How to pay international contractors in Bulgaria


Sep 5, 2023


Rana Bano

Celebrated for its profound historical context and cultural heritage, Bulgaria is flourishing into a hub for hiring skilled professionals. With a literacy rate of 97.52%, the country offers a well-educated and talented workforce. Additionally, its rapidly expanding outsourcing sector has attracted foreign investors, contributing significantly to Bulgaria's GDP.

However, prior to harnessing the potential of Bulgarian contractors, you must acquaint yourself with the procedures around correctly categorizing, onboarding, and compensating them—all while adhering to the nation's comprehensive labor laws.

Wondering how to pay your international contractors in Bulgaria? Here's a step-by-step breakdown.

Step #1: Classify your workers in Bulgaria

In Bulgaria, there are clear rules for distinguishing between employees and independent contractors, outlined in the Obligations and Contracts Act (OCA). According to this law, an individual is considered an independent contractor if they:

  • Have the freedom to choose when and where they work
  • Operate independently without close supervision
  • Use their own tools and equipment for their tasks
  • Can work for multiple companies simultaneously
  • Determine their own payment terms
  • Can involve others to assist with their work

In the event of misclassification, whether intentional or not, your business could face significant penalties and fines imposed by the Bulgarian government. This exposes you to additional risks, such as potential lawsuits, retroactive taxes, and possible harm to your company's reputation. 

Luckily, there are certain tests to help you accurately classify hires as employees or contractors under the law. These tests will help you ensure you remain legally compliant.



High level of worker control. Contractors often enjoy more independence in deciding how to get the job done and when to do it.

More direction from the employer. Employees usually work under closer supervision and follow guidelines from their employers, who offer instructions on task execution and may establish specific work hours.

Workers typically bring their own tools and equipment as contractors.

Companies usually provide the necessary tools and equipment for employees.

Less integrated. Contractors tend to be more self-reliant, often working remotely, and employing their personal tools.

Highly integrated. Employees frequently become integral parts of the company, oftentimes operating from the company's premises.

No entitlement to benefits. Contractors aren’t entitled to the same benefits and safeguards provided to employees; they're also responsible for handling their own tax obligations.

Entitled to benefits. Employees receive specified employment benefits and protections like minimum wage, overtime pay, and vacation compensation. They may receive further benefits such as health insurance, maternity leave, retirement plans, and paid sick leave.

Time-bound engagement. Contractors are typically engaged for specific projects or durations.

Indefinite engagement. Employees are generally hired without a predetermined end date.

Risk of loss. Contractors might shoulder greater liability related to their work.

No risk of loss. Employees are generally shielded from liability concerning work-related matters.

Subcontracting. Contractors can delegate work to others or subcontract to external entities.

No subcontracting. Employees are expected to complete their tasks personally, and delegation typically needs company approval.

Step #2: Determine the best way to pay your contractors in Bulgaria

Once you've identified your new Bulgarian hire as a contractor, the next step is to explore methods to pay them compliantly and on time. The good news is that you have several options to pay your contracted workers correctly, each designed to simplify international payments:

  • Bank transfers. You can open a bank account in Bulgaria and put money directly into your contractor's account. Or you can use your bank to send money internationally.
  • International money orders. You can buy a money order, which the contractor can deposit later. Keep in mind money orders often have transactional fees and bad exchange rates, plus the method is slower.
  • Digital wallets or payment platforms. You can use digital platforms like Wise and PayPal to pay your contractors in Bulgaria. But remember, not all platforms work in Bulgaria (like Venmo, which only works in the US). Also, exchange rates change, so it's hard to know exactly what your outgoings will be.
  • Global payroll services. Generally, contractors aren't part of a company's regular payroll because they aren’t subject to the same deductions as employees. They send invoices for their work, and the payments normally go through accounts payable. However, with Rippling, you can pay your Bulgarian employees and contractors in one go, regardless of location.

Step #3: Use global payroll software to process payments for Bulgarian contractors 

While there are several ways to pay Bulgarian contractors, the fastest and most straightforward approach is through global payroll software.

With Rippling, you can efficiently compensate contractors worldwide. Here's a breakdown of Rippling's global payroll system:

Step #4: Ensure your Bulgarian contractor has the right tax information 

Foreign employers aren't obligated to handle income tax withholdings and payments for contractors in Bulgaria; it's the contractors' responsibility to manage their own taxes and social security contributions.

If your contractor operates as a sole trader, they must pay a fixed 15% rate on their business profits annually, regardless of their earnings. However, if they've registered as a freelancer, their tax rate will vary based on their profession.

Self-employed people in Bulgaria are also required to submit their income tax returns by the specified deadline to avoid a fine, which can amount to at least BGN 500 (approximately $280).

Furthermore, both sole traders and freelancers in the Republic of Bulgaria must fulfill compulsory social insurance contributions. A breakdown of these contributions can be found on the NRA website.

Frequently asked questions about running payroll for contractors in Bulgaria

Do you need to withhold taxes when paying contractors in Bulgaria?

No. As a foreign employer, you don't have to withhold taxes when paying contractors according to Bulgarian law.

Does the Bulgarian minimum wage apply to independent contractors in Bulgaria?

The current minimum wage in Bulgaria is BGN 780 per month. However, the minimum wage laws don't apply to independent contractors in the country.

Do Bulgarian contractors get benefits?

No. Bulgarian contractors are generally not entitled to the same benefits as employees, including paid leave, annual leave, and sick days.

Can you pay contractors in Bulgaria in your home currency?

Ideally, you should compensate international contractors using their native currency. In the case of Bulgaria, the local currency is the Bulgarian lev (BGN). Nevertheless, if contractors provide written consent, you can pay them in a different currency.

Can you manually pay contractors in Bulgaria?

Yes. While attempting to cut costs, small business owners might manually handle contractor payments. However, as your business expands and you collaborate with multiple contractors from different countries, this can become taxing. Moreover, manual payroll processing entails certain risks:

  • Compliance: Manual processing leaves room for human errors and oversights that could breach local regulations. A platform like Rippling automatically ensures compliance with applicable labor laws, regardless of your contractors' locations.
  • Security: Using spreadsheets or paper records for manual processing poses security and privacy risks, potentially resulting in the loss, theft, or mishandling of sensitive employee data.

Rippling seamlessly integrates your business's HR data with payroll, eliminating the need for manual data input. This streamlined system guarantees prompt and compliant payments to employees and contractors across the globe, all in a single pay cycle.

How do you turn a contractor into an employee in Bulgaria?

Once you've collaborated with a Bulgarian contractor for some time, you might decide to elevate their role and bring them on board as a full-time employee. However, onboarding them can present logistical and compliance challenges, given the complex nature of Bulgarian labor regulations. 

Rather than working out a new employment contract or hiring a Bulgarian employment law specialist to navigate this transition, consider using an Employer of Record (EOR) like Rippling to streamline the process. Rippling helps you convert contractors into full-time employees with legally sound paperwork, benefits management, payroll, and more.

Rippling and its affiliates do not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any related activities or transactions.

last edited: September 5, 2023

The Author

Rana Bano

A Kolkata-based B2B and business trends writer, Rana writes on global workforce onboarding and management, with expertise in Japan, Mexico, Portugal, and, of course, India.