Bulgaria’s reputation has transformed from an ‘unstable’ country regulations-wise to one now providing a consistent, reliable environment for HR and payroll operations.
Decades of change
Bulgaria’s transition to democracy has seen regular legislative changes, including to rules affecting payroll. The constant revisions made to social security laws, pensions, taxes, etc. were to an extent to be expected, due to the uncertain atmosphere around the new political system. However, this period of uncertainty is now behind the country, and today Bulgaria’s political parties try to avoid making major changes in legislation - notably in the HR and payroll field.
In recent years there have been hardly any major changes related to HR and payroll rules in Bulgaria. Social security and health security instalments and the way they are calculated have not been subject to amendment for some time, and changes are not anticipated in the near future.
Similarly, taxes have also remained constant and the local market has no reason to believe there will be any change shortly, as it is well recognised that a stable legislative environment creates broader economic stability. Local businesses do not find themselves needing to tune their administrations to accommodate frequent change. In the past, rules would change on an annual basis; sometimes quite dramatically.
Bulgarian HR rules are well established, with the only regular changes being legislative upgrades intended to create a better environment for employers, taking into account the local labour legislation (which is not as modern as foreign investors would prefer or be accustomed to).
Social security and tax rates
Bulgarian social and health security rates are among the lowest in Europe and there is no expectation of an increase in these rates in the foreseeable future. Local rules provide for the social security cap. If an employee (or other socially insured person) receives more than BGN 2,600 (approx. €1,300) per month, the amount exceeding this cap will remain out of the scope of the social security calculations. Although this cap is sometimes increased at the beginning of each year, in general it does provide for a limit of the social (and health) security installments due to the local budget.
Taxes are also easy to anticipate and calculate in Bulgaria. The country’s flat 10% income tax is well accepted by the leading political parties and there are no specific indications of any change of stance. Combined with relatively low salary costs, it’s easy to understand why Bulgaria is a preferred destination for employers looking to decrease their overall personnel-related costs.
Electronic correspondence and reporting
Bulgaria’s ‘electronic governance’ has mostly developed around correspondence and reporting to the local revenue authorities. Almost all required declarations, submissions and exchanges of information from the local employer can be processed online via the National Revenue Agency’s platform. Recently the National Social Security Institute also developed an online platform, allowing for more necessary declarations and reports to be submitted online.
Bulgaria is still working towards the implementation of full electronic coverage of the services provided by local institutions, but it is increasingly apparent that paperless correspondence with the authorities will be ‘the norm’ in the future.
Demanding compliance requirements
While Bulgarian HR and payroll administration can now be managed online in what is quite a stable and attractive regulatory environment, local compliance remains a burden, particularly for foreign companies. The many short, strict deadlines, form fulfillments and correspondence - in the Bulgarian language – can be difficult to navigate.
While HR and payroll rules have not changed much in recent years, they are scattered amongst different laws, regulations and ordinances; many of them quite vague to those without an understanding of the local market. The authorities also regularly publish letters with instructions to taxable persons which should be considered for compliance purposes.