Remote Work for a Foreign Employer: Taxes and Social Security in Bulgaria

Introduction: The New Era of Global Mobility and the Bulgarian Job Market

The rise of information technologies, digital services, and remote communications has cemented remote work (home office) as a permanent reality. Today, highly skilled professionals residing in Bulgaria can easily sign contracts with employers based in London, Berlin, Munich, New York, or San Francisco. Bulgaria stands out as a highly attractive hub for remote talent due to competitive living costs, high-speed fiber internet, safety, and a favorable tax environment.

However, performing services for an international employer while living permanently in Bulgaria raises complex legal, tax, and social security questions. Many workers mistakenly assume that if their employer has no physical office or legal entity in Bulgaria, they are outside the local insurance system. In this comprehensive guide, we cover everything you need to know about working remotely for a foreign corporation in full compliance with Bulgarian legislation.

1. What EU Law Says About Social Security: The Lex Loci Laboris Principle

If the foreign employer is based within the European Union (EU), European Economic Area (EEA), or Switzerland, social security coordination is strictly regulated by EC Regulation No. 883/2004.

The fundamental principle in European law is lex loci laboris – the legislation of the country where the work is physically performed applies. This means:

• If you work physically from your home in Sofia, Plovdiv, or Varna for a German or French company, you fall under Bulgarian social security and healthcare laws.
• All social security contributions must be calculated using Bulgarian rates and paid into the Bulgarian state budget via the National Revenue Agency (NRA).
• The foreign employer is legally obligated to comply with Bulgarian employment and social security laws, even without a local subsidiary.

2. Obtaining an A1 Certificate for Remote Workers

To prove to the foreign employer and their local tax authorities that social security is legally declared and paid in Bulgaria, the employee must obtain an A1 Certificate. This document is issued by the territorial directorate of the NRA following a detailed application process.

The A1 Certificate guarantees that the worker is fully covered in Bulgaria and exempts the employer from paying duplicate insurance in their home country, eliminating double social security exposure.

3. The “Social Security Representative” Mechanism (Art. 21 of Regulation 987/2009)

Managing Bulgarian payroll, making monthly NRA filings, and tracking local employment laws is highly complex for an employer based abroad with only one local worker. To address this, EC Regulation No. 987/2009 introduces the Social Security Representative Agreement.

Under this written agreement, the foreign employer and the local worker agree that the employee will fulfill the employer’s obligations to pay and declare social security contributions. The process works as follows:

1. The employer transfers the gross salary plus the employer’s share of social security contributions directly to the employee’s bank account.
2. The employee registers in the BULSTAT Register as a social security representative.
3. The employee monthly calculates, declares, and pays the social security and income tax to the NRA on behalf of the employer.

This model is fully legal and widely used across the EU, removing the need for international companies to set up local branches just to handle payroll administration.

4. Remote Work for Employers Outside the EU (USA, Canada, UK)

When the employer is located outside the EU (e.g., in the USA) and no bilateral social security treaty exists between Bulgaria and that country, European regulations do not apply. US companies cannot easily register as insurers with the NRA. To maintain full legal compliance, workers adopt one of the following two models:

• Registering as a Freelancer (Self-Employed): The individual registers with BULSTAT as a freelancer. They sign a service agreement with the US client, issue monthly invoices, and manage their own taxes and contributions. This model allows for a 25% statutory expense deduction, reducing taxable income.
• Using Employer of Record (EoR) Services: A local Bulgarian partner employs the individual locally and leases their services to the foreign client, handling all payroll, compliance, and HR duties.

5. Personal Income Taxation Under PITA

Individuals classified as Bulgarian tax residents (residing in the country for more than 183 days a year or having their center of vital interests in Bulgaria) owe a flat 10% tax on their worldwide income.

If you work under a remote employment contract and manage your contributions via a representative agreement:

1. The taxable base is calculated by deducting the employee’s share of social security contributions from the gross salary.
2. A flat 10% income tax is calculated on the remaining balance.
3. The employee pays advance income tax and reports their earnings annually by April 30th using the Annual Tax Declaration (Form 50, Annex 1 for foreign employment income).

6. Frequently Asked Questions (FAQ)

Q1: What happens if my EU employer continues withholding taxes and social security in their home country (e.g., Germany) while I work from Bulgaria?
This violates EU law. The NRA can demand full payment of social security contributions in Bulgaria, plus interest. Your employer will have to go through a complex refund procedure in Germany to recover the mistakenly paid contributions.

Q2: Is there a cap on social security contributions in Bulgaria?
Yes. The maximum monthly taxable insurance base in Bulgaria for 2026 is capped at EUR 2,111.64. Even if your salary is EUR 8,000, social security is only paid on EUR 2,111.64. The remainder is subject only to the 10% income tax.

Q3: Which declarations must be filed monthly under a representative agreement?
Declaration Form 1 (individual worker insurance details) and Declaration Form 6 (total employer contributions) must be filed by the 25th of the following month.

Q4: How do I prove to my foreign employer that social security is paid locally?
You provide the issued A1 Certificate, monthly bank transfer receipts to the NRA, and copies of the filed monthly declarations.

Q5: Am I eligible for sick leave and maternity benefits under a representative agreement?
Yes. Because you pay full social security contributions into all Bulgarian social security funds, you are fully entitled to NSSI benefits, including sick leave and maternity pay.

Q6: Can I work for a US client through my own company (EООD)?
Yes, this is a highly popular and tax-efficient B2B model. Your company invoices the US client, pays a 10% corporate tax on profits, and a 5% dividend tax upon distributing earnings.

Q7: What are statutory deductions for freelancers?
Freelancers in Bulgaria are allowed to deduct a flat 25% of their gross revenue as recognized business expenses without providing receipts, paying tax only on the remaining 75%.

Q8: How is tax residency determined if I travel frequently?
The 183-day rule applies. If you are physically present in Bulgaria for more than half the calendar year, you are considered a tax resident. Double Tax Treaties apply tie-breaker rules if residency is contested.

Q9: Do I need a local Bulgarian bank account to receive payments from my foreign employer?
While not strictly required by social security laws, having a local bank account denominated in EUR is highly recommended. It simplifies the calculation of exchange rates, reduces transaction and conversion fees, and ensures smooth local tax payments to the NRA. Local banks are also more familiar with processing salary income from foreign sources, which helps satisfy local bank compliance and anti-money laundering (AML) declarations.

Conclusion

Working remotely for an international employer offers excellent financial freedom but requires precise compliance. Managing filings alone carries risks of double taxation or audit fines. A professional accounting partner ensures your setup is solid from day one—managing BULSTAT registrations, A1 certificates, monthly payroll, and annual declarations. Contact us for a consultation today.