6 ms·

The numbers in this article are wrong, especially the company vs individual chart: you'd only pay 16% tax with a company if you paid yourself in dividends. Past

by atxbcp 5y ago

The numbers in this article are wrong, especially the company vs individual chart: you'd only pay 16% tax with a company if you paid yourself in dividends. Past a certain threshold, with a company, the best option is to pay yourself a salary every month. Then your tax rate will be in the 11 - 15% range depending on your income. source: I've got a company in Bulgaria conclusion: coming to Bulgaria to pay less taxes can definitely be done, but hire a local accountant and get professional advice.

dimonomid 5y ago
Could you elaborate? Of course I do have a local accountant, and if what you're saying is true, I am disappointed she didn't mention that; they just said, paying salary will end up being more expensive than dividends.
- saberdancer 5y ago
  I'm not from Bulgaria but I think what was said is that you depending on profitability of your company you can pay out a part of the profit as a dividend (using the lower tax rate until the cutoff) and then the rest as a salary. It's not one or the other. As a company owner you can use both the dividend and pay yourself a salary.
  - dimonomid 5y ago
    While I def agree that those are not mutually exclusive and I considered paying myself a salary, but paying a salary still involves a bunch of extra taxes, which end up being more than the dividend's 5%. At least that's what I had from my accountant, but I'd be happy to know details of how to make the combination of salary+dividends to require less taxes than just dividends.
- atxbcp 5y ago
  By paying yourself with a salary via your company, you'd pay 10% revenue tax + health insurance (ЗО) + social insurance (ДЗПО, ДОО)... except the insurance part is capped on a maximum revenue of 3000 BGN or something like that... so as you make more money, your total tax rate converges to 10%. Take these numbers with a grain of salt because I'm no accountant, but I know for sure your accountant is wrong, because I know how much tax I pay, and that's close to 11.5% total.
  - dimonomid 5y ago
    Thanks, I'll research more into that. In the meantime, I clarified in the article that as long as a company is concerned, the article only focuses on the dividends option, and added the link to your comment.
  - dimonomid 5y ago
    My math still can't show how this is true. If we take a gross income of 20K BGN (which is not a bad income for a software engineer), then with dividends, net income will be roughly this: 20000*0.9*0.95-710*(0.148+0.05+0.08) = 16902, which means taxes are 15.59%. And if it all goes as a salary, then net is roughly this: 20000*0.9-3000*(0.148+0.05+0.08) = 17166, which means taxes are 14.17%. It's lower than dividends, but still far from the 11.5% that you mentioned. To get to 11.5%, the gross income has to be around 50K: 50000*0.9-3000*(0.148+0.05+0.08) = 44166, so the taxes are around 11.67%. Could you clarify in which range your gross income is, is it closer to 50K BGN than 20K BGN? I guess there can be some bonuses which aren't taxed, and this way one could reduce the tax, but paying large bonuses to myself smells too much to me since it's clearly done just to pay less taxes.
romaniatax 5y ago
In Romania you pay 7% tax for an LTD (dividend + corporate tax) and for up to 100k turnover you pay <2% as a consultant registered as a PFA (sole trader), or 10% as a non consultant but software engineer as a PFA. The cost of living is a bit higher than bulgaria but so is the standard of living (i.e.: I pay roughly 850 EUR rent pcm in Bucharest for a two bed flat, enjoy private health care and generally speaking a more decent living standard). Earn around 120k EUR per year and get to keep > 90% after tax as per above.
- fy20 5y ago
  I was working with a Ukrainian guy for a few years, and he was always complaining about taxes and how he wanted to pay less. Eventually he told us he was paying an effective tax rate of 7% :D
  - romaniatax 5y ago
    Considering how tax money are being used in these countries, even 7% is too much. I don't mind taxes, but there's too much embezzlement so some dude in the parliament can buy lambos. An issue common to countries in the region, but less so in Poland or Romania.
    - PaywallBuster 5y ago
      What about 40+ per cent charged in South Europe countries? Do you think they're all that better
      - romaniatax 5y ago
        These taxes we are debating here apply mainly to "contractors". In Romania there are incentives for permanent tech employees as well, getting closer to the 40% mark - a bit higher. Non tech seems like it's taxed more on par with northern europe (factoring in income tax, health care tax, and some other taxes idk much about).
- sbacic 5y ago

by atxbcp 5y ago

dimonomid 5y ago

Could you elaborate? Of course I do have a local accountant, and if what you're saying is true, I am disappointed she didn't mention that; they just said, paying salary will end up being more expensive than dividends.

