Social contributions EOOD manager/shareholder

Further investigation already answered one question: change of salary is possible, even on a monthly basis.

I still don't know if I would have to pay social contributions like an employee...

Hi there,

Q1: As the sole manager AND shareholder of an EOOD, will there be an employment contract with a fixed salary?
Basically the answer is YES. But you can also choose to appoint another person for a manager, and then you will be just the company owner/shareholder, therefore no contract, salary and social security contributions.

Q2: Can I adjust my salary regularly - say, 2 months 2000 BGN, next 2 months twice that amount, then again 2000 BGN etc. (like a freelancer)?
The answer is YES, but you can do it also in several different ways - e.g. like a bonus, or like a commission, or even like divident payments.

Q3: Do I have to pay social contributions like an employee or will my status be "self-employed" and can I have private insurance?
If you are employed at the company, then it is just like for any other employee. And no self employment status. If you choose to work as a self employed then it is another  case. Private insurance - what do you mean by this?

Q4: I read about the possibility of being a manager without a contract who will only pay a minimum amount of social contributions... can that be? That is possible in some way, e.g. if you have another manager, as I explained before, or if you are on a managerial contract, working part time, and other options too.

Remember that there's no way to fully avoid social contributions in Bulgaria!!! At least not legally.
But you can decrease the amount and convert the majority to Corporate profit tax (10 %) and Divident tax (5%). In this case you will pay social contributions (about 40 %) on a small amount of money, and the rest will be subject to Profit tax + Divident tax (15 % in total).

Hope that helps,

Thank you very much, you helped me a lot!

You are welcome

However regard these only as general advice, actually everything should be tuned to the specific of your business, length of stay in Bulgaria per year and even the company's turnover. Solutions will vary.

Yes, I know. I really do appreciate your advice. I am already in touch with a tax consultant agency

Good approach, but strange they didn't tell you the things you were asking here.

As it's your company, I think you can get away with whatever you prefer to do / find the least hassle. As you know, legally, being a director/officer and/or shareholder and/or employee are distinct and separate.

(a) You can make yourself an employee, give yourself an employment contract and a regular salary... and get an accountant to take care of paying the payroll taxes and social security payments.

(b) You can formally declare yourself to be self-employed, and then, when you want, invoice your company for such services as you wish to be paid for. You need to make social security contributions as a self-employed person. And you'll need to make the appropriate tax payments on your receipts. I think the minimum social security contribution is around 150 leva per month.

(c) I'm guessing you could also decide to be unemployed, and make the minimum social security payment each month (about 25 leva). This is enough to have you registered in the system, and get a BG EHIC card.

(d) You can choose to not officially be employed, self-employed, or unemployed. But you are then not making social security contributions, and you can't get a BG EHIC card. And you can't get paid a salary, or submit invoices for services rendered.

(e) Instead of, or in addition to the above, if your company makes any money you could issue a dividend, and get money into your pocket that way.

(f) Instead of, or in addition to the above, you could invoice your EOOD from another corporate entity (in another low/no tax jurisdiction) in your sprawling multinational empire. :-)

At 10%, Bulgaria is a pretty low-tax jurisdiction, and it's in the EU so it does raise any suspicious flags. It's certainly a lot more tax-efficient than Germany. Personally, I think a BG company is a pretty good option, and trying to mess around with complex structures to save a few percent more is not worth the hassle.

Similarly, if you're running a successful company, I would do the same in BG that you currently do in DE. Personally, I find being an employee (if there are other employees) is the least hassle, as you just decide on a salary and you get some money every month without having to think about it.

If you're really relocating to BG, that's great. You will save lots of money. :-) If you're actually continuing to live in Germany, or spend large amounts of time there, I would be much more careful about the whole situation and what you're trying to achieve.

Hello,

I moved to Bulgaria about 2 years ago and had to find a solution to be able to work.

In Bulgaria, the only solution is to create the EOOD, very simple but you will need to the support of an attorney to do so and to sign an employee contract with your own company.

Self-employee contract are very restricted and complicated. The employee status is the only one you can consider.

I have to pay myself a salary every month and my accountant automatically calculated the amount that I have to pay for the social security.

