Advance tax is the most commonly overlooked obligation for new freelancers. Three times a year, you file and pay 10% of your income (after deducting expenses and social security contributions). The formula is simple, the deadlines are fixed, and the whole process takes less than 15 minutes.
What you'll learn
- What advance tax is and why it's paid in instalments
- Who is required to pay advance tax
- How to calculate the amount you owe
- The exact deadlines for filing and payment
- How to submit an Article 55 declaration
Disclaimer
This article is for informational purposes only and does not replace professional advice. If you have questions, reach out to us at support@effortless.tax or consult with an accountant of your choice.
What is advance tax
Advance tax is exactly what the name suggests: tax you pay in advance. Instead of waiting until the end of the year and paying everything at once, you make quarterly payments throughout the current year.
Why does the government want the money earlier? The budget needs a steady flow of funds. If all taxpayers waited until April of the following year, the treasury would run dry for most of the time. That's why the Personal Income Tax Act (bg: ЗДДФЛ) introduces advance taxation. This way, the state receives revenue evenly throughout the year.
Advance tax versus annual tax
Your income tax is paid in two stages - in advance during the year and finally with your annual tax declaration:
Advance tax refers to the payments you make each quarter during the current year. You calculate them based on the income you actually received during that quarter.
Annual tax is the final amount calculated in your annual tax declaration. It accounts for all your income and tax relief for the entire year.
The good news is that advance payments aren't an additional tax - they're deducted from your annual tax. If you've paid more in advance tax during the year than your final calculation shows you owe, you get the difference back. If you've paid less, you pay the remaining balance.
The tax rate in Bulgaria is 10% - a flat tax that doesn't depend on how much you earn. This makes calculations relatively straightforward, whether you're working out advance payments or annual tax.
Who owes advance tax
Do you owe advance tax? It depends on the type of income and your status. Let's look at the different scenarios.
Which types of income require advance tax
Advance tax is owed on income from:
- Freelance profession - programmers, designers, consultants, translators, and other freelancers
- Civil contracts - fees for specific tasks outside an employment relationship (similar to independent contractor agreements)
- Property rental - renting out an apartment, office, or other real estate
But who pays the tax to the NRA? It depends on whether you're registered as self-insured.
Who remits the tax
Employment contract - your employer handles everything, regardless of whether you're a self-insured person or not. They withhold tax from your salary every month and remit it to the NRA. You don't need to do anything extra - the tax is calculated and paid by your employer.
Self-insured person - for income from freelance activities, you bear the responsibility. You need to notify your client when you start working together that you are self-insured. After that, they have no obligation to withhold tax from payments to you. You receive the full amount on your invoice and from that point, you handle declaring and paying the advance tax each quarter.
Civil contract without registration as a self-insured person - here things depend on who the payer is. If you work with a company or a self-insured person, they withhold the tax from the amount and remit it on your behalf (Article 44 of the Personal Income Tax Act). You receive the net amount after tax deduction. However, if the payer is an individual (for example, you're building a website for a friend), you remit the tax yourself.
If you regularly receive income outside an employment relationship, you should register as a person exercising a freelance profession. This is standard practice for freelancers - you issue an invoice for the full amount, receive it, and calculate and pay the advance tax quarterly.
As a self-insured person, you always remit the advance tax yourself, regardless of whether your client is a company or an individual.
How to notify your clients
To prevent your client from withholding tax, you need to provide them with a written declaration under Article 43, paragraph 5 of the Personal Income Tax Act. There is no official template - the declaration is free-form.
What it must include:
- Your full name
- EGN/LNCh (personal identification number)
- Permanent address
- BULSTAT registration number (your business registration number in Bulgaria)
- A statement that you are a self-insured person within the meaning of the Social Security Code
Once you provide this declaration, your client has no obligation to withhold tax or social security contributions. They pay the full (gross) amount on your invoice and do not issue a Statement of Paid Amounts (a document Bulgarian payers would otherwise need to prepare when paying non-employees).
In practice, most freelancers provide this declaration once when starting work with a new client.
How to calculate advance tax
Advance tax is calculated on your tax base - what remains from your income after deducting statutory recognised expenses and social security contributions.
The formula
Advance tax = (Gross income - Statutory recognised expenses - Social security contributions) × 10%
Let's break down each component:
Gross income - this is the total sum of all payments received during the quarter. It includes invoiced amounts from clients, whether Bulgarian or foreign.
Statutory recognised expenses - the state recognises that you have business expenses without requiring documentation for them. For most freelance professions, statutory recognised expenses are 25% of gross income. Lawyers, authors, and artists can claim 40%.
Social security contributions - the social and health insurance contributions you've paid for the respective quarter. These are deducted from your tax base.
Practical example 1: Web developer with 25% statutory expenses
Let's take a real scenario. You work as a freelance web developer and earn an average of €1,500 per month. You pay contributions based on the minimum insurable income.
Monthly contributions on €550.66 (for individuals born after 31 December 1959):
- SSI (State Social Insurance - Pension Fund): €550.66 × 14.8% = €81.50
- SCPI (Supplementary Compulsory Pension Insurance): €550.66 × 5% = €27.53
- Health Insurance: €550.66 × 8% = €44.05
- Total monthly: €153.08
- Total for quarter: €459.24
Calculation for the first quarter:
| Component | Calculation | Amount |
|---|---|---|
| Gross income | 3 × €1,500 | €4,500 |
| Statutory expenses 25% | €4,500 × 25% | €1,125 |
| Income after statutory expenses | €4,500 - €1,125 | €3,375 |
| Social security contributions | 3 × €153.08 | €459.24 |
| Tax base | €3,375 - €459.24 | €2,915.76 |
| Advance tax 10% | €2,915.76 × 10% | €291.58 |
With income of €4,500 for the quarter, you owe advance tax of €291.58.
