Bulgaria Freelance Taxes: Detailed Breakdown | Hacker News Reader

Bulgaria Freelance Taxes: Detailed Breakdown

dmitryfrank.com

88 pointsdimonomid128 comments

The numbers in this article are wrong, especially the company vs individual chart: you'd only pay 16% tax with a company if you paid yourself in dividends. Past a certain threshold, with a company, the best option is to pay yourself a salary every month. Then your tax rate will be in the 11 - 15% range depending on your income.

source: I've got a company in Bulgaria

conclusion: coming to Bulgaria to pay less taxes can definitely be done, but hire a local accountant and get professional advice.

In Romania you pay 7% tax for an LTD (dividend + corporate tax) and for up to 100k turnover you pay <2% as a consultant registered as a PFA (sole trader), or 10% as a non consultant but software engineer as a PFA. The cost of living is a bit higher than bulgaria but so is the standard of living (i.e.: I pay roughly 850 EUR rent pcm in Bucharest for a two bed flat, enjoy private health care and generally speaking a more decent living standard). Earn around 120k EUR per year and get to keep > 90% after tax as per above.

I was working with a Ukrainian guy for a few years, and he was always complaining about taxes and how he wanted to pay less. Eventually he told us he was paying an effective tax rate of 7% :D

Considering how tax money are being used in these countries, even 7% is too much. I don't mind taxes, but there's too much embezzlement so some dude in the parliament can buy lambos. An issue common to countries in the region, but less so in Poland or Romania.

What about 40+ per cent charged in South Europe countries?

Do you think they're all that better

These taxes we are debating here apply mainly to "contractors". In Romania there are incentives for permanent tech employees as well, getting closer to the 40% mark - a bit higher. Non tech seems like it's taxed more on par with northern europe (factoring in income tax, health care tax, and some other taxes idk much about).

I was under impression it was 1-3% profit tax + 5% dividend with an upper limit of 1 million euros? Or has that changed (again)?

Also, 850 pcm seems kind of high, at least compared to what I saw on olx.ro.

> I was under impression it was 1-3% profit tax + 5% dividend with an upper limit of 1 million euros? Or has that changed (again)?

Correct, but on average mine works out around 7% and I have almost 0 company expenses as I don't partake in dodgy wizardry.

> at least compared to what I saw on olx.ro.

one does _not_ rent property on OLX and there are only some areas that are desirable (i.e.: have to look and feel of central or western europe).

try imobiliare.ro and look around baneasa, floreasca, aviatiei, herastrau, or pipera (voluntari). prices vary but generally speaking a new building, parking included, security is in the range above.

> one does _not_ rent property on OLX and there are only some areas that are desirable (i.e.: have to look and feel of central or western europe).

Interesting. Why not? The apartments look pretty legit.

If you like them then there is no issue, but usually i find them of lower quality. Not saying there aren't decent apartments, but anything <650/700 is not great IMO. Also the areas I mentioned look and feel like a different country hence willing to pay more. No trying to be sure or demeaning sorry if i come across that way.

No, it's fine. I assumed that you meant that olx.ro was a scam or something. Only after I visited immobiliare.ro did I realize the difference in quality between their offerings.

There are some scams too around OLX, but the quality is indeed way below what you find on imobiliare as you can see. One of the other reasons is that expats usually use the latter, thus you are more likely to find better communities. In my building there are Spanish, Italian, Canadian, US, UK, Nigerian tenants among Romanians working either tech or blue collar. Plenty of cultural exchange and, naturally, beer tasting. However, it's still Romania and services are not something I am happy with, nor can i get used to the aggressive driving and generally speaking the occasional hostility (people just getting pissed off for no reason).

120k EUR per year is less than 5% of people in Bucharest and probably less than 1% country wide.

It is. Worth noting that I know no one among locals that are permanent employees to earn < 2500 EUR after tax. Pre-tax as a permanent that's 45-50k EUR a year (with some margin of error). That's for senior level devs with > 10 years of experience. Junior or mid is way less. BI/Data science or web dev. Game dev and other types of development are low paid, as in western europe. I had my first shock when Microsoft offered a salary of 70k + bens for someone from cluj napoca to relocate to London around 2014, and they flat out turned it out because cost of living adjusted they earned more in Cluj. Go figure that out. Tbh if you earn 2.5k in Romania after tax you are way way better off than someone earning 4k in London.

I know several people just out of college that earn 50k in Bucharest or Cluj, not after 10 years. The salaries increased a lot in the past 5 years, but still 120k is extremely rare, above director level for employee type of contracts.

That's impressive!

120k is a medium level contract in the UK, at least for my background, so I am technically speaking ... cheap.

