With a highly educated and multilingual workforce of about 3.05 million active workers as of 2024, Bulgaria attracts international employers seeking both talent and value. Complementing this talent pool is an impressive 10% corporate tax, one of the lowest in the entire European Union. It’s no surprise that many business owners are thinking of doing business in Bulgaria.  

For a successful endeavor, you need a thorough understanding of payroll, income tax regulations, and employer responsibilities for compliance and optimal cost management.

In this guide, we will provide a comprehensive overview of Bulgarian payroll and income tax, covering mandatory contributions, individual tax rates, filing procedures, and employer duties.

Let’s get to it!

What is Payroll Tax in Bulgaria?

For businesses operating in Bulgaria, a clear understanding of payroll tax is critical due to its direct impact on labor expenses and compliance with legal requirements.

It involves mandatory social security contributions taken from employee salaries and supplemented by employers, with contribution rates differing based on the nature of employment and industry.

These contributions fund important public insurance programs, including pensions, healthcare, and unemployment support.

National Insurance and Social Security Contributions in Bulgaria

In Bulgaria, both employers and employees are mandated to contribute to the country’s social security system, which comprises various insurance funds designed to provide financial support for cases like retirement, illness, unemployment, and occupational accidents.

Though the payments are made through the National Revenue Agency (NRA), the National Social Security Institute (NSSI) is the major beneficiary of these contributions. The total social security and health insurance contribution rate ranges between 32.7% and 33.4% of the employee’s gross salary.

For the most part, both Bulgarians and foreigners alike are mandated to pay these contributions, with only the health insurance being optional to foreigners.

1 Mandatory Pension Insurance (First Pillar)

Contribution TypeRate
Employer Contribution8.22%
Employee Contribution6.58%
Total Rate14.8% of gross salary

This fund provides pensions for retirement, disability, and survivors. 

As an employee in Bulgaria, you are entitled to this fund to be paid as a monthly annuity for life once you are retired as of January 2025:

  • A woman aged 62 years and 4 months with 36 years and 8 months of insurance payments.
  • A man aged 64 years and 8 months with 39 years and 8 months of insurance payments.

The minimum monthly pension is currently 580.57 BGN. This amount will increase to 631.08 BGN starting July 1, 2025, as a result of an upward review outlined in the Public Social Insurance Budget Bill for 2025.

The stakes are not quite the same for self-employed persons.

Self-employed individuals born after December 31, 1959, and before January 1, 1960, are to make 14.8% and 19.8% contributions, respectively, of their declared income directly to the NRA.

These rates are applied to the declared insurance income, which must fall between the minimum and maximum thresholds. For both contract-employed and self-employed persons, as of April 1, 2025, these thresholds are:

  • Minimum Insurance Income: BGN 1,077
  • Maximum Insurance Income: BGN 4,130

For instance, if an individual’s gross monthly earnings amount to BGN 6,000, Bulgarian tax regulations stipulate a cap on the income subject to taxation. In this specific scenario, despite the actual earnings, the taxable income for that month will be restricted to BGN 4,130.

2 Supplementary Mandatory Pension Insurance (Second Pillar)

The supplementary mandatory pension insurance co-exists with the first pillar and applies to individuals born after 31 December 1959. It represents 5% of the gross salary, with employers and employees to pay 2.8% and 2.2% respectively. Self-employed persons are to make the total 5% payment themselves.

These payments can be claimed as monthly lifetime annuities, deferred payments, or lump sums when due.

Unlike the Mandatory Pension Insurance made to the NSSI through the NRA, these payments are managed by private insurance companies, supervised by the Financial Supervision Commission (FSC), under one of two funds – the Universal Pension Fund (UPF), and the Professional Pension Fund (PPF) for those in specific professions. The Doverie and Allianz Pension Insurance companies are popular examples.

3 Voluntary Pension Funds (Third Pillar)

Though not part of mandatory contributions, this represents the third and final pillar of the Bulgarian pension scheme. It exists to allow individuals make additional contributions as they deem fit to enhance their retirement income.

4 Health Insurance

The health insurance fund covers medical care and services under the National Health Insurance Fund.

Contribution TypeRate
Employer Contribution4.8%
Employee Contribution3.2%
Total Rate8.0% of gross salary

Self-employed persons contribute 8%.

