GigsTalk 2 - Accounting Tips for Freelancers
Freelancing is awesome - it gives you the freedom to decide your own place and pace of work, you have clients and you are your own boss. As long as you know how to set up your freelancing business in the right way, it can be a dream come true. Yet, all of us who have experience working for ourselves know how important it is to get valuable advice in areas where we lack expertise. In the corporate world you get departments or at least experts in different areas. When you work for yourself - well, you have to find them somehow. And this is exactly what we at GigsRemote are committed to doing for you: ensure that you have access to the right professionals who can provide answers to your questions in order to make your journey successful without headaches.
In March we invited our partners from Sb Accounting and Consulting, a leading company providing expertise and services to many digital nomads, freelancers, and companies in Bulgaria. We asked them to share their knowledge and help our freelancing community to understand some extremely important topics related to setting up their accounting and administrative aspects of work.
On Sb Accounting & Consulting webpage specially prepared for this occasion you can read more on the topic, and bellow are some answers to questions asked during the event.
Questions & Answers Asked During the Event
If I am registered as a self-employed freelancer in Bulgaria, do I need VAT registration? – Yes, after you reach the threshold - if you provide services to local companies with an annual value of more than BGN 100,000. Yes, in advance - if you provide services to foreign EU companies regardless of turnover. No - if your customers are outside the EU.
What about VAT registration for IT services if my client is located in the UK? – No, this is not needed. From Jan 1, 2021, the United Kingdom is considered a third country towards the EU for VAT purposes related to services. The exception is when it comes to goods - then the Northern Ireland / Ireland Protocol is taken into account. Thus, if the subject of the transaction is goods, the EU legislation in the field of VAT will continue to be applied. On the other hand - for services, these rules are no longer applicable. Therefore, when you provide an IT service to a business in the UK, the place of performance will be where the client is established and this turnover does not count for VAT registration in Bulgaria.
I am a self-employed freelancer in Bulgaria and already have a VAT registration. Do I have to charge VAT when providing IT services to businesses outside the EU? No, this service is not taxable with added value tax and in this case, no VAT should be charged on your invoice to the client even if you are VAT registered in Bulgaria.
I work on an employment contract with a local employer on the maximum insurance income. I am about to conclude an agreement for the provision of IT services with an American company. Which is better for me? - To register as a self-insured freelancer or to open a company - Freelancer status is better for you. The income tax in this case will be only 7.5 percent, and you will not owe payroll insurance at all. Because your income is from the US you will not need to register for VAT. The registration, suspension and de-registration procedure for freelancers is extremely simplified. The administrative fees for servicing this form are lower than the company.
I am a self-employed freelancer in Bulgaria and won a 5-month project in Germany. During this period, I will travel often to the client's site there and I will be working in their office for quite a while. Do I need A1 in this case? – Yes, in case you perform cross-border activity with physical presence as well as carrying out services simultaneously in more than one EU member state (including the UK) you need to obtain A1 from the Bulgarian authorities. In this case social insurance will be due in Bulgarian only. The planned duration of the activity in the other Member State shall not exceed 24 months.
If I am registered as a self employed freelancer in Bulgaria and work on an IT project in the UK, do I owe income taxes there? - No, it shouldn't be the case. Even if the local law of the country requires the payer of the income to prove that the recipient is not established on the territory thereof, this is usually done with a certificate of residence and its presence exempts the payer of the income from the need to withhold income taxes. Things are different if the payer of the income is a person from a country with which Bulgaria does not have a Double Taxation Treaty. In this case it is possible to have a tax deduction as per the requirements of the local fiscal legislation.