Freelancer Income Tax in Bulgaria: Advance Tax, Annual Return and Statutory Expenses

Why freelancers should think about tax during the year, not only before the annual return

The most common mistake is to collect payments throughout the year and only later start looking for invoices, platform reports, payment statements, social security contributions and tax records. When this happens, the annual tax return becomes a reconstruction exercise instead of a normal closing process.

Freelance income taxation is manageable when the year is organised month by month. Every income item should be recorded, every payment should be linked to a client or platform, social security should be monitored, advance tax should be planned and the annual return should be based on a structured year-end summary.

What income does a freelancer declare?

A freelancer declares income acquired from the professional activity according to the applicable personal income tax rules. The income may come from Bulgarian clients, foreign clients, platforms such as Upwork and Fiverr, PayPal, Revolut, Wise, bank transfers or other payment channels. The important question is not only where the money appeared, but what the real income source was.

With platforms and payment processors, the freelancer must distinguish between gross income, platform fees, payment fees and net received amounts. Looking only at the bank receipt can create an incomplete tax picture.

25% statutory recognised expenses for freelance profession income

One of the most important elements in the taxation of freelance profession income in Bulgaria is the use of statutory recognised expenses. For income from a freelance profession, the Bulgarian National Revenue Agency states that the income acquired is reduced by 25% statutory recognised expenses when assessing taxable income.

This makes the self-employed freelance model practical for many individual service providers because the tax calculation does not depend on proving every small business cost. However, statutory recognised expenses do not eliminate the need for proper documents. Invoices, payment evidence, platform reports and client data remain essential.

How the taxable base is calculated in practice

The practical logic is: start from acquired income, reduce it by the statutory recognised expenses, consider the applicable mandatory social security contributions, and determine the taxable income. The exact calculation depends on the type of income, the payer, the period, paid contributions and whether the tax is being calculated in advance or annually.

Advance tax: when freelancers need to plan during the year

Advance tax allows part of the personal income tax to be handled during the year instead of only with the annual return. For freelancers, it is important to know who is responsible for calculating, withholding, paying and declaring advance tax. The answer may differ depending on whether the income is paid by a Bulgarian payer, a foreign client or a platform.

When income comes from foreign clients or platforms, the freelancer often needs to monitor the position directly and should not assume that someone else has handled Bulgarian tax. When income comes from a Bulgarian enterprise or another relevant local payer, the role of the payer should be checked.

Bulgarian income vs foreign income

Bulgarian and foreign income should be organised differently from a practical point of view. A Bulgarian client may provide local documentation, while a foreign client will require the freelancer to keep the agreement, invoice, payment evidence, currency data, proof of service and, where relevant, VAT logic.

Foreign clients also require a VAT review: whether the client is a business or individual, whether the client is in the EU or outside the EU, whether there is a valid VAT number, whether Article 97a VAT registration is relevant, and whether VIES or reverse charge wording applies. This is covered in the next article, but the documentation should already be prepared here.

Minimum data for foreign income

• Name and country of the client.
• Whether the client is a business or individual.
• VAT number, if the client is an EU business.
• Description of the service.
• Invoice or other document.
• Date of payment.
• Currency.
• Platform or payment processor fees.
• Net amount received.
• Bank or payment institution statement.

Upwork, Fiverr and other platforms: gross income, fees and payout

Platforms make finding clients easier, but they make the accounting trail more complex. A freelancer may see one amount as project earnings, another amount as platform fee, another as payout and another as bank receipt after currency conversion.

Platform reports should be downloaded regularly. They should show projects, clients where available, gross amounts, commissions, service fees, refunds, payouts and currencies. Where the platform issues fee documents or tax forms, these should also be retained.

PayPal, Revolut, Wise and currency payments

PayPal, Revolut and Wise are payment channels. They show movements of money, but they do not always show who the client was, what service was supplied or how the income was formed. Each payment should therefore be linked to an invoice, agreement, platform report or another supporting document.

What to keep from payment channels

• Monthly statements.
• Transaction history.
• Fees.
• Currency conversions.
• Date of receipt.
• Currency.
• Link to invoice or client.
• Link to platform payout, where relevant.

The annual personal income tax return

At year-end, the freelancer must summarise the income and prepare the annual personal income tax return. The return should not be prepared only from bank statements. It should be based on a yearly summary that includes clients, invoices, platforms, currencies, payment fees, social security contributions and advance tax.

Documents from Bulgarian payers

When income is paid by a Bulgarian company or another local payer, the freelancer may receive documents showing income paid, tax withheld or other relevant data. These documents should be kept and compared with the freelancer’s own annual summary.

The freelancer should not rely entirely on the payer’s records. There may be other clients, foreign income, platform income or payments outside the payer’s knowledge. The freelancer or accountant should maintain the full annual picture.

Tax reliefs and other personal income items

The annual personal income tax return may include more than freelance income. There may be employment income, civil contracts, rental income, investment income, tax reliefs, children, donations, insurance products or other personal tax elements.

This is especially important for people who have both employment and freelance income. The annual tax and social security position should be reviewed as a whole, not as isolated invoices.

Annual freelancer summary

The best way to prepare the annual return is to maintain an annual summary throughout the year. It should include all income, payments, social security contributions, advance tax, platforms and currencies.

Year-end checklist for freelancers

At the end of the year, the freelancer should check whether all data is available. This checklist is a practical filter before preparing the annual return.

1. All invoices issued to clients are collected.
2. All agreements, offers or project statements are collected.
3. All Upwork, Fiverr or other platform reports are downloaded.
4. PayPal, Revolut, Wise and bank statements are downloaded.
5. Gross income, fees and net receipts are separated.
6. All currencies and conversions are reviewed.
7. Documents from Bulgarian payers are collected, where applicable.
8. Social security contributions are summarised.
9. Annual social security equalisation is reviewed.
10. Advance tax is reviewed.
11. Other income sources are checked.
12. Tax reliefs are reviewed.
13. VAT and VIES obligations are checked.
14. An annual summary by clients and platforms is prepared.
15. The annual personal income tax return is prepared and archived.

How this article connects to VAT and documents

Income tax is only one layer. The next layer is VAT, especially where there are EU business clients, VAT numbers, reverse charge invoices, VIES declarations and purchases from foreign suppliers such as Google, Meta, Adobe, OpenAI, hosting or SaaS platforms.

The next part of the series is: VAT for Freelancers in Bulgaria: EU Clients, Reverse Charge and VIES.

The previous parts are: the business model and registration and social security.

Official sources

Income tax for freelancers should be reviewed using current official sources. The correct treatment depends on the type of income, payer, period, social security contributions and the person’s full annual tax position.

• Bulgarian National Revenue Agency: Advance income tax
• Bulgarian National Revenue Agency: Annual income tax
• Bulgarian National Revenue Agency: Self-contributing persons
• Bulgarian National Revenue Agency: Health insurance – insured persons
• Bulgarian National Revenue Agency: VAT in Bulgaria