saberdancer 5y ago
I'm not from Bulgaria but I think what was said is that you depending on profitability of your company you can pay out a part of the profit as a dividend (using the lower tax rate until the cutoff) and then the rest as a salary. It's not one or the other. As a company owner you can use both the dividend and pay yourself a salary.
- dimonomid 5y ago
  While I def agree that those are not mutually exclusive and I considered paying myself a salary, but paying a salary still involves a bunch of extra taxes, which end up being more than the dividend's 5%. At least that's what I had from my accountant, but I'd be happy to know details of how to make the combination of salary+dividends to require less taxes than just dividends.
atxbcp 5y ago
By paying yourself with a salary via your company, you'd pay 10% revenue tax + health insurance (ЗО) + social insurance (ДЗПО, ДОО)... except the insurance part is capped on a maximum revenue of 3000 BGN or something like that... so as you make more money, your total tax rate converges to 10%. Take these numbers with a grain of salt because I'm no accountant, but I know for sure your accountant is wrong, because I know how much tax I pay, and that's close to 11.5% total.
- dimonomid 5y ago
  Thanks, I'll research more into that. In the meantime, I clarified in the article that as long as a company is concerned, the article only focuses on the dividends option, and added the link to your comment.
- dimonomid 5y ago
  My math still can't show how this is true. If we take a gross income of 20K BGN (which is not a bad income for a software engineer), then with dividends, net income will be roughly this: 20000*0.9*0.95-710*(0.148+0.05+0.08) = 16902, which means taxes are 15.59%. And if it all goes as a salary, then net is roughly this: 20000*0.9-3000*(0.148+0.05+0.08) = 17166, which means taxes are 14.17%. It's lower than dividends, but still far from the 11.5% that you mentioned. To get to 11.5%, the gross income has to be around 50K: 50000*0.9-3000*(0.148+0.05+0.08) = 44166, so the taxes are around 11.67%. Could you clarify in which range your gross income is, is it closer to 50K BGN than 20K BGN? I guess there can be some bonuses which aren't taxed, and this way one could reduce the tax, but paying large bonuses to myself smells too much to me since it's clearly done just to pay less taxes.

romaniatax 5y ago

In Romania you pay 7% tax for an LTD (dividend + corporate tax) and for up to 100k turnover you pay <2% as a consultant registered as a PFA (sole trader), or 10% as a non consultant but software engineer as a PFA. The cost of living is a bit higher than bulgaria but so is the standard of living (i.e.: I pay roughly 850 EUR rent pcm in Bucharest for a two bed flat, enjoy private health care and generally speaking a more decent living standard). Earn around 120k EUR per year and get to keep > 90% after tax as per above.

fy20 5y ago
I was working with a Ukrainian guy for a few years, and he was always complaining about taxes and how he wanted to pay less. Eventually he told us he was paying an effective tax rate of 7% :D
- romaniatax 5y ago
  Considering how tax money are being used in these countries, even 7% is too much. I don't mind taxes, but there's too much embezzlement so some dude in the parliament can buy lambos. An issue common to countries in the region, but less so in Poland or Romania.
  - PaywallBuster 5y ago
    What about 40+ per cent charged in South Europe countries? Do you think they're all that better
    - romaniatax 5y ago
      These taxes we are debating here apply mainly to "contractors". In Romania there are incentives for permanent tech employees as well, getting closer to the 40% mark - a bit higher. Non tech seems like it's taxed more on par with northern europe (factoring in income tax, health care tax, and some other taxes idk much about).
sbacic 5y ago