In Romania, from what I gather, a director can mean a low level manager. Pretty soon the market will adjust and learn that they are not worth the money. CTO/CEO director levels, yes. Experienced Product Managers that actually drive the product, sure. But management that does nothing but crack the whip and demand to be addressed as "dumneavoastra" to inflate their egos are a dying breed.

people "just out of college" earn a lot more than someone with 20 years experience, in tech here. In fact, there is straight discrimination against people over 30 in many tech shops in the USA.

What about VAT? A turnover threshold in Romania is 88500€ (as quick google search suggests). How on earth are you keeping 90% when VAT is 19% there.

Asking for a friend :)

No need to ask for a friend :P as in other countries mentioned here, VAT for intra community (or in my case non EU / UK) trade there is no VAT. You do have to register as a VAT company but since there is none you charge there is none to pay. My daily rate is 450 GBP (500 EUR more or less) and that's it. No VAT added despite being a VAT reg company. There is nothing dodgy, it is by design. The country benefits by preventing a brain drain and keeping money in the country.

In my case since I work B2B and my clients are mostly B2B as well then VAT is not really cost to the other side. They just subtract VAT they pay to me from the VAT they need to pay.

VAT is a problem if you work with end users directly, they can't "subtract" it like that.

One (LTD or PFA) only has to pay VAT if they invoice Romanian companies. Otherwise, based on what's called "taxare inversă" (reverse taxing), the invoices won't contain VAT, so it doesn't have to be paid either, even if the commercial entity is a VAT paying one.

Could you elaborate? Of course I do have a local accountant, and if what you're saying is true, I am disappointed she didn't mention that; they just said, paying salary will end up being more expensive than dividends.

I'm not from Bulgaria but I think what was said is that you depending on profitability of your company you can pay out a part of the profit as a dividend (using the lower tax rate until the cutoff) and then the rest as a salary.

It's not one or the other. As a company owner you can use both the dividend and pay yourself a salary.

While I def agree that those are not mutually exclusive and I considered paying myself a salary, but paying a salary still involves a bunch of extra taxes, which end up being more than the dividend's 5%. At least that's what I had from my accountant, but I'd be happy to know details of how to make the combination of salary+dividends to require less taxes than just dividends.

By paying yourself with a salary via your company, you'd pay 10% revenue tax + health insurance (ЗО) + social insurance (ДЗПО, ДОО)... except the insurance part is capped on a maximum revenue of 3000 BGN or something like that... so as you make more money, your total tax rate converges to 10%. Take these numbers with a grain of salt because I'm no accountant, but I know for sure your accountant is wrong, because I know how much tax I pay, and that's close to 11.5% total.

Thanks, I'll research more into that.

In the meantime, I clarified in the article that as long as a company is concerned, the article only focuses on the dividends option, and added the link to your comment.

My math still can't show how this is true.

If we take a gross income of 20K BGN (which is not a bad income for a software engineer), then with dividends, net income will be roughly this:

  20000*0.9*0.95-710*(0.148+0.05+0.08) = 16902, which means taxes are 15.59%.

And if it all goes as a salary, then net is roughly this:

  20000*0.9-3000*(0.148+0.05+0.08) = 17166, which means taxes are 14.17%. It's lower than dividends, but still far from the 11.5% that you mentioned.

To get to 11.5%, the gross income has to be around 50K:

  50000*0.9-3000*(0.148+0.05+0.08) = 44166, so the taxes are around 11.67%.

Could you clarify in which range your gross income is, is it closer to 50K BGN than 20K BGN?

I guess there can be some bonuses which aren't taxed, and this way one could reduce the tax, but paying large bonuses to myself smells too much to me since it's clearly done just to pay less taxes.

I just want to throw out there that this is nice, but it's zero in Panama on foreign source income. The country uses the US dollar and is quite stable and modern. I used to live there, and I want to go back to that tax system as soon as I can.

Thanks for that info!

Yeah taxes in Bulgaria are lower than the average, but not lowest for sure. Good to know about Panama.

What about social security though?

No social security to speak of. Health care is excellent and reasonably priced, so not too big a deal. Set aside some savings and get some basic insurance / critical illness insurance. No pension either, so plan for your own retirement.

With what you save on taxes you can do that and take three months of awesome vacation a year anywhere you want and still save money over most countries.

So they literally don't take any tax for foreign income and don't require any social security payments? That's seriously awesome. Actually I specifically like it because, while I'm paying here those social security contributions for pension etc, I've no idea if I'm gonna be able to use them for the retirement, since I'm not a citizen, and not sure if I'm ever going to be one.

By paying those I'm helping other people though, which is not a bad thing I guess. But I'd definitely prefer this to be more of a donation and less of a tax.

Anyway, thanks again. You got me researching about Panama this evening.