5 General Disease and Maternity Fund

This provides compensation in periods of illness or maternity leave.

Contribution TypeRate
Employer Contribution2.1%
Employee Contribution1.4%
Total Rate3.5% of gross salary

6 Unemployment Fund

During times of unemployment, this fund offers financial support for as long as is required.

Contribution TypeRate
Employer Contribution0.6%
Employee Contribution0.4%
Total Rate1% of gross salary

7 Accident at Work and Occupational Diseases Fund

This ranges from 0.4-1.1% of gross salary and is paid entirely by the employer. The exact rate depends on the risk category associated with the employee’s occupation.

Personal Income Tax in Bulgaria

Unlike many countries with a progressive tax system, Bulgaria offers a 10% flat rate on personal income tax, levied by the NRA. This includes monies from all taxable income, including salaries, bonuses, freelance, and capital gains.

Like the national insurance and social security fund contributions, the personal income tax is withheld by the employer and paid to the government on behalf of the employee.

It is important to note that the taxable base is determined by deducting the employee’s social security contributions from their gross salary. For example:

ItemAmount (BGN)
Gross Salary3,000.00
Employee Social Security Contributions (13.78%)413.40
Taxable Income2,586.60
Income Tax (10%)258.66

Calculating payroll can be difficult. Simplify the process with our payroll calculator here.

Employer and Employee Responsibilities

In Bulgaria, employers bear the primary responsibility for ensuring compliance with payroll tax and social security regulations. This begins with registering both the company and its employees with the NRA and NSSI before employment starts.

Employers must accurately calculate all mandatory social security and health insurance contributions for each employee based on their declared monthly salary within the prescribed legal thresholds. 

They are also responsible for withholding the employee’s share of contributions from their salary, adding their portion, and paying the combined total to the NRA every month. These payments are due not later than the 25th day of the month following the income payment month.

Bulgarian employers are also legally required to submit monthly salary and contribution reports (via Declaration Form No. 1), maintain payroll records for up to 50 years per employee, and provide payslips detailing salary, taxes, and contributions.

Meanwhile, employees must provide accurate personal and tax information to their employers and monitor their payslips regularly to ensure that the correct deductions and contributions are made. 

Though employers withhold payroll taxes, employees must still file individual tax returns, particularly if they have other income sources. The filing deadline is February 28, or February 29 in leap years. Employees should also promptly notify their employers of any changes that could affect their tax or social security status, such as changes in marital status or residency.

Breakdown of Employer Contributions in Bulgaria

Employers contribute a total of roughly 22% of an employee’s gross monthly salary to various social security and health insurance funds. The major components are as have been earlier discussed:

SchemeEmployer Contribution
Pension Insurance13.78%
General Sickness and Maternity Fund2.10%
Health Insurance4.80%
Unemployment0.60%
Accident at Work and Occupational Diseases0.40–1.10%
Total Employer Contribution21.68–22.38%

This unique fund involves contributions solely from the employer, without any salary deductions for the employee.

Industry-Specific Tax Rates

Bulgaria’s flat corporate income tax rate of 10% remains one of the lowest in the EU, offering simplicity and predictability for most businesses. There are, however, some industry-specifics that apply to certain sectors.  

Gambling and betting operators are taxed on gross revenues or licensing terms rather than profit, with casino games and slot machines facing a 15% tax on gross gaming revenue, while online betting and lotteries have fixed licensing and fee requirements. 

Shipping companies meeting specific criteria can choose a tonnage tax regime based on net tonnage, providing significant tax advantages. 

While subject to the standard 10% corporate tax rate, registered agricultural producers may be eligible for various subsidies and tax exemptions, particularly through the EU rural development programs. 

Finally, some micro and small enterprises, such as tailors, barbers, and small retailers, pay a patent tax instead of corporate income tax, with the fixed tax amount varying by municipality and business type.

Simplify Bulgaria Payroll and Income Tax with Remote People

Navigating Bulgaria’s payroll and income tax can be complex due to varied contribution plans, sector-specific benefits, and strict deadlines. Our payroll service provides a streamlined answer by handling every aspect of your Bulgarian payroll through one unified system.