Mobile app revenue

Mobile app revenue

Question:
Hello!
Since the summer of last year, I have been selling my mobile app on the google play store. Last year the amounts were negligible, but over the course of this year I've slowly made it to just over a minimum wage a month. I want to pay taxes on this profit. I have a few questions:
1. What is the most profitable way to declare these incomes, I have friends who have companies, I have also heard about the freelance professions, but I have no idea what percentages the state will deduct.
2. Since I am declaring this income late, I assume that I will owe interest/penalties, in what amounts /%/ will they be?
3. What information/documents should I prepare for the NRA? Should I translate into Bulgarian the entire description of the application - what functions it has, what is its name, etc., or should I simply provide them with the invoices that Google sends me, should these invoices be translated into Bulgarian?
Thanks in advance!

Answer:
Hello,
In order to be able to determine which is more profitable - a company or a freelance profession, we will look at what tax and insurance obligations you would have in both cases.
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, 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 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 an annual tax return is submitted, an adjustment is made. Then the realized income during the year is looked at, and 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 an 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.
 
You will need to estimate and make some kind of plan for what income you expect to receive and what expenses you would have. Only in this way can you determine which form of activity is economically more profitable (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 makes stays with the company. If, as an owner, you want to have this money at your disposal, 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, to distribute the profit to you as a dividend (but you will have to pay 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. This exemption does not apply to an EOOD, and if you receive cash, you will need to purchase a cash register from which to issue receipts.
- 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. A set of documents is being prepared (foundational act, minutes of the founding meeting, management contract, several declarations and a sample signature). Some of the documents are notarized. After that, a fundraising account is opened 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 - 8.00, and the bank fee depends on the selected bank /varies from BGN 10.00 to BGN 50.00/
With that I think we answer your first question.

Regarding the issue of interest payable - it depends on the amount of the obligation. We are attaching a link to the NRA website, where you can enter any amount and delay period in order to calculate the interest due. Keep in mind that the income you received in 2022 should be declared in the application provided for Sole Traders, with the deadline being 30.06.2023.

Regarding the third question - nothing applies to the declaration of income itself. Upon verification by the NRA, it will be necessary to provide both invoices and bank statements from the account from which you receive your income. The NRA has the right to request that the documents be translated into Bulgarian. They don't always do it, but it's at the discretion of the NRA officer.

There is one more issue that is also of great importance for your business - VAT registration. Since you receive income from a legal entity (company) established on the territory of the EU (Google is in Ireland), it arises an obligation to register for VAT no later than 7 days before the first receipt of income. This applies to both legal entities and individuals. This means that you are already in violation. Naturally, this violation may never be detected, but in your future work, you need to know that there is such a risk. If you decide to register for VAT, as an individual - self-employed, they will require statements from all your bank accounts for the past 12 months. This means that the amounts received by Google will become visible and you will be found to have missed the VAT registration deadline. If you are working through a company, this will not be able to be established on the company's VAT registration, as the company itself will not have a history of bank statements and amounts received from Google. With VAT registration, you will not actually owe VAT on the value of your sales to Google. The mode is only for registration and you will have the obligation to submit monthly reports to the National Revenue Agency regarding the value of the amounts received from Google.
We hope we have been helpful!
Greetings!