More and more foreign employers are turning their attention to Bulgaria in their search for workers, which is reflected in the increasing outsourcing of services and IT services. Some of these foreign legal or natural persons continue to carry out their business or professional activities in one or more EU Member States without changing their registered office or residence, registering subsidiaries or branches in Bulgaria. However, they enter into employment relationships with persons residing and working in Bulgaria without setting up a permanent establishment. The lawful development of these cross-border employment relationships requires an answer to the question about which law would be applicable in these cases, which governs not only the amount of remuneration and the terms of payment, but also the payment of social security contributions and registration of the foreign employer in Bulgaria.
I. Applicable law
In order to answer this question, Regulation (EC) No 883/2004 of the European Parliament and of the Council of 29 April 2004 on the coordination of social security systems, hereinafter referred to as "the Regulation", must be taken into account. According to Article 11 of the Regulation, a person who is employed in a Member State is subject to the legislation of that Member State, in this case - Bulgaria. I.e. the calculation and payment of remuneration and social security contributions for the employee residing on the territory of the Republic of Bulgaria is governed by Bulgarian law. The provisions of Article 21 of Regulation (EC) No 987/2009 shall also apply, whereby the employer who has his registered office or establishment outside the competent Member State shall comply with the obligations laid down by the legislation applicable to his employees, namely the obligation to pay the contributions required by that legislation, as if the employer had his registered office or establishment in the competent Member State. It follows that the foreign employer who has concluded an employment contract with a worker or employee resident in Bulgaria who also performs his work in Bulgaria is subject to Bulgarian social and labour law and accordingly has to pay social security contributions in the country, regardless of the fact that he has his registered office or establishment in another Member State.
II. Registration at the National Revenue Agency (NRA)
According to the provisions of the Bulgarian Social Security Procedure Code, every employer is obliged to calculate and pay social security contributions in favor of his employees, and this results in his function as an "social security carrier". The NRA keeps registers of obligated persons, the registration therein is made ex officio based on the the data published in the Commercial Register, BULSTAT register and other public registers. Since this hypothetical person is a foreign person who is not registered in these registers, additional documents identifying this person and assigning a service number must be submitted at the NRA. These documents must be submitted by the employer when fulfilling his/her obligations under Art. 62, para. 3 of the Bulgarian Labour Code for submitting a notification to the NRA regarding the conclusion of an employment contract.
The following documents must be submitted:
- current extract from the Commercial Register for the foreign legal entity, issued by the competent authority at the registered office of the company, which extract, except for some exceptions (e.g. for documents of persons resident in Austria), must be accompanied by an apostille and a translation into Bulgarian by a publicly recognised translator. The extract should show
- Company name and registration number of the legal entity, if any;
- Representative and representation arrangements;
- Registered office and business address, etc.
- Certificate of tax registration issued by the tax office at the registered office of the company as well as a certificate with a VAT number of the company. These must also be certified with an apostille.
Once these documents have been received by the NRA, they are checked by the officials and the foreign employer is then assigned a service number on the basis of Art. 82 Para. 4 of the Tax and Social Security Procedure Code.
The foreign employer must then conclude the employment contracts with his employees in Bulgaria in accordance with Bulgarian law.
After registration as a foreign employer, the company (in person or through a representative) is obliged to submit monthly declarations on the taxes and social security contributions to be paid to the NRA. Therefore, it is strongly recommended that the employer opens an account in Bulgaria to make payments to the national budget. Experience shows that social security contributions and taxes transferred from a foreign account are often incorrectly booked by the NRA.