Starting operations and paying taxes as an owner after registering a company in Bulgaria

From what point is a company considered to be operating?

A company in Bulgaria is considered to be carrying out activity from the moment the first legal action is performed on its behalf – i.e. the first accounting document recording income or expenditure of the company is issued. It does not matter whether the company makes a profit: documents on expenses, for example for renting premises, also indicate that activity has begun.

What obligations arise once a company in Bulgaria starts operating?

Why is it so important to determine the moment a company starts operating? From the moment the company becomes active, its owner must pay social security contributions (осигуровки). Within one week of the start of the company’s activity, the owner must file with the National Revenue Agency (NAP) a SOL Declaration «за регистрация на самоосигуряваще се лице» (Declaration OKD-5). It is important to do this within 7 days in order to avoid penalties. From the moment activity begins, the company must already have an experienced accountant.

The document is filed on behalf of the owner, not on behalf of the company. If the owner of the company already pays contributions as a SOL in another company, they are not obliged to pay them additionally in another company.

There are several types of social security contributions in Bulgaria. Contributions to the Pension Fund of the State Public Insurance (ДОО) and to the Universal Pension Fund (for those born after 31.12.1959) are mandatory. Those entitled to use the Health Insurance Fund (the compulsory health insurance system) must also pay «здравни осигуровки» to the НЗОК. This applies, for example, to Bulgarian citizens, holders of a permanent residence permit and EU long-term resident status, as well as those granted «закрила» in Bulgaria.

Contributions to the «Общо заболяване и майчинство» fund are voluntary. Paying contributions to this fund provides for payment of sick leave and maternity leave.

In addition to paying taxes, Declaration form No. 1 must be filed with the NAP every month. Those insured only in the «Пенсии» fund may file this declaration only once a year, by 25 February, with data for January. This is only possible if the obligation to pay contributions arose as of 1 January or continues from the previous year.

In all other cases Declaration No. 1 is filed monthly, by the 25th day of the month following the reporting month. Taxes must be paid by the same deadline.

The option of paying contributions as a company manager under a management and control agreement

If the owner of the company is at the same time its manager on the basis of a Management and Control Agreement, they must make contributions to the following funds:

• «Пенсии»;
• «Universal Pension Fund» (for those born after 31.12.1959);
• НЗОК (if entitled to use the compulsory health insurance system);
• «Общо заболяване и майчинство»;
• «Безработица»;
• «Трудова злополука».

The obligation to pay contributions arises from the moment the Management and Control Agreement is concluded. The same taxes are paid for the manager as for any employee of the company. Income tax must also be paid.

Which is more advantageous – paying as a «самоосигуряваще се лице» or as a manager under the relevant agreement?

The answer to this question depends on many factors. For example, the travel expenses of the company owner who is also the manager can only be written off if there is a DUK (company management agreement). But the contributions for a SOL (самоосигуряващо лице) are lower. Before choosing the appropriate option, and preferably even before the newly registered company starts operating, it is worth discussing this question with an experienced accountant, who will take all the details into account and give specific recommendations.

You can book a consultation with our specialists by phone: +359 898 766 005