Yeah, it's pretty awesome. Panama has its problems too mind you, and one really should learn Spanish if you're going to live there.

But all of that seems small in comparison to the tax break that you get. You could spend the whole summer in Europe or North America if you wanted and it would be free, including food and entertainment, and you'd still have plenty left for a medical and retirement savings account for yourself.

My understanding of “foreign sourced” is that it usually applies to things like pensions, dividends, rental income. If you’re working, the source of the income is where you do the work - not saying you can’t fly under the radar and not pay tax, and each country has its own specific nuances and laws so Panama may allow it, but if you’re living and working remotely in a territorial tax country then that’s “locally sourced income” unless you can find laws or rulings to the contrary.

“The general rule for sourcing wages and personal services income is controlled by *where the service is performed*. The residence of the recipient of the service, the place of contracting, and the time and place of payment are irrelevant.” - https://www.irs.gov/pub/int_practice_units/ftc_c_10_02_05.pd... (my emphasis)

I'm pretty sure you're correct as far as the US is concerned. Panama is different though. Panama imposes no income, corporate, capital gains, or estate taxes on individuals or companies that only engage in business outside of the jurisdiction. No distinction is made between active business or passive income.

Getting an accountant is really one of the best decisions you can make especially if you make above average income or income from multiple streams no matter the place you live in.

I've done my taxes for individual business for 8 years myself, but when I've moved abroad I needed help with setting up business as I was unfamiliar with local laws and regulations. I hired a great accountant who helped me with setting up both individual business and limited company. I'm getting schooled on how I should do things to take advantage of different opportunities and tax breaks - things I never though or did before.

Considering moving in Bulgaria after this, thanks!

My Freelance taxes/social sec/retirement tax in Italy is on average 76% on a total of 80k eur average gross annual income (98th income percentile).

Do you mean you'll only make 19.2k net from 80k gross? That sounds like an awful amount of taxes. I'm from Austria and here it's ~27% for social security and income tax is ranging from 0% to 55%. From 80k gross you would make around 42k net (Calculated without any tax benefits).

He is probably adding VAT to his income tax rates, which imo is not correct.

Is vat not a tax? I think every government cost that is a percentage of income or spending should be calculated as your expense for the government. I think inflation also should be kept in mind as it is a hidden tax. Maybe harder to calculate.

VAT is a tax on consumption. But it is only levied when you take a certain action with your funds -- i.e. consume it. You could also (re)invest and let your capital compound.

So yes, if you spend all your money to the last penny, that would be your tax rate. But many (higher income) people do not.

But all your income is meant to be spent. All people invest so they get to buy more in the future, not for the sake of it. If you don’t pay VAT today, you will in the future.

VAT is added on top of your invoices. It's paid by the end user to the government. It only passes through you.

When I measure my revenue, I always leave VAT out. It was never my money.

Why not?

VAT is typically charged to customers and then compensated with the VAT you pay if you as a freelancer have expenses.

For instance in Spain I have to increase my clients invoices by 21%, but if those invoices are for software, you have almost no purchases to offset that, so I need to pay that 21% quarterly.

So to earn 50k€ in net terms, I would need to charge 25k€ extra just on income tax, plus 3.5k€ on direct taxes on freelancing (because Spain), plus 21% VAT.

It’s no wonder the south of Europe does poorly.

Come to Albania, should be easier for italians. Assuming you work remote, no taxes until ~$120K, then it's 15% of profit.

On your wage, you'll pay $50/month economist + $80/month health/pension + $80/month municipal taxes.

These taxes changed this year. Previous year it was 5% if you pass $50K and 15% if you surpass ~$120K.

Do you have a source for this?

You can see here: https://www.tatime.gov.al/eng/c/4/96/107/income-tax

The thing is that remote programming is considered "export" and export has no VAT. The numbers above are literally the taxes I paid in 2021 & 2020 (I paid the 5% of profit tax on 2020). I may have missed any small thing like $14/month for electronic signature & software. Mostly less than $500/year in all other things combined.

Edit: By "taxes changed this year" on parent comment, I meant in 2021. Not in 2022.

Albania also has great sea, amazing food and welcoming people

The only drawback is that insurance companies don’t insure your car inside Albania for whatever reason.

Can you be more explicit ? Minimum car insurance is mandatory, and you can pay for full insurance if you want.

Full insurance in European Union often has explicit exception for Albania if you bring your car from there.

If you live in Albania you'll have to do the local insurance. I dont know how it is with foreign license plate.

Unless you invoice more than ~120k€ it's generally more convenient, if possible, to cap your work/earnings at 65k€ and pay less taxes, less social security contribution, and no VAT

Yes, if you want to only pay around 50% (which is still insanely high) in taxes there is a 65k eur gross cap.

