How to set up as an independent contractor in Bulgaria

Are you ready to turn your back on the 9-to-5 grind, and become your own boss?

If so, Bulgaria is an ideal place to go it alone. Whether you want to set up shop in a charming, ancient city like Plovdiv, or while away your working days on a Black Sea beach, this historic Balkan republic has something for everyone.

Before you get started, though, you’ll need to understand how to:

• Register your business in Bulgaria

• Avoid misclassification as an employee

• Create compliant contracts that protect you

• Invoice and collect payments from around the world

In this article, we’ll cover all these things. We’ll also help you navigate your tax obligations as a self-employed worker, and discuss some of the other risks and liabilities you should be aware of. So order another slice of banitsa — or a glass of rakia if you’re feeling brave — and make yourself comfortable.

First, it’s important to clarify how Bulgaria defines independent contractors.

What is an independent contractor according to Bulgarian law?

Independent contractors are workers who provide paid services (or products) to another party. However, they are classified differently to employees, and are usually not entitled to the same benefits, such as paid leave, sick days, and minimum wage. On the flip side, contractors have more freedom and flexibility in the way they work.

See also: Why businesses hire contractors vs. international employees

In Bulgaria, the differences between employees and independent contractors are laid out in the Obligations and Contracts Act (OCA). Under this legislation, you are a considered a contractor if you:

• Determine your own work schedule and location

• Work without direction or supervision

• Supply and use your own tools, materials, and equipment

• Are able to perform work for other companies simultaneously

• Set your own pay rate

• Are able to delegate or subcontract work

When you work with clients, it’s important to be correctly classified to avoid penalties and fines.

Sole trader or freelancer?

In Bulgaria, independent contractors are generally either a:

• Sole trader: Tradespeople or artisans, such as mechanics, hairdressers, and carpenters. If you fall into this category, you must register your business with the Commercial Register (see next section).

• “Freelancer” (svobodna profesiya): People who practice the so-called “free professions,” such as doctors, lawyers, and accountants. If you fall into this category, you must register with your professional body, rather than the Commercial Register. Note that “freelancer” is a translation of the specific Bulgarian term, and should not be confused with its general English language definition.

See also: Work permits and visas in Bulgaria

Business registration in Bulgaria

To begin working as an independent contractor in Bulgaria, you’ll first need to choose a legal structure for your business. Some of the most popular models include:

• Sole trader (ednolichen tŭrgovets, or ET): A simple structure that is ideal for independent, individual contractors (who are not freelancers). You have full control of the enterprise, although there is no legal separation between you (the owner) and the business; you are personally responsible for all its debts and liabilities.

• Sole owner limited liability company (EOOD): A formal, legal entity that is separate from you, the individual. All income and losses are attributed to the company as opposed to you personally (you are only liable for the capital you invest in the company). If you are looking to enter into a partnership with one or more partners, you can also set up a limited liability company (OOD).

There are pros and cons to each structure, but most independent contractors choose the sole trader model, as it is fairly simple to set up and operate.

If you do opt for this structure, you will need to register with the Bulgarian Commercial Register (Tŭrgovskiya Registŭr) using form A1 on the Registry Agency portal. You can also fill out this form in person at your local Registry Agency office. Note that if you opt for the online version, you will need a qualified electronic signature (QES).

You will also need to provide:

• A signed statement that you are not in a delinquent financial state, such as bankruptcy

• A small administration fee of Лв.15 ($8) if you are registering online, or Лв.30 ($17) if you are registering in person

• A business name containing your personal name and surname

Freelancers do not need to register with the Commercial Register, and must register with their own professional body instead. In addition, both sole traders and freelancers must:

• Acquire a unique identification code (EIK), also known as a BULSTAT Code. You can get this code by registering on the BULSTAT National Register.

• Register for VAT with the National Revenue Agency (NRA) if you expect to earn more than Лв.100,000 (around $56,000) in your first year. We will discuss your VAT obligations in more detail in the taxation section of this article.

How do I get paid as an independent contractor in Bulgaria?

As an independent contractor, it’s down to you to handle your invoices and payment collection. Unfortunately, this means billing each client individually and collecting payment through their preferred payment method — which can be inefficient and time-consuming.

Some of the most common ways to collect payments include:

• Bank transfers

• Direct deposits

• Paper checks

• Money orders

• Virtual wallets

• Digital transfer services like PayPal and Wise

These methods all have their own pros and cons. For instance, bank and digital transfers can be pretty quick, but often come with hefty service fees. And if you have clients in other countries besides Bulgaria, the payment collection process can be even more complicated. 

Alternatively, you can use a trusted solution like Remote. Our platform is a simple, secure, and reliable way to get paid quickly in Bulgarian leva — and with no hidden fees. Learn more about how our platform can help.

Independent contractor taxes in Bulgaria

As an independent contractor, you’re also responsible for paying your own taxes and social security contributions.