Practical example 2: Lawyer with 40% statutory expenses
If you practise law or another profession entitled to 40% statutory recognised expenses, the calculation looks different.
Calculation with the same income of €4,500:
| Component | Calculation | Amount |
|---|---|---|
| Gross income | 3 × €1,500 | €4,500 |
| Statutory expenses 40% | €4,500 × 40% | €1,800 |
| Income after statutory expenses | €4,500 - €1,800 | €2,700 |
| Social security contributions | 3 × €153.08 | €459.24 |
| Tax base | €2,700 - €459.24 | €2,240.76 |
| Advance tax 10% | €2,240.76 × 10% | €224.08 |
The difference is €67.50 less tax per quarter just because of the higher statutory expense rate.
Important clarifications
Your tax base cannot be negative. If your social security contributions exceed your income after deducting statutory expenses, you simply don't owe any advance tax for that quarter.
The contributions you deduct are those for the quarter's period, not those you pay during it. For example, for the first quarter you deduct contributions for January, February, and March - regardless of when exactly you paid them.
How to file the declaration
The declaration you need to file is called the Declaration under Article 55, paragraph 1 of ЗДДФЛ and Article 201, paragraph 1 of ЗКПО. Don't let the long name intimidate you - the actual filing process is quite straightforward.
Filing methods
As a self-insured person, you must file the declaration electronically through the NRA portal. You can use either a PIC (Personal Identification Code - a free access code you can get from any NRA office) or a QES (Qualified Electronic Signature).
If you have your calculations ready, the process is straightforward. Effortless Tax automatically calculates your advance tax based on the income you've entered, and all that's left for you is to submit the declaration.
Common mistakes to avoid
Filing a declaration for the fourth quarter - this is the most common mistake! You don't file a separate Article 55 declaration for the fourth quarter. The tax for the last three months is declared and paid with your annual tax declaration.
Wrong period - make sure you select the correct quarter when filling out the form. Mixing up the second and third quarters, for example, can lead to unnecessary corrections.
Forgetting to pay after filing - declaring and paying are two separate steps. Simply filing the declaration doesn't mean your tax is paid. You still need to make the transfer.
How to pay
After you file the declaration, you have several payment options:
- Directly through the NRA portal - the easiest method, you can pay immediately after filing the declaration
- Bank transfer - to the account of your regional NRA directorate
Deadlines for filing and payment
Advance tax is declared and paid on a quarterly basis, but only for the first three quarters of the year. The fourth quarter is an exception and has a special regime.
Deadline calendar
| Quarter | Period | Filing and payment deadline |
|---|---|---|
| First | Jan - Mar | 30 April |
| Second | Apr - Jun | 31 July |
| Third | Jul - Sep | 31 October |
| Fourth | Oct - Dec | No declaration required |
Remember the three deadlines: 30 April, 31 July and 31 October. These are the final dates for filing and paying your advance tax.
Why is no declaration required for the fourth quarter?
The tax for the final quarter is reconciled through the annual tax declaration under Article 50 of the Personal Income Tax Act.
Here's what happens in practice:
- By 30 April of the following year, you file your annual tax declaration
- In it, you calculate the total tax due for the entire year
- You deduct the advance payments you've already made for the first three quarters
- You either pay the difference or receive a refund for any overpayment
This way, the tax for October, November and December is automatically included in the annual reconciliation. There's no need for a separate declaration.
Conclusion
Advance tax isn't complicated once you understand the logic behind it. In short, it's how the state collects tax on your income throughout the year, rather than waiting for everything at once at year-end. Three dates are key: 30 April, 31 July, and 31 October - these are the deadlines for declaring and paying advance tax for the first, second, and third quarters.
Next steps:
- Calculate your expected income for the current quarter
- Deduct statutory recognised expenses (25% or 40%) and social security contributions
- Calculate 10% of the tax base - this is your advance tax
- Submit a declaration under Article 55 through the NRA portal
- Pay the amount due by the quarter's deadline
Frequently asked questions
Late payments accrue interest on the amount due for each day of delay. If you don't submit your declaration on time, you may receive a fine of up to €255. It's not ideal, but it's not the end of the world either - pay as soon as possible and move on. The NRA would rather receive the money late than not at all.
No, you don't. The declaration under Article 55, paragraph 1 of the Personal Income Tax Act is for declaring tax due, not income itself. If you have no income for the quarter, you have no tax due, so there's nothing to declare. Simply skip that quarter and submit a declaration when you have taxable income again.
You have several payment options: directly through the NRA portal (the easiest way - you can pay immediately after submitting your declaration) or by bank transfer to the account of your local NRA territorial directorate.
Yes, you can pay more. The overpaid amount will be deducted from your annual tax when you submit your annual tax declaration. If there's still a surplus after the deduction, you can request a refund or use it for future tax obligations.
Yes, the advance tax obligation doesn't depend on whether your clients are Bulgarian or foreign. If you're a tax resident of Bulgaria and receive income from self-employment, you owe advance tax on all your income - regardless of where it comes from. You submit a declaration under Article 55 for the first three quarters and pay the tax within the same deadlines.
If you're not registered as a self-insured person and work under a civil contract, the rules are different. When the payer is a company or a self-insured person, they withhold the tax from your payment and remit it to the NRA on your behalf. Only when the payer is an individual (for example, you're building a website for a friend) do you pay the tax yourself.
