Freelance or Ltd.

Freelance or Ltd.

 

Question:
Hello!

I am an IT specialist and I would like to sell a course developed by me in an American online platform with which we will share% of the selling price of the course. Do I need to declare the income I will receive from the platform and how does this happen? Filing a tax return and paying 10% tax at the end of the year or do I need to register as a freelancer or Ltd.? Is VAT registration required? Since I am thinking of advertising, through paid advertising, the course on Facebook and other platforms, is it possible to recognize my advertising costs as an operating expense (only if it is absolutely mandatory to register an EOOD).

Thanks in advance!

 

Answer:

Hello,

You are obliged to declare all income received by you, including those described by you. If we understand correctly, in practice you will provide some kind of training. In any case, you will carry out a commercial activity, which will require registration on your part. You can do this by registering as a freelancer or by registering a Company. The main differences between the two options are the following:

From a tax point of view, things look like this:

- in the free profession you declare the amount of income for the year. From the amount thus received you deduct 25% of legally recognized expenses and the insurances paid during the year and you owe 10% tax on the amount thus received.

- with 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 with 10% tax.

From an insurance point of view, things are as follows:

- in the case of a freelance profession, you are insured on a monthly basis, and accordingly you must declare and pay insurance every month at least on the minimum insurer's income. At the end of the year, when submitting the annual tax return, an equalization is made. This equalization looks at the realized income during the year, and if its amount exceeds the amount on which you have been insured, you must add insurance on the difference. The amount on which contributions are paid on an annual basis may not be higher than the maximum insurance income for the year.

- in the case of EOOD the insurances are again paid at least on the minimum insurance income for the year, the difference being that there is no annual equalization of the insurance contributions.

Ie From a purely tax and insurance point of view, you will need to assess and make a plan about what income you expect to receive and what expenses you would have. Only in this way could you determine which form of activity is more economically viable.

Apart from the differences from the tax and social security point of view, there are several purely functional differences:

- The money you earn as a freelancer is really your money and you can "spend" it whenever and for whatever you want. At EOOD, the money that the company earned remains with the company. If you want, as an owner, to have this money, there are several options - to give a salary, to give a loan, or after the financial year is over and the company, if it has made a profit, then you will be able to distribute the profit as dividend (but you will have to pay an additional 5% dividend tax on that amount).

- as a freelance profession you can work only you, ie. if you expand your business, you will not be able to hire additional staff. At EOOD this restriction does not exist and in case of possible expansion of your activity, you can easily hire staff.

- Your activity assumes that you will receive cash. If you practice your profession as a freelancer, you will not be obliged to issue a receipt upon receipt of cash. For EOOD, this relief does not apply and if you receive cash, you will have to buy a cash register.

- in order to register as a freelancer, you need to provide a diploma or some other certificate to the set of documents, which certifies your competence to provide the services you will perform.

VAT registration will be mandatory for you, as you will receive services from Facebook and other platforms. In principle, if you receive services from companies from EU member states, VAT registration under a certain regime (based on Article 97a of the VAT Act) is mandatory. According to the registration under this regime, you will have to charge and pay VAT only on the services received from the EU. If you reach the total of BGN 50,000 for the last 12 months, you will now have to re-register for VAT under the general regime.

We hope we have been helpful to you.

Greetings!