Non-EU Freelancer - Confused about taxes and social security

I've also read about setting up a limited company. This might also be good to give a bit more of a professional look for my freelancing business.

Looks like companies also pay 10% tax, but only on their income. They also have a 5% tax on dividends.

So assuming that I pay myself 100% of the income as dividends each month (just for simplicity's sake), how would the tax and social security be structured?

Company income: 6000 EUR
Company income tax: 600 EUR
Company Dividends tax: 300 EUR

5100 EUR goes into my personal bank account. Then applying the same formula from the above post, I get 59,6% of that and it totals to about 3040 EUR.

Please do correct my numbers and logic, I am quite confused as to how all this works.

No, you're not right. Actually you will be paying social security contributions in two cases:

1. If you are employed under a labour or a civil contract;
2. If you work as a self employed person.

In all other cases whne you establish a company: OOD, EOOD, ET, .... etc ( which is Ltd and PP) you will be paying only the corporate and the divident tax (in case you act as a shareholder/owner).

There are also specifics in Option 2, where you will first have a reduction of your income before taxes by (usually) 25 %, and the rest of the amount will be taxed.

In the meanwhile I've done some more digging and found out that you only pay social security on your insured income, which is capped at 3000 BGN for 2019.

This means that it is considerably less than I thought.

to be freelancer :
https://translate.google.com/translate? … ;sandbox=1

social taxes :
see Contributions for self-employed workers here :

https://translate.google.com/translate? … garie.html

you must pay social cotisations only between 640 BG to 3000 BGN of your revenues monthly

Hey, boykie, with 6,000 euros you will live like a king, eh! :-)

And, unlike Cape Town (for example), you will not need razor wire round your house and 24 hours armed security. In fact, the contrary: nobody will bother you.

The flat tax is 10%, indeed.

But there's no need to pay that all out every month as you suggested.

It probably makes most sense to incorporate a BG company and include expenses (I'd imagine that pension contributions and a fancy company car are allowable) against that gross income, and pay 10% (corporate tax) on the net. While paying yourself (as an employee) a smaller salary 500-1,000 euros monthly maybe (as minimum wage is 300 euros/month, you can judge where you want to be) upon which you would pay personal tax and make the social security contributions.

The effective rate would be much lower than your calculation.

The social security contributions would entitle you to free medical treatment in Bulgaria, and an EHIC card for treatment in the rest of the EU. Plus, I'd guess, a private medical policy might also be an allowable expense.

If you wanted to be fancy, you could look at incorporating an IP company in a zero tax jurisdiction, and paying it 3,000/month for IP rights. :-) This is a bit flippant, but, basically, your 6,000 is (probably) very profitable, and (probably) far more than you will need to live on here. So it will justify spending a bit of time researchig the legal options for how you can reduce the income (or increase the expenses) in your new BG company. Do this before you set everything up because if you show 6k in with nearly 0k out the taxman will be miffed when you figure out there was a better way to do it!

I'll correct you a little bit. On my mind EOOD/OOD is the appropriate form for your case. And you don't need to pay 1800 for social taxes. There are lot of reasons, I'll show some.
For example, 1. you will not pay health taxes (you will start to pay it after you get ЕГН, means after 5 years in Bulgaria).
2. You can minimize the social security even more, bcs you are the owner of your company. So use your status of owner for this.
3. You can regulate your income taxes. Especially for the first time in Bulgaria. You will buy a lot, rent, inet, cellphones...
You will find, that a lot of accountants will say you: No, no it is impossible, you can't. But don't believe them and go to another accountant. Actually, in Bulgaria, is the most important thing for businessmen is to find real, adequate and professional accountant. Most of them do everything to minimize their work and maximize your payments.
We choose Bulgaria because of the attractive business taxes. But we spent a lot of time and money to understand, how does it work, how to use Bulgarian system. You have to build up a tax plan  first. With your accountant or tax manager. If you need one, I can recommend.

A possible calculation with 6,000 euros of income (without any group structure or other creativity to reduce income/increase expenses, which, personally, I would still go look at)...

6000 sales
0 expenses (but you must have some expenses, like home office, hosting costs, AdWords, etc. etc.)
10% corporate profit = 600

However, private pension contributions, private medical, company leased car are allowable expenses and would reduce profit and tax. As it's your company, it would be very typical to do something like this.

Let's say 1,000 for above (but could be more), so profit is 5,000 and tax is 500

You would be an employee. minimum salary BG is 300 euros. let's say you set yours at twice that 600. You tax is 10% = 60 euros, you social security contributions around 13%, or 78 euros. So your net salary is around 460 euros. And now you can get BG health care and a BG EHIC card. And BG state pension (later).

Your salary (600) and employer's contribution (18%) is allowable, so expenses now 1,700 and profit is 4,300 and tax is therefore 430.

So... you got 460 (net). the company paid 430 tax. and retained profit is about 3,900.

Total is 4,400 ish, so effective tax rate in this scenario is 27%.

You can leave retained earning fully in company, or pay some or all of it to you with a 5% withholding tax.

If you paid all (but I don't see why you'd want/need to) the effective rate would hence be around 30%.

If you paid yourself an extra 1,000 there would be a 50 tax. You'd have 950 + 460 in your pocket. Company would have retained earnings of 2,900. Now effective tax rate is about 28%.

Much more than the headline 10% figure... but a lot less than your 40%-60% calculations.

Plus the above puts you in the BG health/pension systems (all dividends would not)... with a salary twice the BG minimum, along with private medical, private pension, and fancy company car. So it's a nice package to live on here.

You  could also add your girlfriend to the payroll as your "PA" or "marketing assistant" or something. At 300 (BG minimum), she'd get 255 or thereabouts (and cost the company 360, which would also be deductible against profit/tax)... but, importantly, she'd also be in the BG system for healthcare.