Social Security for Owners and Partners in a Ltd.: Complete Business Guide
1. Introduction: Social Security for Owners and Partners in a Ltd.
One of the most common questions that arises after registering a limited liability company (known in Bulgaria as EOOD or OOD) is how its owners and partners should be insured for social security and health purposes. Choosing the correct social security model is vital, as it determines both the monthly overhead costs of the company and the individual, as well as the level of social and health protection for the managers. Misinterpreting social security regulations can lead to substantial interest, penalties, and fines during tax audits by the National Revenue Agency (NRA).
Following Bulgaria’s integration into the Eurozone in 2026, social security legislation continues to be governed by the Bulgarian Social Security Code (SSC), with all payments and thresholds denominated in Euro (EUR). To help business owners budget long-term without constantly editing obsolete values, this guide presents a completely “evergreen” social security model. We will focus on the legal principles, ratios, percentages, and formulas that do not change from year to year, while explaining how to calculate your contributions based on the current applicable thresholds.
2. The Dual Role of the Owner: Ownership vs. Management and Labor
To determine the correct social security obligations of a partner or a sole owner of capital, we must distinguish between the two distinct capacities they can hold in a company:
- Capacity as an Owner/Shareholder: Merely owning shares or equity in a company does not trigger any social security obligations. If the owner only receives dividends from the distributed profit and does not perform any operational work in the company (does not manage, sign contracts, or perform administrative tasks), they do not owe social security contributions on this income. Dividends are subject only to a flat withholding tax.
- Capacity as an Active Worker/Manager: If the owner or partner actively participates in the daily operations of the company—managing it as a registered manager or providing personal labor (such as consultations, sales, or manufacturing)—they must be insured for social security. The social security model depends on the type of legal relationship and the activity performed.
3. Social Security for the Manager: Management and Control Contract (DUK)
A Management and Control Contract (known in Bulgarian as “Договор за управление и контрол” or “ДУК”) is a civil contract under which the manager undertakes to manage the company in exchange for a remuneration. For social security purposes, a DUK is treated similarly to employment contracts, but with specific nuances:
- Insurable Income under DUK: Social security contributions are calculated on the gross monthly remuneration agreed in the contract. However, this remuneration cannot be lower than the minimum social security threshold for the respective economic activity and professional group. These minimum thresholds are set annually by the government for each industry.
- Maximum Ceiling: The maximum monthly insurable income under a DUK is capped at the maximum monthly social security threshold established by the State Social Security Budget Act for the current year. Any income exceeding this ceiling is exempt from social security contributions, though it remains subject to standard personal income tax.
- Distribution of Contributions: The social security burden is divided between the employer (the company) and the insured individual (the manager) in a ratio of approximately 60:40. The contributions cover all social security risks: pension, general sickness and maternity, occupational accidents, unemployment, and health insurance.
4. Social Security as a Self-Employed Person (SOL)
This is the most popular and cost-effective option for business owners and partners who do not want to set up high-salary management contracts. In this case, the individual registers as a self-employed person (known in Bulgaria as “Самоосигуряващо се лице” or “СОЛ”) under Article 4, Paragraph 3, Item 2 of the Social Security Code:
- Commencement of Activity: Upon starting operations, the owner must submit a Self-Employed Registration Declaration to the NRA within **7 days** of beginning their activity, specifying the chosen coverage package.
- Selecting Insurable Income: The self-employed person pays contributions on a chosen monthly income, which is limited by law:
- Minimum Limit: Cannot be lower than the minimum monthly insurable income for self-employed persons voted in the State Budget Act for the current year.
- Maximum Limit: Cannot exceed the general maximum insurable income ceiling for the current year.
- Coverage Packages for Self-Employed Persons:
- Option 1 (Basic Package): Covers disability due to general sickness, old age, and death (pension), plus health insurance. The total social security burden is approximately 25.8% of the chosen insurable income. Under this package, the individual is not covered for sick leave or maternity benefits.
- Option 2 (Full Package): Covers all social security risks except unemployment (adds sick leave and maternity benefits). The total contribution is increased by 3.5% (totaling approximately 29.3%). This option is recommended for individuals seeking comprehensive health and family protection.
- Payment Structure: Unlike a DUK, self-employed contributions are paid entirely by the individual. However, they can be processed directly from the company’s bank account and accounted for as a receivable from the owner.
5. Providing Personal Labor by a Partner
If a partner works in the company (e.g., providing specialized services to clients, design, marketing, or bookkeeping) but does not have a formal employment contract or a paid DUK, they are performing “personal labor”. They can receive a remuneration for this labor:
- The individual must be registered as a self-employed person (SOL).
