Insurance and taxes of the artist

Insurance and taxes of the artist

Question:
Hello!
My wife works in a company where she is insured for BGN 800. In his spare time he paints and wants to sell his paintings legally. What registrations does he have to make and what taxes and insurances will he owe?
Thanks in advance!

Answer:
Hello,
In your case, you have two good options in which your wife can carry out their activities in accordance with the regulations and laws in Bulgaria for this - to register a company in her name, or she to register as a freelancer. The main differences in the two options are the following:
From a tax point of view:
- 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 social security contributions 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:
- in the case of a freelance profession, you are insured monthly, and accordingly you have to declare and pay insurance every month, as the minimum insurance income is currently BGN 710.00, which means insurance in the amount of BGN 200.00 per month. 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 - if its amount exceeds the amount on which you were insured, you must add insurance on the difference. The amount on which social security contributions are paid on an annual basis cannot be higher than BGN 39,600.00 for 2022. It should be borne in mind that since your wife is insured under an employment contract, her insurance income is also included in these calculations.
- with EOOD the insurances are again paid on the minimum insurance income for the year - BGN 710.00, 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 (ie you would pay less tax and social security).
Apart from the differences from the tax and insurance 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 the company makes remains with the company. If you, as the owner, want to have this money, there are several options - to give a salary, to give a loan or after the financial year is over and if the company 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 this amount).
- as a freelancer you can work only you, ie. if you expand your business, there is no way to hire additional staff. With EOOD this restriction does not exist and in case of possible expansion of your activity, you can easily hire staff.
- if you practice your business 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 (application and declaration), which certifies your competence to provide the services you will perform. The registration itself is done by Register Bulstat within 24 hours, and there is a state fee of BGN 10.00. To register EOOD the procedure is a bit longer and more complicated. To begin with, a set of documents is prepared (memorandum of association, minutes of the constituent assembly, management contract, several declarations and a sample signature). Some of the documents are notarized. Then you need to open a fundraising account at a bank of your choice to deposit the start-up capital. The minimum is BGN 2.00. The import note for the paid-in capital, together with the other prepared documents shall be submitted to the Commercial Register no later than 7 calendar days from the date of the memorandum of association, and the registration shall be made within 7 working days. . The state fee is BGN 110.00
We hope we have been useful to you!
Greetings!