It is not advised to change the salary on a regular basis but preferrable to find the salary that you can live with and that you can keep for at least a year. The solution is that at the end of the year, you can also distribute a dividend to yourself on with the taxes are only of 5%.

If you want, you can contact me directly to look into this more precisely. As I did this procedure quite recently and manage my company, I can give you a full range of advice and document if needed.

Good luck in your adventure!

Sophie
***

Some great insights here.

I am in a similar situation and maybe you can help me clarify which business would be the best choice for me.

As a self-employed web designer I am not having any employees and I am not planing to change that. I work with other freelancers on a project-to-project basis and want to continue doing so.

When moving to Bulgaria, I now have the option to either stay self-employed or to create a EOOD.

If I understand it correctly, as a self-employed one-man show (sole proprietorship) that will earn 8.000 levs/month with remote work I will have following situation.

Income: 8.000 levs
fixed deduction of 25%: 2.000 levs
Corporate Tax 10% (of income - deduction = 6.000): 600 levs
Social Contribution 27,8% (of 3.000 levs): 834 levs
---
profit: 4.566 levs

Is this correct?

If so, the social contribution is the biggest position.

Will I still need health insurance from Germany or is it covered with the rates mentioned above?

Given that numbers, would it be beneficial to look into the EOOD? Also to lease a company car, maybe parts of the apartment as office use and so on?

I usually advise all my clients to establish an EOOD instead of being freelancers.
Being an owner of EOOD you will have plenty of possibilities for expences, even more than these 25%. But the next issues with the social contributions and the Corporate tax+divident tax are more coplicated and my advice is to listen to an experienced accountant.

You’ve made some mistakes.
25% fixed deduction, what do you mean ?
Maybe VAT, but it is 20%, and sometimes you pay, sometimes not
You forgot dividends - 5%
About Social contribution 27,8 - it’s  not correct too.
I recommend you to order a tax plan for your future EOOD. Ask accountant, or I can recommend  you my tax manager ( just let me know in a message). Because taxes depend from your activity, your clients and some more.

bricks wrote:

Some great insights here.

I am in a similar situation and maybe you can help me clarify which business would be the best choice for me.

As a self-employed web designer I am not having any employees and I am not planing to change that. I work with other freelancers on a project-to-project basis and want to continue doing so.

When moving to Bulgaria, I now have the option to either stay self-employed or to create a EOOD.

If I understand it correctly, as a self-employed one-man show (sole proprietorship) that will earn 8.000 levs/month with remote work I will have following situation.

Income: 8.000 levs
fixed deduction of 25%: 2.000 levs
Corporate Tax 10% (of income - deduction = 6.000): 600 levs
Social Contribution 27,8% (of 3.000 levs): 834 levs
---
profit: 4.566 levs

Is this correct?

If so, the social contribution is the biggest position.

Will I still need health insurance from Germany or is it covered with the rates mentioned above?

Given that numbers, would it be beneficial to look into the EOOD? Also to lease a company car, maybe parts of the apartment as office use and so on?

If you are owner of EOOD, you are not always selfemployed. It depends … But social taxes is strongly recommended.

Vasilev wrote:

I usually advise all my clients to establish an EOOD instead of being freelancers.
Being an owner of EOOD you will have plenty of possibilities for expences, even more than these 25%. But the next issues with the social contributions and the Corporate tax+divident tax are more coplicated and my advice is to listen to an experienced accountant.

Thanks Vasilev. I dont have a lot of expenses really. So 25% seems like a "ok" deal for me. Because that way I also don't need expenses for accounting and really don't need to do much paperwork, I assume.

What other possibilities for expenses do you see? Is it possible to take a part of the apartment that is used as an office? What about costs for internet, phone, car?

Olenaya wrote:

You’ve made some mistakes.
25% fixed deduction, what do you mean ?
Maybe VAT, but it is 20%, and sometimes you pay, sometimes not
You forgot dividends - 5%
About Social contribution 27,8 - it’s  not correct too.
I recommend you to order a tax plan for your future EOOD. Ask accountant, or I can recommend  you my tax manager ( just let me know in a message). Because taxes depend from your activity, your clients and some more.

Thank you too, Olenaya.

With 25% fixed deduction I mean the fixed percentage of expenses for freelancers.