Unlike most countries, Bulgaria does not have a progressive income tax rate. As a sole trader, you must pay a flat rate of 15% on your business profits (i.e. your revenue minus expenses) each calendar year, regardless of how much you earn. 

As a freelancer, your tax rate depends on your profession. You may also need to register to pay additional tax to your local municipality if your profession is deemed to be “patentable” (i.e. if you are a hairdresser or a beautician). 

You must declare your income through a tax return between March 1 and June 30 the following year if you are a sole trader, or between January 10 and April 30 if you are a freelancer. If you miss this deadline, you could be subject to a fine of at least Лв.500 (around $280).

Note that your business profits are classed as personal income, so you don’t need to fill out a separate tax return.

Both sole traders and freelancers must also make mandatory social insurance contributions. You can see a full breakdown of these contributions on the NRA website.

VAT information for independent contractors in Bulgaria

As mentioned, you only need to register for — and charge — VAT if your taxable income is more than Лв.100,000 (around $56,000) over 12 months. You can still opt to register for VAT even if you don’t meet this threshold, although you should discuss this with a tax professional first to fully understand how it might affect your business.

Bulgaria has a standard VAT rate of 20%, although lower rates may apply in rare circumstances.

Liability considerations for independent contractors in Bulgaria

As a sole trader, you are personally liable for finance and tax debts, which means your private assets can be forcibly used to settle your business debts. Many independent contractors purchase liability insurance to help mitigate this risk.

It’s also important to cover yourself when drafting and signing agreements with clients. Our legal experts can provide you with fully compliant contract templates, for both Bulgarian and international clients.

Accounting requirements for independent contractors in Bulgaria

As a sole proprietor, you do not need to publish financial statements each year. However, it’s a good idea to keep records of your accounts, including all your client invoices and business purchases.

You can either manage these records yourself using an accounting or bookkeeping tool, or hire a professional bookkeeper or accountant.

The dangers of contractor misclassification in Bulgaria

As we’ve mentioned, independent contractors are classified differently to employees. Many of the protections and benefits employees enjoy do not typically apply to contractors.

As a result, companies may deliberately misclassify you to circumvent their legal obligations, while at other times, it may happen accidentally. Whether it’s intentional or not, misclassification can result in penalties and fines for both you and your client.

As an independent contractor, you can work with your clients to ensure this doesn’t happen. Discuss your role and responsibilities with them, and review the working arrangement regularly.

If your working relationship changes over time and you become more integrated into a client’s company, you can ask to be converted into an employee.

How do I ask the company I’m working with to convert me to an employee in Bulgaria?

Open a dialogue with your client and carefully discuss the risks and benefits of moving to an employer-employee relationship. In particular, be clear about how it can benefit both parties — not just you.

You can even suggest the help of a third-party solution, such as Remote, to ease the transition. Our global employment services help both parties stay compliant by taking care of key HR functions (like payroll management and benefits administration) in line with Bulgarian law.

4 ways Remote makes life easier for contractors and their clients

As you can see, there’s a lot to take on board when setting up as an independent contractor. Remote can help you with many of these challenges, allowing you to focus on growing your business and delivering to your clients. Here’s how:

1. International payments in countries around the world

Navigating all of your clients’ different invoicing, approvals, and payments systems can be complicated and time-consuming. And manual methods of invoicing and collecting payments can increase the risk of fees, errors, and delays.

Remote gives you access to a highly secure, streamlined dashboard that makes invoice management and international payments cost-effective and efficient. You can use our platform to get paid in Bulgarian leva hassle-free, without any hidden fees.

2. Localized in-app contracts and advice

When you draft agreements and contracts for your clients, you run the risk of non-compliance with local labor laws — especially when working with international clients. Remote offers localized contracts tailored to Bulgarian laws, ensuring that you stay compliant. Our legal experts can also provide guidance on complex issues, such as local classification and intellectual property protections.

3. Invoicing automation

With Remote, you no longer need to rely on spreadsheets and other manual tools to invoice for payments; we remove many of the inaccuracies and delays caused by archaic processes and manual management. Our platform lets you create invoices, submit them for approval, and subsequently get paid in your local currency without needing to switch to any other tool or software.

4. Tax management

Tax management is notoriously complex work. Remote helps you quickly and efficiently deal with tax management by compiling data about your income based on your invoices and payments received.

Setting up as a contractor in Bulgaria

Having the freedom and flexibility to work on your own terms is liberating. But your administrative responsibilities can distract from what you really want to be doing: helping your clients, delivering great work, and collecting invoices.

By using a stable, trusted platform like Remote, you can manage these obligations quickly and efficiently, allowing you to focus on your business goals. Specifically, we can help you:

• Avoid intermediary fees and delays with international client payments

• Draft compliant contracts for Bulgarian and foreign clients

• Enhance your invoice management and avoid manual processes

• Comply with local labor laws regarding work practices

Our platform makes it quick, simple, and seamless to get started as an independent contractor. Learn more about how our expertise can save you time and resources today.