10.05.2023
CIVIL CONTRACT WORK. WHAT TAXES ARE PAYABLE?
If you have concluded a civil contract in your capacity as a natural person, the income acquired under the contract is subject to taxation according to the rules for taxation of remuneration in non-employment legal relationships, namely with advance tax and with tax on the general annual tax base (Art. 29, Para. 1, item 3 of the Personal Income Tax Law). You file an annual tax return.
Income from civil contracts under the Personal Income Tax Law is income from non-employment legal relationships and is subject to declaration in Appendix No. 3 of the annual tax return in all cases, regardless of their amount.
Non-employment legal relations are those which cannot be defined as employment legal relations or cannot be defined as legal relations with persons exercising a trade or a liberal profession, by virtue of which the achievement of a certain result is due to a natural person who is not a sole trader (§ 1, item 30 of the additional provisions of the Personal Income Tax Law). See also Freelancing.
Determination
The taxable income from business activity of natural persons who are not traders within the meaning of the Commercial Law is determined by reducing the acquired income with activity expenses in the amount of 25 percent for income from exercising a free profession or remuneration from non-employment legal relationships.
The annual tax base for income from other economic activity is reduced by:
The contributions that the person is obliged to make for the tax year at his own expense in accordance with Art. 40, para. 5 of the Law on Health Insurance, when the taxable income from another economic activity is included in the annual equalization of the insurance income.
The sums received for business trips under legal relationships that are not employment are not subject to taxation, when they are at the expense of the contracting authority:
Advance tax
You owe advance tax on the difference between the taxable income and the withheld compulsory social security contributions. If you are self-insured – on the difference between the taxable income and the contributions you are obliged to make as a self-insured person on your own account for the months of the quarter in which the taxable income was acquired. The tax rate is 10 percent.
If you are 50 or more than 50 percent disabled, you owe business income tax in advance after your taxable income from all sources of income acquired since the beginning of the year and subject to tax on the annual tax base, reduced by mandatory insurance contributions withheld or paid for your account exceeded BGN 7,920.00. You certify the degree of reduced working capacity with a TEMC/NEMC expert decision valid on the date(s) of payment of the income, a copy of which you present to the payer of the income once, when he is obliged to withhold and pay the tax.
Withholding
When the payer of the income is an enterprise or a self-employed person, the amount of tax is determined and the tax is withheld from the payer of the income when it is paid. If you self-insure, you must have submitted a written declaration of this to the payer.
The payer issues for the paid income and withheld tax a receipt for paid amounts according to a model, which he provides to you personally or through an authorized person. Upon your request, the payer shall issue, within 14 days, an office memo according to the model for the income paid during the year and for the tax and mandatory insurance contributions withheld during the year.
Where the payer of the income is not a business or a self-employed person, the amount of tax is determined and the tax is paid by you, the person who acquired the income.
The payer does not withhold advance tax and does not issue an invoice for paid amounts and a service note. Documentation of earned income is done by you. Taxable persons, who are not obliged to issue a fiscal receipt from a fiscal device, issue a document for the income they have acquired from another economic activity, when the payment is not by bank transfer, containing the following information (Art. 9, Para. 2 of the Personal Income Tax Law):
Declaration
You declare advance tax by submitting a quarterly declaration under Art. 55 of the Personal Income Tax Law by the end of the month following the quarter of income acquisition. No advance tax is withheld and remitted for income earned in the fourth quarter of the tax year, except when, as the person acquiring the income, you declare in writing to the enterprise or the self-insured person - payer of the income that you wish to withhold the tax. In these cases, the withheld tax is paid and declared by the payer of the income by January 31 of the following year with the declaration under Art. 55 of the Personal Income Tax Law only electronically.
When for the acquired income from another economic activity during the relevant quarter, you should not pay advance tax - in the cases in which relief is used for reduced working capacity by 50 and over 50 percent, declaration under Art. 55 of the Personal Income Tax Law is not submitted.
In the case of payment of income from other business activities subject to taxation on the general annual tax base, the enterprises - payers of income, prepare a report according to a model for the income paid to natural persons during the tax year. The report shall be provided by February 28 of the following year to the territorial directorate of the National Revenue Agency at the place of registration of the payer of the income (Article 73, Paragraph 1, Item 1 of the Personal Income Tax Law). The report is submitted only electronically in the format and in the order approved by order of the executive director of the NRA.
When the payer of the income is not obliged to withhold and pay the tax, a declaration under Art. 55 of the Personal Income Tax Law, you submit it to the NRA office at your permanent address or electronically with a personal identification code or a qualified electronic signature. You declare these incomes in the annual tax return under Art. 50 of the Personal Income Tax Law, in the period from January 10 to April 30 of the year following the year of acquisition of the income. Enterprises and self-insured persons - payers of income from non-employment legal relationships fill in a template report on the income paid to individuals.
Payment
When the payer of the income has an obligation to withhold and pay the advance tax, the payer pays the tax to the state (central) budget to the account of the TD of the NRA at the payer's place of registration.
When the payer of the income has no obligation to withhold and pay the advance tax, you pay the tax to the state (central) budget to the account of the TD of the NRA at your permanent address.
The tax of a foreign person, who received income through a proxy with a permanent address in the country, is paid into the state budget on the account of the TD of the NRA at the proxy's permanent address.