"Freelancers, civil contractors, notary officers, physicians, dentists, or other private practitioners may deduct 25% from their gross income. VAT registration may be required after achieving certain turnover."

source (bottom of page): https://taxsummaries.pwc.com/bulgaria/i … deductions

You say that social contribution of 27,8% isn't correct. What is the correct value?

I got the numbers from this page (again on the bottom): https://www.ruskov-law.eu/bulgaria/arti … rsons.html

And its stated like this:
- State Social Security Funds-14.80 % and if the insured person has chosen to provide for all contingencies including the General sickness and maternity fund, which includes insurance for temporary disability, temporarily reduced capacity and maternity, the amount of insurance for the SSS funds is 18.30 %.

- Additional mandatory pension insurance fund within the Universal Pension Fund - 5.00%

- Health insurance fund - 8.00%

I just added the 14,8 + 5 + 8. Thats why I came up with 27,8%. Is not all of that mandatory?

Thanks again @ all

I cant edit my post but I forgot something.

There are additional 5% (after tax and social contributions) on the profit for dividends?

Yes, car, Internet, home (which can be transform to an office if the owner agree). In some cases you can reduce your profit a lot and pay less tax.
When we start with the client we make an interview to se their income and expectations to offer him the best possibilities to start a business. Every case is different.
And finally as person=self employed (freelancer) you are personally responsible with your whole property, when the case with the EOOD (sole owner limited Li ability company) is different.

Thank you Vasilev.

Personal liability isn't an issue for me, as in my field of expertise (online marketing) this doesn't matter.

I also don't have a lot of expenses, that's why 25% rate of deduction isn't a bad deal either.

Since I am working from home, only if I really can deduct all the stuff I need for both, private and work, than it would become interesting again.

Is there an online resource that shows whats possibly deductible in Bulgaria?

For example:
- Power
- Rent for parts of the apartment (home office)
- Internet
- Mobile contract
- Car leasing
- Software licences
- Hardware
- Online costs for services
...

If I really can add ALL that stuff, it becomes interesting, since I further can minimize my social contribution as a sole holder of an EOOD.

Currently I have almost the same case as yours - "online marketing expert" from Ireland, working from home in Plovdiv. But he establish an EOOD and he never doubted it. Except the energy, water, anything else is acceptible as an expences. And Yes, there are information for everything - in all Taxation Act and others.
But without professional help from lawyers and accountants there is always risk for mistakes.
I Can send contacts of my Irish client for Recommendations.

Thank you. I assume the administrative monthly workload is a lot higher on an EOOD than as a freelancer, right? How much would an accountant for an EOOD with around 50 monthly invoices be? Is it possible to say that roughly?

The freelancer has almost the same monthly obligations - declaring and paying social securities, annyal closing, etc.
About the expences - it depend of the origin of the invoices and The fees starts from 150-200 EUR (VAT excl) but If they are the same monthly expences or income (some subscribtions for example) the Price could be lower. In this Price you recieve monthly accounting - VAT declarations and social securities, Annual closing, consultations. Please, have in mind that you will recieve and offer services abroad, so you will need mandatory VAT registration.
So, If you need some more advice, please, message me.

Thank you Vasilev. I expected that amount and this doesn't sound like a great option for me then.

I rather use the freelancer model than and just declare my monthly income and pay social contribution accordingly.

Since I will do business only on a B2B basis with reverse-charge there shouldn't be any workload for VAT declaration.

Again, thank you for your insights and your feedback. Highly appreciated.

Even with 0 VAT charge, there is mandatory VAT registration.
I hope you'll get the right choice.
Thanks.

Registration yes (if I am about the free income amount, what I am), but I mean the monthly declaration will be very simple I guess.

Thats at least what I hope for.

I am just trying to figure out the most simple way to do the paper work. The EOOD is by far the best choice for most solopreneurs, I understand that, but I think for my use case I could have an easier life with the freelancer option.

Of course you are the expert so I will ultimately trust your expertise but on the other hand I want to limit paperwork and be as (cost) efficient as possible.

Hello all,

Maybe a bit off topic, but it seems to me that there is a lot of knownledge in here

I also have an Eood in Bulgaria, is it possible to invest with company money in hard assets like gold etc. and have this stated as assets on the company balance sheets?

Best regards,

John