Is the length of service under an employment contract with a foreign company recognized in Bulgaria?

Is the length of service under an employment contract with a foreign company recognized in Bulgaria?

 

Question:
Hello!

I have a proposal for remote work from an English company (there is no branch in Bulgaria). They offer me an employment contract (based on English law) and a gross monthly salary, and I will have to take care of the payment of taxes and insurances in Bulgaria. I wonder if, if I accept the job, the length of service I gain will be recognized in Bulgaria, given that the UK is no longer a member of the EU and what is the procedure for declaring and paying taxes and social security contributions?

Thanks in advance!

 

Answer:

Hello,

After the UK leaves the EU, the two countries (the EU and the UK) have an agreement that includes a clause that will recognize the traineeships of individuals, EU citizens working in the UK and vice versa.

Specifically in your case, you have several options, unfortunately not very "simple" to perform, but in any case, your internship will be recognized. Specifically for your job options:

1. Employment contract - if you are employed on an employment contract, there is no way for you to "take care" of the declaration and payment of taxes and social security contributions in Bulgaria. Your employer must register as an insurer in Bulgaria and either he or a person authorized by him will have to declare and pay the due insurance contributions on his behalf. It is not a problem to be you, but in any case both you and your employer will have to go through certain procedures, which would cost a lot of time. Our experience suggests that foreign employers are not always willing to "do their job" and rather look for other options (which we will describe below). However, this is also a working option, which can be applied if there is determination on both sides.

2. Register as a freelancer - Depending on the activity you perform, if you have a diploma, certificate or other document proving that you can perform this activity, you can register as a freelancer. . In this case, you can settle your relationship with your employer on a "customer-supplier" basis. Ie you enter into a contract on the basis of which you perform a certain service for a certain fee. In this case, you will actually be able to "take care" of the declaration and payment of social security contributions in Bulgaria.

3. To register a company - Actually this is the same option as the previous one, but if you do not have the necessary documents for registration as a freelancer or if you think it is more profitable to register a company, you can choose this option.

Regarding the possible choice between a freelance profession and a company and which would be more profitable, we will try to describe the main differences.

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 insurance 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 social security contributions are paid on an annual basis cannot be higher than the maximum insurance income for the year. It should be borne in mind that once you are insured on an employment contract, your insurance income is included in these calculations as well.

- with EOOD the insurances are again paid 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 (ie you would pay less tax and insurance).

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 to have this money as an owner, there are several options - to give a salary, to give a loan or after the financial year the company has expired, 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.

- if you practice your activity as a freelancer, you will not have the obligation 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 in 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 constitutive act, 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!