31.05.2023

WHAT COSTS ARE INCURRED WHEN WORKING ON A CIVIL CONTRACT

Let us recall that under the so-called "civil contracts" work is also performed, but the legal regime of the contract is not subject to labor legislation, and the performer generally does not have the quality of "worker or employee", which is the exact name according to the Labor Code in Bulgaria. However, there are also quite frequent cases in which the parties to an existing employment relationship conclude civil contracts with each other in parallel.

These contracts have their own specifics, such as the fact that the costs of achieving the final result are borne by the contractors. What amounts should be withheld and deducted from the amounts payable under civil contracts?

Let us clarify that the parties to the civil contract are called the Performer and the Contractor. The Contractor is actually the person ordering, i.e. the person who assigns the performance of a certain work. The performer, on the other hand, is the person who is assigned to perform this work.

The law does not set special requirements for the two parties, it is sufficient that they be of legal age and capable of acting (when it refers to natural persons) or legally competent legal entities that have not been terminated due to liquidation or bankruptcy. Only the care with which the performer must fulfill the contract is different. If he is a merchant, he owes performance with the care of a good merchant, if he is not of merchantable quality, he owes the care of a good householder.

If the person who concludes a civil contract also has an employment contract concluded at the same time, he must necessarily notify the Employer of this. On this basis, the payer of the income is obliged to withhold and pay after deducting 25 percent of normatively recognized expenses, insurance contributions for the mandatory social insurance and 10 percent of income tax. Under a civil contract, no insurance is due only when the maximum insurable income for the month is exceeded or only health insurance is due if the person is a pensioner, but 10% income tax is always due.

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 party, such as travel and accommodation money, documented through an issued primary accounting document in the sense of the Accounting Act. The same applies to the daily travel allowance, but not more than twice the amount that is determined for persons in employment relationships - the excess over the double amount is taxable income.

When working under a civil contract and receiving remuneration, the payer of the income issues an account for amounts paid, in which the amount received, the charged insurance and tax are noted. Only for the last 4th quarter of the year (for the months of October, November and December), the payer has no legal basis to charge the tax, unless this is expressly agreed between the payer and the recipient of the income. If this arrangement is not made, the tax for the amounts paid in the 4th quarter is calculated and paid by the person receiving the income.

At the end of the year, the payer of the income issues an official note for the amounts paid during the year, which the person must attach to his annual tax return under Art. 50 of the Personal Income Tax Act.