Remuneration, income tax and social security contributions

Updated last 26.03.2021

General information

• The work provided by an employee is to be compensated. Remuneration represents the cash payment by the employer to the employee for the provided work-related activities.

• All occupations and positions in Bulgaria are listed and categorised in the National Classification of Occupations and Positions 2008 – NCOP-2011, which ensures the application of the International Standard Classification of Occupations. The NCOP categorizes the positions into 9 classes, depending on the education and qualifications required for the specific position. Class I positions require the highest educational level and should have the highest pay, and Class IX – the lowest educational level and therefore should have the lowest pay.

Minimum salary and minimum insurance income

• A minimum gross monthly salary has been set in order to protect employees whose jobs require minimal qualifications/ skills. Currently, it amounts to BGN 650. This means that by law, a gross monthly salary below this amount cannot be agreed by an employer and an employee (assuming normal work during normal working hours).

• In order to protect the employees, the law has also introduced minimum insurance income by main economic activities and qualification groups, which obliges the employer to pay social security contributions on income in amount of not less than the minimum insurance income for the respective occupation. A complete list of the positions and the minimum insurance income levels is available in Appendix No 1 to LBSSS: Minimum social security income by main economic activities and occupationqualification groups – 2019.

Payment of remuneration

• The payment of the remuneration is a fundamental duty of the employer;
• The basic wage is paid in cash (the additional work remuneration could be also paid in kind, if such option is provided in an act of the Council of Ministers, collective employment contract or the worker’s individual employment contract);

• The frequency of payment of the remuneration is agreed between the employee and the employer in the employment contract. If otherwise is not agreed upon, the remuneration is paid twice monthly (and advance and a final payment);

• The remuneration is paid personally to the employee. By exception, the remuneration may be paid to another individual in which case the employee should provide a written request to the employer. The persons who have the right to receive the remuneration include only close relatives of the employee.

Social security contributions

• Any individual who is employed is subject to mandatory social security and health insurance in the country. The employer, in his capacity as an insurer under art. 5 of the Social Security Code (SSC) is obliged to withhold and pay social security and health insurance contributions for his employees on a monthly basis. Social security and health contributions are due on the total monthly gross remuneration of each employee within the minimum and maximum thresholds provided for by law;

• The minimum social security and health insurance income in Bulgaria for 2021 is BGN 650 and the maximum – BGN 3000. This means that if the employee receives remuneration exceeding BGN 3000, he / she will pay social security and health insurance only up to the maximum insurance income – BGN 3000. At the same time the employee may not be insured at gross monthly remuneration of less than BGN 650;

• Social security and health insurance contributions are allocated by funds. The total amount of the contributions is 32.70-33.40% of the gross remuneration, whereby 18.92-19.62% are at the expense of the employer and 13.78 % are withheld from the monthly remuneration at the expense of the employee.

What do monthly social security and health insurance contributions include (both at the expense of the employer and the employee)*?

• 14,8 % – 19.8 % to “Pension” Fund (the percentage varies depending on the year of birth of the ensured person);

• 5 % for additional obligatory pension insurance (for the born after 1960). For the people born before 1960 no separate insurance contribution is due for additional pension insurance, since it is included in the social security and insurance payment to “Pension” Fund);

• 3,5 % to General Disease and Maternity Fund;

• 1 % to Unemployment Fund;

• 0.4-1.1 % to Accident at Work and Occupational Diseases Fund (the percentage varies depending on the economic activity of the company);

• 8 % for health insurance.

^*The values indicated are for III category positions (additional information on the positions categories is available in the Ordinance on labour categorisation upon retirement.

For more information
	Further information for the amount of the social security and insurance contributions is available here.

Income tax

• Each legal entity, in its capacity as an employer, is obliged to deduct and pay on a monthly basis advance tax for its employees by the 25th day of the month, following the month in which the remuneration was paid (provided for in art. 42 of Personal Income Tax Act (PITA);

• The income tax due on the remunerations received by employees amounts to 10% (flat tax, calculated based on the monthly tax base which is the gross monthly remuneration after deduction of the statutory social security and health insurance contributions). The employer should pay the withheld tax for each of its employees to the respective competent directorate of the National revenue agency;

• Employees’ taxable income includes both the agreed base pay and all other cash and non-monetary payments made during the respective month by the employer or at the expense of the employer, related to the services provided by the employee;

• Non-taxable income in accordance with the Bulgarian legislation is stated in article 24, paragraph 2 of the Personal Income Taxation Act and it includes given to the employees free food, provided in kind, work clothing and personal protection equipment, food vouchers of up to BGN 80 per month, additional insurance of up to BGN 60 per month, covered by the employer, as well as business trips expenses covered by the employer in compliance with the requirements of the Ordinance on business trips in the country (non-taxable up to the double maximum admissible amount), etc.

When is filing an annual tax return required?

• If the employee’s income is only from employment relations on which advance tax has been withheld by the employer, no obligation arises for the employee to file an annual tax return under art. 50 of PITA.

• However, if the employee receives another personal income, not related to his/her employment relations, such as income from rents, dividends, interests, etc., the person is obliged to file an annual tax return, stating all incomes received during the respective tax year, as of 10^th of January and no later than 30th of April of the year following the year for which the return is filed.