Once you make 1 cent more, you get hammered with 76+%.

Depending on your age and how much you can deduct, the switch over can come as "low" as 90k. At 100k you should always be ahead in any case. And that's without counting the social security contributions. Depending on how you value them, it might be more convenient even under <90k.

Taxes at that income level are around 50%, including ~20k worth of social security contributions. You're probably mixing up VAT, advance payments and final balance payments to get to that 76%, which is NOT what you're really paying on your income, unless your accountant made some major mistake.

BTW, if you invoiced 65k instead of 80k, you could use the "forfettario" tax regimen, which would result in a higher net income (yes, it's that crazy: you earn more if you earn less).

Maybe is just me but paying 76% taxes is dystopic. The economics of slavery are not that far.

Developers in many developed countries (Germany, Belgium) are in ~50% effective tax bracket for the salary, add there company paid taxes for the 'salary budget' or whatever it called properly and you certainly in ~60% territory.

Try Romania - lower taxes, see my previous comment, higher standard of living and there's a small but decent size italian community here.

Actually go for Lithuania or Malta - even lower taxes than Romania and even higher standard of living (especially Malta)

While I am not so sure about Lithuania (lower GDP per capita than Bucharest, Bucharest being twice as developed as the rest of Romania, ibm, google, amazon, microsoft all having offices here with pay comparable to germany as a backup plan - could be wrong, but it sure is colder), Malta is now an option considering your comment - had no idea taxes are low in that country. Working from near a beach is the dream tbh.

> While I am not so sure about Lithuania (lower GDP per capita than Bucharest ...)

Why are we comparing a country with a city in GDP per capita terms? And is this meant to imply that standard of living is higher in Bucharest than, say, Vilnius?

I would assume two cities with similar GDP per capita (as Vilnius and Bucharest) can have wildly different standard of living depending on many other factors.

I can only speak about Bucharest as that's the area I know best. From what I see it has a slightly higher GDP per capita than Lithuania, and if you factor in the metro area, Bucharest has the same population as the country.

"And is this meant to imply that standard of living is higher in Bucharest than, say, Vilnius?"

Statistically, it is, albeit by a small margin. There is also Cluj Napoca (Romania's second or third largest city, similar size to Vilnius), also at a higher standard of living than both, but I don't know much about that city. Outside these two, Romania is a wasteland.

Edit: Interesting:

Vilnius is the major economic centre of Lithuania. The GDP per capita (nominal) in Vilnius county was €25,400 (~US$30,000)[285] in 2019, making it the wealthiest region in Lithuania and the second-wealthiest region in the Baltic states.

Almost one third of national taxes is paid by Bucharest's citizens and companies. In 2009, at purchasing power parity, Bucharest had a per-capita GDP of €26,100, or 111% that of the European Union average and more than twice the Romanian average.

So likely Bucharest's GDP per capita is higher by a wider margin.

Edit 2: The region Bucharest-Ilfov is the most developed region in Romania, with a GDP per capita of 139% of the European average. Bucharest thus surpasses other European capitals such as Athens, where the GDP per capita reaches 92% of the EU average, Madrid (125%), Berlin (118%), or Budapest (102%).

https://rumaenien.um.dk/en/the-trade-council/about-romania

If standard of living is purely defined as GDP per capita, then it makes sense.

I was thinking of "standard of living" as something akin to "quality of life" (which is subjective of course, but here are a couple of rankings placing Vilnius above Bucharest [0][1][2][3]). Also, for someone working remotely, a lower GDP per capita (assuming good infrastructure, low inequality/poverty/crime and corruption, etc. which are true in Vilnius, at least) might be preferable.

That being said, I think the trend for most of these statistics (GDP, HDI) for Lithuania vs Romania (or Vilnius vs Bucharest) seems to favor the former as well.

e.g. Vilnius county went from 0.861 to 0.920 HDI (0.59 delta) between 2009 and 2019; Bucharest went from 0.898 to 0.933 HDI (0.35 delta) in the same time period [4]

[0] https://mobilityexchange.mercer.com/Insights/quality-of-livi...

[1] https://www.numbeo.com/quality-of-life/rankings.jsp

[2] https://worldhappiness.report/ed/2020/cities-and-happiness-a...

[3] https://ec.europa.eu/regional_policy/en/information/maps/qua...

[4] https://globaldatalab.org/shdi/shdi/LTU+ROU/?levels=1%2B4&in...

Quite interesting - didn't consider going beyond the GDP per capita.

> but here are a couple of rankings placing Vilnius above Bucharest [0][1][2][3]

informative, thanks for this!

