Bulgarian legislation permits two options for the social security coverage of the manager of an EOOD or OOD. Most often, the sole owner of the capital or the partner holding the largest share takes on the role of manager, but this function may also be performed by a third party. The manager may be insured under a management and control contract (ДУК) or as a self-insured person, with the second option usually being preferred in small and medium-sized enterprises.
The Commerce Act provides that the relationship between the manager and the company is governed by a contract assigning the management, but the signing of such a contract is not mandatory.
Social security coverage under a management and control contract (ДУК)
If a management and control contract has been concluded and remuneration for the manager is provided for, the contract is treated as an employment contract for the purposes of social security legislation. The manager is insured against all social risks, including sickness, maternity, invalidity, old age, occupational accident, occupational disease and unemployment. For those born after 31 December 1959, contributions towards supplementary mandatory pension insurance are also payable, as are health insurance contributions.
Even if the remuneration is not specified in the contract, it may be determined by way of an additional agreement or by a decision of the sole owner or the general meeting. In this case too, an obligation arises to insure the manager against all risks and to pay mandatory pension and health insurance contributions.
Contributions are due on the remuneration accrued, including remuneration that has not been accrued but is payable, which must be reflected in the company's accounts. Where the remuneration is below the minimum social security income determined for the company's economic activity and occupational group, contributions are due on that minimum income. For managers, the minimum social security thresholds are set out in the "Managers" column according to the Classification of Economic Activities (КИД-2008). The maximum monthly social security income is BGN 3,000 (as at 2019).
Social security contributions are apportioned between the company and the manager, while the contribution to the "Occupational Accident and Occupational Disease" Fund is borne entirely by the company.
Social security coverage as a self-insured person
In the absence of a management contract, or if the contract specifies no remuneration, the manager is insured as a self-insured person, in which case the contributions are for the manager's own account and the company incurs no expense in respect of them.
When self-insured, the manager must compulsorily pay contributions for invalidity, old age, death and health insurance. The manager may, at their own discretion, add insurance for general sickness and maternity in order to be entitled to sick leave.
Contributions are made on a chosen monthly income, which must fall between the minimum and maximum social security income for the year. As at 2024, the minimum social security income for self-insured persons is BGN 933, and the maximum is BGN 3,750.
Within 7 days of commencing activity, the manager files a declaration with the Territorial Directorate of the НАП for registration as a self-insured person. When self-insured, contributions are lower, and the minimum social security income is below the minimum social security threshold for the relevant economic activity and qualification group. A disadvantage is that these contributions are not recognised as an expense of the company and do not reduce the taxable profit.
Should you need additional information, a consultation or assistance, please contact us on tel.: 0887550706 or by e-mail: [email protected]
