Taxes and social security and health insurance contributions related to employees
 

This section provides the following information:

  • What is the procedure for declaring and paying in advance personal income tax by the employer?
  • What do taxable income and tax basis include?
  • How are social security and health insurance contributions for employees declared and paid?
  • How is the annual tax restated by the employer?
  • How is the personalannual tax return (ATR) filed and what is the obligation to file an ATR?
  • What are the filing deadlines and methods?


What is the procedure for declaring and paying in advance personal income tax by the employer?

According to the Bulgarian legislation any person, in its capacity as employer, is obliged to withhold 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 is paid. The tax rate is 10%. The employer should pay the tax withheld for each employee to the competent National revenue agency (NRA) directorate.

 

Important to know
Important to know

It is important to know that the different territorial directorates of the NRA have different bank accounts which can be found on NRA’s website here. Furthermore, when ordering the bank transfer it is important to state a CODE FOR THE TYPE OF PAYMENT for the respective liability, in order to avoid the risk of incorrect allocation of the tax due.

 

What do taxable income and tax basis include?

The taxable income from employment relations includes both the basic agreed salary and all other monetary and non-monetary payments made for the respective monthby the employer or at the expense of the employer that are related to the work of the employee.

Under the Bulgarian legislation the non-taxable income includes:

  • Income from statutory social and health insurance in Bulgaria or abroad;
  • Food vouchers granted to the employees up to BGN 60 per month;
  • Additional voluntary social  security;
  • Voluntary health insurance;
  • Life insurance up to BGN 60 per month in total for all insurances covered by the employer;
  • Travel and accommodation expenses supported by documents, daily business trip allowances (not exceeding the double maximum allowed amount), etc.

The tax base for income from employment relations  is formed by deducting the statutory social security and health insurance contributions withheld by the employer, which are at the expense of the individual, from the total gross remuneration received by the employee. Tax at a 10% rate is due on the difference.

 

How are social security and health insurance contributions for the employees declared and paid?

Any person working in Bulgaria is subject to social security in the country. In this respect the employer, in the capacity as insurer in accordance with art. 5 of the Social Security Code (SSC), is obliged to withhold and pay social security and health insurance contributions to its employees on a monthly basis. The social security and health insurance contributions are due on the total gross remuneration of each employee within the minimum and maximum thresholds set out by law (depending on the economic activity of the employer). The minimum social security and health insurance income in Bulgaria for 2019 is BGN 560, and the maximum for 2019 is BGN 3000. This means that, if the employee receives remuneration exceeding BGN 3000, he / she owes social security and health insurance contributions only up to the maximum income subject to social security and health insurance – BGN 3000, but may not be insured at a gross monthly remuneration lower than BGN 560.

Social security and health insurance contributions are allocated by funds and vary depending on the economic activity of the employer and the employee’s position. The total social security and health insurance rate is 32.70-33.40% on the gross remuneration, 18.92-19.62% of which are at the expense of the employer and 13.78% are withheld from the monthly remuneration at the expense of the employee.

The monthly contributions include:

  • 14,8 % to Pensions Fund;
  • 5 % for additional pension insurance;
  • 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);

Social security contributions are split between the employer and the employee at a 60:40 ratio.

 

How is the annual tax restated by the employer?

By 31 January of the following tax year the employer should calculate the annual tax base for the employment relation income, less the annual amount of the tax relieves and determine the annual tax, when as at 31 December of the tax year he is an employer under the basic employment of the employee. When determining the annual tax base and the annual tax the employer does not include the income from employment relations for personal work from partners, cooperative members and shareholders, owning more than 5% of the capital of the joint-stock company.

In relation to the above the annual tax base is reduced with the annual amount of:

  • The tax relieves for people with reduced ability to work;
  • The tax relieves for personal contributions for voluntary social security and insurance, when the amounts were withheld by the employer upon the payment of the income from the employment relation;
  • The tax relieves for personal contributions for socially secured length of service upon retirement;
  • Tax relieves for donations when the amounts were withheld by the employer upon the payment of the income from the employment relation;
  • The tax relieves for children;
  • The tax relieves for children with disabilities.

If during the tax year the employee has had employment contract to work additionally with another employer, or had a basic employment relation with another employer, the employer includes the income received from the other employer in the calculation of the annual tax base and determines the annual tax, if the employee presents a certificate from the other employer.

When the annual tax calculated is higher than the tax withheld from the employee during the year, the difference is withheld from the person’s income by 31 January of the following year.

When the annual tax calculated is lower than the tax withheld in advance, by the 31 January of the following year the employer refunds the difference to the person. The refunded amount is offset by the employer consistently from the next payments to the republican budget concerning income taxes from employment relations of the person or of other persons.

 

How is the personal annual tax return (ATR) filed and what is the obligation to file an ATR?

If employees receive income only from employment relations in the country, for which the total tax due is withheld and paid in advance by the employer, the individuals have no obligation to file an ATR under art. 50 of Personal Income Tax Act (PITA).

The other cases when natural persons have no obligation to file annual tax returns include incomes that were taxed with final tax, for example income from interest on bank accounts in Bulgaria.

If the employees receive another personal income, not related to their employment relations (for example, rent income, dividend income, interest, etc.), the individual is obliged to file personally an annual tax return where they should state all additional income received during the respective tax year within the statutory deadlines. The form of the ATR under art. 50 of PITA is available on the website of the NRA here.

All local natural persons have an obligation to file an annual tax return, if during the respective year they:

  • Have received income subject to taxation on the total annual tax base of income on the annual tax base for incomes from economic activities as sole proprietors;
  • Would like to use tax relieves;
  • Have paid patent tax;
  • Have granted or received a loan(s) from other individuals or companies at a total amount exceeding BGN 10 000 or there are outstanding balances amounting to a total of more than BGN 40 000 of loans granted or received during the year or during the preceding five years;
  • Have held shares and shareholdings in companies and real estates abroad;
  • Have received income from a source abroad subject to taxation with final tax.

 

What are the filing deadlines and methods?

Individuals who are obliged to file an ATR may use 5% discount on the tax due as per their tax return, but not exceeding BGN 500, if they meet all of the conditions listed below:

  • They have filed their annual tax return electronically by 31 January of the following year;
  • At the time of the filing of the return they have no public liabilities subject to enforced collection; and
  • The tax due additionally as per the annual tax return is paid by 31 January of the following year.

The annual tax return is filed electronically with a personal identification code (PIC), which may be obtained free of charge in each office of the NRA, or using a qualified electronic signature (QES). The ATR may also be filed by mail - with a letter with a return receipt, in certain post offices with an incoming number, as well as at the NRA office of the permanent address of the individual.

 

For more information
For more information

Additional information is available on the website of the NRA.

 

 
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Ministry of Economy
8, Slavyanska Str., Sofia 1052, Bulgaria
BULSTAT: BG176789453
phone: +359 2 940 7001

fax: +359 2 987 2190
 
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