> HDI

dang, i didn't consider looking into HDI. not sure how it's measured but it places bucharest-ilfov on par with parts of the UK and east switzerland?

https://globaldatalab.org/shdi/shdi/ROU+CHE+GBR/?levels=1%2B...

Either way you are right, quality of life is subjective. I don't particularly enjoy life here overall, just taxes and the group of friends I have. Romania is far behind central and western europe in terms of mindset, but is nowhere near the low level i thought it was.

> My Freelance taxes/social sec/retirement tax in Italy is on average 76% on a total of 80k eur average gross annual income (98th income percentile).

If you have a profit of 80k and your net income is 19k, you're doing something very wrong. This is not an accurate representation of Italian taxes and social security. A more reasonable net income for that gross is 40k; but you have to take into consideration that with around 24k of the other 40k you are paying a pension (not a very generous one, but still).

Keep in mind that Bulgaria has just elected a reformist parliament for the first time in more than 10 years. Maybe wait a year or two before buying a one-way ticket as the government may raise taxes, especially on the unaffected by the anti-COVID measures. Or they could lower taxes even more if they manage to get on top of the rampant tax evasion and grey economy (one can hope).

Also there are other small things to consider:

* Healthcare in Bulgaria is severely underfunded and understaffed. Not only that, but the incentive system for hospitals is currently IMO completely broken, as they get paid per patient i.e. more sick people = more pay, not more healthy people. My current belief is that you need to live in a large city if you want to have a chance to survive an incident or a heart attack/stroke. Source: trust me, I live here, have lost several family members due to poor healthcare, and have had one receiving incompetent treatment so the hospital can receive more money from health insurance.

* Same goes for childcare/education.

* * There is currently a severe deficit of kindergartens in the large cities -- Sofia (~10k children left out), Plovdiv, Varna and Burgas.

* * Bulgarian public education has been in a freefall for the last 10 years as evidenced by dropping results in state exams and international studies (https://gpseducation.oecd.org/CountryProfile?primaryCountry=...). Private schooling is available in large cities and unsurprisingly is limited. Take into account potential need of home-schooling if you plan to start a family here.

* The public institutions are (currently) not working or corrupt. There are issues with the judicial system, the prosecution, the police, etc. Tl; dr: better hope you won't have to deal with those before major reforms and definitely don't rely on having your rights protected by them. You are on your own here.

Do not be under the illusion that Bulgaria is just like $western_european_country but with less taxes and cheaper housing. Everything comes at a price. You will not find many things you take for granted in your home country here.

If by those unaffected by COVID you mean self-employed people, not sure that's really the case, as taxes for people that are employed by a Bulgarian company are not THAT much higher. Using the 10k BGN example, your net salary is 8627.94, and the employer (of course, excluding accounting and all that stuff) pays 10567.60.

I don't remember exactly the numbers for self employed, but if his are correct (and they seem a bit off, maybe because of the missing health insurance), the difference is basically 5-600 BGN, so 5-6pp.

The plans are to raise the maximal social security income (“максимален осигурителен доход”). This will arguably* disproportionately affect people with incomes above 3000 BGN.

*) Arguably because (while they could easily afford to pay more tax) higher income employees usually get taxed on their actual amount of income as opposed by the rampant tax evasion among employees with lower pay and their employers (so called grey economy: employers declare they pay a given employee the BG equivalent of the US 'minimum wage' which the employee receives monthly via bank transfer, while the rest of the salary is given in cash and not declared).

Didn't they raise it? To be fair, I've always thought it's way too low.

On the plus side Bulgarian food is excellent

Ah yes, sorry for the negativity above. Just wanted to point out that moving here should be a well thought out decision and preferably not based on a single not-entirely-correct HN post. There are trade-offs and there's more to a country and to life than low taxes...

There is plenty of negativity surrounding east europe on HN so there is no need to remind people they won't get the same quality of life as in western europe, but it's not that bad. At least that's what i keep telling myself and counting invoices. I saved enough to buy a deeecent flat in London (>600kEUR).

> moving here should be a well thought out decision and preferably not based on a single not-entirely-correct HN post. There are trade-offs and there's more to a country and to life than low taxes...

While I definitely agree with that (and in fact my own reasons to move to Bulgaria back in the day were not about taxes at all), could you elaborate on the not-entirely-correct part? What exactly is not correct?

> Do not be under the illusion that Bulgaria is just like $western_european_country but with less taxes and cheaper housing. Everything comes at a price. You will not find many things you take for granted in your home country here.

Technically speaking you are right: there is almost no police, no public health care (quality is too low to even step foot in a public hospital), school are pretty low quality, and people tend to be rude. But for a temporary gig (I am in Romania due to taxes for a few years) it can be beneficial. It's not as bad as say India or Pakistan as east eu countries are orders of magnitude more developed, and if you can put up with the nuisance for a while then you can return to your western country and maybe afford a deposit to stop living with flatmates as an adult. Worth while in my case.