- The remuneration for personal labor is treated as personal income and is subject to a 10% flat personal income tax (PIT), with no statutory expenses allowed for deduction.
- The company is required to withhold this tax and pay it to the NRA monthly, accompanied by a declaration under Article 55 of the PITA.
6. Comparison: Management Contract (DUK) vs. Self-Employed (SOL)
To help you choose the best structure for your situation, we compare the key criteria in the table below:
| Criteria | Management Contract (DUK) | Self-Employed (SOL) |
|---|---|---|
| Minimum Insurable Income | Economic activity threshold (usually higher) | Minimum self-employed threshold for the year (lower) |
| Expense Distribution | Shared between company and individual (60:40) | Paid entirely by the individual |
| Unemployment Benefits Eligibility | Yes, included in the coverage | No, self-employed individuals cannot claim unemployment benefits |
| Tax Deductibility for the Company | Remuneration and company-paid contributions are deductible expenses | Self-employed contributions are not a direct corporate expense |
| Reporting Complexity | High (requires monthly Declaration 1 and Declaration 6 filings) | Low (monthly Declaration 1, annual reconciliation) |
7. Rules for Multiple Insurable Activities
It is common for an entrepreneur to serve as a manager under a DUK, register as self-employed in their own firm, and simultaneously work under an employment contract at another company. In these cases, the following rules apply:
- Maximum Limit: The total monthly insurable income across all activities cannot exceed the maximum insurable income ceiling for the current year.
- Order of Priority: Social security contributions must be paid in the following priority order:
- 1st Priority: Income from employment contracts and DUK.
- 2nd Priority: Income as a self-employed person (SOL).
- 3rd Priority: Income from civil contracts (non-employment services).
- Example: If you are employed elsewhere and earn the maximum insurable income for the year, you do not owe any social security contributions as a self-employed person or manager in your own company (although you must still file the self-employed registration declaration).
8. Frequently Asked Questions (FAQ)
Q1: Does the owner have to pay social security if the company has no activity?
No. Social security obligations only arise if the individual performs operational or management work. If the company is dormant and the manager does not carry out any business actions, no social security is owed, and self-employment can be officially suspended via a declaration to the NRA.
Q2: What if the manager is a pensioner?
Pensioners who register as self-employed (SOL) in their own EOOD/OOD can choose not to pay contributions to the pension fund. However, they must still pay the mandatory 8% health insurance contribution based on the minimum insurable income for the year.
Q3: How do self-employed persons claim sick leave or maternity benefits?
To be eligible for sick leave and maternity benefits from the National Social Security Institute (NSSI), the self-employed person must have selected the full coverage package (Option 2) and accumulated the minimum required contribution period (6 months for sick leave, 12 months for maternity).
Q4: How is the annual reconciliation of insurable income calculated?
At the end of the year, when filing the Annual Personal Income Tax Return, the self-employed person completes a specialized reconciliation table (Table 1 and 2). If their actual income from personal labor exceeded the amount on which they paid advance contributions, they must pay the difference in social security contributions.
Q5: Can a DUK manager be insured on a salary below the minimum wage?
No. The insurable income of a manager under a DUK cannot be lower than the government-mandated minimum thresholds for the specific management position and economic sector, which are typically higher than the national minimum wage.
Q6: How do we prove to the tax authorities that a company has no activity?
A lack of activity is proved by showing that no invoices were issued or received, bank statements contain no commercial transactions, no customer/supplier contracts were signed, and official declarations of inactivity have been filed.
Q7: Are social security contributions owed on dividend payouts?
No. Dividends represent a distribution of net profits after corporate income tax. They are subject to a 5% withholding tax, but are completely exempt from any social security or health insurance contributions.
Q8: What is the deadline for paying monthly social security contributions?
Monthly contributions for the preceding calendar month must be paid to the NRA’s bank accounts by the **25th day** of the current month. The corresponding Declaration Form No. 1 must also be submitted by this date.
9. Conclusion
Choosing between a Management and Control Contract (DUK) and registering as a Self-Employed Person (SOL) depends on your business operations, budget constraints, and desired level of social protection. Understanding these mechanisms allows you to optimize your company’s costs in a fully legal and safe manner.
Our professional accounting firm has extensive experience managing social security compliance for corporate owners and partners. We will help you select the optimal social security model, file the necessary declarations with the NRA, and handle monthly and annual reports without errors. Contact us for a consultation.