declare the amount of income and expenses related to your activity. If the income is more than the expenses, then you make a profit and this profit is taxed at 10%.
 
From an insurance point of view, the situation is as follows:
- if you are self-employed, you are insured monthly, and accordingly you must declare and pay insurance every month, as the minimum insurance income is currently BGN 780.00, which means minimum insurance in the amount of BGN 250.00 per month. At the end of the year when the annual tax return is submitted, an adjustment is made. In this equalization, the realized income during the year is considered. If its amount exceeds the amount on which you were insured, you must add insurance on the difference. The amount on which insurance is paid on an annual basis cannot be higher than BGN 40,800.00 for the year 2023.
 
- with EOOD, the insurance contributions are paid again on the minimum insurance income for the year - BGN 780.00, the difference being that there is no annual equalization of the insurance contributions.
 
I.e. purely from a tax and insurance point of view, you will need to assess and make some kind of plan as to what income you expect to receive and what expenses you would have. Only in this way could you determine which form of activity is economically more profitable for you (ie you would pay less tax and insurance).
 
Apart from the differences from a tax and insurance point of view, there are also several purely functional differences:
- the money you earn as a freelancer is actually your money and you can "spend" it whenever and on whatever you want. With an EOOD, the money the company earns stays with the company. If you, as an owner, want to have this money available, there are several options - to give yourself a salary, to give yourself a loan, or after the financial year is over and if the company has made a profit, you will be able to distribute the profit as a dividend (but you will have to pay an additional 5% dividend tax on this amount).
- if you exercise your activity as a freelancer, you will not have the obligation to issue a receipt when receiving cash. For EOOD, this exemption does not apply and if you receive cash, you will need to have a cash register purchased in advance.
- in order to register as a self-employed person, you need to provide a diploma or some other certificate with the set of documents (application and declaration) certifying your competence to provide the services you will perform. The registration itself is carried out by the Bulstat Register within 24 hours, and there is also a state fee of BGN 10.00. To register an EOOD, the procedure is a little longer and more complicated. To begin with, a set of documents is prepared (constitutional act, minutes of the founding meeting, management contract, several declarations and a sample signature). Some of the documents are notarized. After that, you need to find a fundraising account in a bank of your choice, to which you can deposit the initial capital. The minimum is BGN 2.00. The import note for the paid-in capital, together with the other prepared documents, must be submitted to the Commercial Register no later than 7 calendar days from the date of the founding act, and the registration is carried out within 7 working days. The state fee is BGN 110.00. The notary fee is BGN 6.00, and the bank fee depends on the bank you choose, and it will vary from BGN 10.00 to BGN 50.00.

The other important thing you need to know is that when providing a service to foreign companies from the European Union, there is an obligation to register for VAT no later than 7 days before the provision of the services in question. In this mode of registration (for the provision of services within the EU) you will not charge and therefore owe VAT. However, you will have to declare every month all your sales of this type of services - amounts, dates, to whom you provided the services.
If, on the other hand, you are going to provide services to individuals from the EU - when you reach 10 thousand euros of income from such services, you will have to register under a different VAT regime, according to which you will have to start charging and paying VAT according to rates, corresponding to the rates of the country in which the natural persons are located.
We hope we have been helpful!
Greetings!