> Bulgarian national currency is BGN, and as of now, its value is pegged to EUR with the fixed ratio of 1.95583. So, 1 EUR is 1.95583 BGN, and it doesn't change over time, at least not yet.

1.95583 is EXACTLY the exchange rate between Euro and Deutsche Mark that I still remember from the switch in 2002. Indeed, after some research I've just learned that the Bulgarian Lev has been pegged to the DM since 1997.

Oh wow, I actually didn't know that about Deutsche Mark!

Not all that unusual really. Before the EURO replaced the DM, many things in Croatia, such as cars and real estate were denominated in DM. This was due to rampant inflation (especially in the 80s and 90s) causing people to lose faith in the local currency.

The big difference is that Bulgaria has a currency board, which was agreed to with the International Monetary Fund and the World Bank. This was done to stabilize the exchange rate and the economy in 1997. The exchange rate has been fixed for the last 24 years.

Yes dont you dare complain of your x2 rate, ours in France was 6.55957 (rmb it fondly, didnt even need to google it), so right in the middle of an integer multiplier, and go multiply everything by 6 and 7 and cut in the middle.

We had lots of anti-german grievances due to that mismatch between x2 for the DM and 6.5 for the Frcs :D

Some were saying we all got to see who our masters were, but I dismiss it as the simplistic german mind which saw an efficiency somewhere and forgot the price everyone else had to grudgingly pay hehe (and why not pull the rug to yourself when there s no global optimum after all)

> And if your income is smaller than 710 BGN, even if it's straight zero, then you'll have to pay social security as if your income was 710 BGN

Is this really how it works? They're taxing people with 0 income? I guess it isn't relevant to the target audience of the article but it must suck for the unemployed.

> Accountant fees: about 150 - 200 BGN per month independently of the income.

This seems really high. Why do you need an accountant every month instead of once a year?

> In either case (company or individual), due to our line of business, most likely you'll also need to do the VAT registration. It's something like 150 - 200 BGN.

The VAT registration requires monthly declarations of VAT. Tracking your VAT takes time for the accountants as they need to summarize all your invoices, expenses, and other paperwork. Links (conveniently only available in Bulgarian):

* VAT form: https://nra.bg/wps/portal/nra/documents/taxes/zdds/35c5ece4-...

* VAT law overview: https://nra.bg/wps/portal/nra/taxes/dds-v-balgariya

Not sure how it works in Bulgaria, but over here in the Netherlands if your income is lower than some level you can (with some conditions) apply for unemployment benefits that will include enough money for the social security taxes. This is a bit roundabout (why not just withhold the social security money from the benefits in the first place?), but such are the joys of a complex tax system evolved over multiple centuries.

In Spain for self employed workers there is also a minimum. If you do not want to pay it you need to unregister.

This does not apply for employees. It's just for self employed workers as it's more of a fee for the paperwork that you generate for the government than a tax on income.

> it's more of a fee for the paperwork that you generate for the government than a tax on income.

It’s more of a total ripoff. I do less than 20 invoices a year so 300$/month is ridiculously overpriced if it’s only supposed to cover “paperwork costs”.

> Is this really how it works? They're taxing people with 0 income? I guess it isn't relevant to the target audience of the article but it must suck for the unemployed.

No no, the social security min base 710 BGN is only relevant if you declared that you're actively working, but in fact getting no income. If one decides to e.g. take a break for a year, they can declare that they don't actively working anymore, and thus they'll be paying a lot less (I don't know exact amounts though)

And also, unemployment is a whole lot different story, but I don't know details about that.

> This seems really high. Why do you need an accountant every month instead of once a year?

As already mentioned by phoronixrly, yes it's because of the VAT registration. Having that registration, accountants have to do some paperwork every month.

Same in Romania, there is a tax minimum that you need to pay even if you don't make that kind of money. on the other side, there is no max on taxes, sky is the limit.

and you can compare some cultural stuff and see if you like it. https://www.hofstede-insights.com/product/compare-countries/

.bg is pretty middle ground (culturally and societaly) between (very) east and (very) west, with all the pros/cons of that. A bit more towards the west.. as situated in south-east Evropa (the original Greek word of Europe) after all, but it depends. A little bit of south as well..

As said elsewhere, Quite some things might be missing or not working but then.. you might not really need them. After being around the world, i am back here, for.. the vitality and variety of life that happens. Not that it is easy, but it is interesting. YMMV

Bulgarian here. :)

We like to be hush-hush about the benefits of living in Bulgaria.

Nothing at the moment beats the taxes, location and potential of Bulgaria in Eastern Europe :)

You can ask me any questions related to living cost, places, customs, etc or anything related to Bulgaria.

In which cities do you think there is the most work in the IT sector? Also, how do you rent a place? With agencies, do they want a lot of documents and stuff? Thanks!

Sofia, without a doubt - the capital.

Not much documents are needed in order to start working with an agency due to the fact that the market is starved for IT specialists.

It's not uncommon a person with 0 experience to start at 2K BGN which is around 1K eur.

Ranges are ( these are NET salaries after tax): - Super Jr -> 1k - 1.5k EUR

- Juniour -> 1.5k - 2.5k EUR

- Mid-Level -> 2.5k - 3.5k EUR

- Sr. Dev -> 3.5k -> ~4-5k EUR without being a people manager

It's full of collocation workspaces like:

https://betahaus.bg/en/

http://soho.bg/index-en.php

https://cosmos.camp/

http://cosharehive.com/

https://trevorworkspaces.com/

etc. etc.

The ranges mentioned are in BGN. Nobody will pay 1.5k - 2.5k EUR to a junior.

source: I work there

Also this: https://noblehire.io/salary-survey-2021/

Nope EUR. If you are making less than 3000 BGN as a juniour in Sofia, you are getting robbed.

Can you provide any sources for these salaries? Thanks.

> Nothing at the moment beats the taxes, location and potential of Bulgaria in Eastern Europe :)

I wouldn't be so sure, haha. I live in RO and this year I've paid less than 5% in taxes (half of them being pension fund and 25% health insurance).

Hold on I am also in Romania and pay 7%. Are you classed as PFA Consultant? If so then there's no programming "allowed" else it's the wrong category. Which tax code are you using so I can switch?

Yup, I'm a PFA with a fixed taxation rate (norma de venit) using 6202. Keep in mind that taxation rates differ by a lot for each county.

6202 is strictly for consulting services (ie. no programming). was advised by anaf and my accountant not to use it as it would be, basically, fraud (since i also write code not just "advice" - which is what the romanian tax system defines as consulting). use it at your own risk as they can back-tax if they catch you.

either way thanks for this!

Yes, I'm aware. I'm not worried because in my contracts it's mentioned that I offer consulting services.

Well that's great but I decided not to massage my contracts to accommodate for an _even_ lower tax.

How are Romanian taxes on capital gains? VAT?

All I can find on the topic is: https://taxsummaries.pwc.com/romania/individual/income-deter....

> The net capital gain is subject to income tax at the flat rate of 10%. The taxable amount is calculated based on the difference between the sale price and the acquisition price of the shares. In general, broker/transaction fees in connection with the acquisition or sale are tax deductible.

I have no clue tho how it works.

Similar as in Poland:

1. Long-term remote contracting as software engineers is legal. No need to worry about being forced into being employee.

2. Regressive taxation at very low level (e.g. recently in Poland you can opt-in for 12.5% taxation of revenue).

Just moved back to Poland after 6 years in US, looking to work remotely for US-based contractors. Dare to elaborate, please? First time I hear of this.

If you are a "creative" person (software engineer, designer etc.) you can just pay a flat rate for all taxes and insurance. For example: 100k revenue will equal to 12k in income tax + medical insurance + social security. In total, it would be less than 20k (17-20% depending on a few factors).

Another option would be to use IP BOX relief. If you are producing IP your tax will be 5%. If you fly to a customer, have a company car, you need a lot of equipment, your tax can be even lower.

https://www.gov.pl/web/poland-businessharbour-en/tax-reliefs...

Thanks, much appreciated!

you have to decide what kind of taxation scheme you have to you after your first invoice. It's for the whole year. You can change it next year.

Google "ryczałt dla programisty". If you play your cards right in Poland you can get legally around ~10% tax total (this includes national insurance ~5% and IP Box 5% for programmers).

Thanks, much appreciated!

If you are self-employed and running a SaaS, the rate is actually 8.5% of revenue (PKWiU 58.29.40). Source: I am self-employed and running a SaaS. With my cost structure my (calculated for comparison) effective income tax rate is 13.5%, and that includes all social security and health insurance payments. It's unbelievably good, socially unjust, and I don't think it will last, but here we are.

Poland also happens to be a really nice place to live, although if you don't speak Polish (or don't have a friend/spouse who does), dealing with government institutions can be a pain.

Oh, we also have a terrible chaotic populist government and a bunch of other problems, but that seems to be the case everywhere these days, so.

Poland is really nice, except if you don't like cold weather and you like to swim in the sea. Even some of my native Polish colleagues complain about the cold, especially the older ones.

Simplified taxation for contractors in Ukraine (pe simplified system) is basically 5% + ~$500. You are allowed to make up to around $250,000 per year this way.

I am a big believer in Flag Theory and stuff…

I currently pay about 2,5% on my gross income ($100k+) as a software developer, which is more than most of EU/US developers are left after tax…

In a short, if you’re willing to make some trade-offs and optimize your taxes, you’ll be legally retaining your hard earned $$$. Among the trade-offs, tax residency is the most important. Things are a bit complicated for US citizens as the government taxes their income regardless of their tax residency, citizenship-based.

P.S. That 2,5% includes all the fees like accounting, legal consultations and banking fees (account maintenance, transfers…)

Go on...

Unless you're actually living in a tax haven or a third world country with no CFC laws, you're almost certainly breaking the law with this.

The conversations I have had with people who have found the gold wheel is mind boggling, and they almost all get in trouble at some point.

US citizens can move to Puerto Rico and pay 5% tax, very legally

Plenty of first/second world country have more friendly tax laws. Many don’t tax foreign income, and if you live outside the US for 300 days per year, you get a $100k tax write off up front.

There are many legal ways to live in nice places and pay low tax.

Based on my limited knowledge it seems possible. The US allows you to exclude $106k USD in foreign income if you’re not a US resident. You can also add some housing costs to bump it up.

Many countries won’t tax you if you work there and a) all your income and work is outside the country, b) you do t spend enough time there to become a tax resident (I’ve seen 180 days for some).

So if you’re willing (and able) to split your time between 3 countries, not go back to the US and get all of your income from outside those 4 countries, you could effectively pay little to no income tax and it would be legal.

But please hire a CPA.

It may be possible; maybe not 2.5%, but total tax rate below 10% is possible =legally= in some places. Yes, it is a punch in the face from the governments to people that pay huge taxes like 50-70% in most of Europe, but this is what governments are very good at doing: discriminating.

Indeed it is possible. I could be getting away with legal, accounting and bank fees only and paying 0% but I prefer this way.

Through the history there are loads of examples: Warren Buffer paying lower tax rate than his secretary (ever got interested how?), Eduardo Saverin denouncing US citizenship in favor of Singapore citizenship and saving hundreds of millions in taxes.

Right now I hire contractor developers in Ukraine and they pay 5% on their income + minor accounting fees.

There are loads of government incentives around the globe, especially for the IT people.

US is the worst of citizenship in terms of taxes. You pay taxes citizenship-based on your worldwide income, while most of other countries tax residents, not citizens.

In a short, move away from a high-taxation country in a low-taxation country and enjoy the benefits. Or become a perpetual traveler and be a tax resident of NO country. There are loads of countries that offer good balance between taxes and life quality.

https://nomadcapitalist.com/tax-reduction/

From certain countries you cannot move out as a tax resident to become a "no country resident". For example if you are a Romanian citizen living in Romania and you move abroad, you cannot remove your Romanian tax residency unless you prove you are a tax resident in another country for at least 6 months. As a slave you can change your master, but you cannot get free.

I'm all ears, if you want to explain how this is possible without breaking multiple laws and cross-country agreements

I am 100% sure long term residents also pay health insurance. Are you an EU citizen?

I'm not an EU citizen, no. And while I was living there as a long-term resident, I didn't pay 8% health insurance.

Perhaps it's indeed different for EU citizens, I'm not sure. I should probably mention it there.

The question is - Do you have to? You may have not paid it but that doesn’t tell if one has to.

This was confirmed by at least two reputable accountants, so yeah, I'm 100% sure I didn't have to pay 8% health insurance while being a long term resident (and not an EU citizen).

Actually, I _did_ pay some health insurance, but it had nothing to do with the business and it wasn't 8% or anything like that. It's like the same kind of health insurance that even tourists have to get.

Ah, I see where the confusion comes from. I assumed you meant you don't have to pay any. Though, I'm curious, how much is it? I went to check in the "Ordinance on the General Terms and Conditions, the Minimum Insurance Amount, the Minimum Insurance Premium and the Procedure for the conclusion of the mandatory medical insurance of foreigners who reside shortly or prolonged in the Republic of Bulgaria or transit through the country" (such a title), it says the price of the premium is determined according to article 65 of the insurance code, but that one is referring to something else. Oh, well.

> Though, I'm curious, how much is it?

I was buying just some bare minimum required insurance, and it was very low, less than 200 BGN per year.

It seems weird you are forced to distribute the dividend in BGN. Pay the withholding tax, yes. But the dividend itself? Most accountants can calculate the corresponding currency equivalent for the dividend being declared on the payout day. Worth looking into.

Also, does Bulgaria support interim dividends? The loan set-up, while not an issue, can perhaps be avoided by use of interim dividends.

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