Are you planning to start working as an influencer, or are you already doing it professionally? One thing is certain – in recent years, the influencer profession has gained immense popularity. With the rise of social media platforms like Instagram, Facebook, and TikTok, influencers have become key figures capable of shaping the behaviour and preferences of thousands, even millions, of followers.
In this article, we will explore the aspects of influencer taxation, the different ways in which they can conduct their activities, and provide useful tips for influencers in Bulgaria.
What does an influencer’s work involve?
Influencers use social media to promote products, services, or ideas. They have great flexibility and creative freedom, allowing them to work from anywhere and at any time. This makes them attractive to various companies looking to reach target audiences in an authentic and direct way.
Are the earnings of influencers from social media platforms like Instagram, Facebook, and TikTok subject to taxation?
Influencers’ income is subject to taxation under the Personal Income Tax Act (PITA). The tax rate in Bulgaria is 10% on taxable income. Every influencer is required to declare their earnings and pay the applicable taxes in accordance with the law.
Forms of Conducting Business
Employment Contract
Advantages:
- Income from employment relationships does not need to be declared in the annual tax return under Article 50 of the Personal Income Tax Act (PITA) if it is the only source of income for the individual during the calendar year.
Disadvantages:
- Social Security contributions and taxes are due regardless of the income amount or whether the individual is insured on another basis.
- The net amount received is significantly lower than the agreed gross salary due to deductions.
Civil Contract
Advantages:
- If an influencer is not insured on another basis and the amount, after deducting the legally recognized expenses of 25%, does not exceed the minimum wage, only a 10% tax is deducted from the remaining amount.
- The company that has signed the civil contract with the individual is responsible for withholding and paying the due taxes.
Disadvantages:
- Does not provide stable employment or a steady income.
Sole Trader (ET)
Advantages:
- Simplified registration procedure.
- Lower state fees.
- The individual is fully self-insured at their own expense.
- Easy procedure for deregistration from the Commercial Register.
Disadvantages:
- The individual is personally liable for all business obligations with their entire personal property.
Sole proprietorship with limited liability (EOOD)
Advantages:
- Limited liability – liability is restricted to the company’s capital.
Disadvantages:
- Higher state fees for establishment.
- The annual financial closing procedure is more complex.
- Business activities are subject to the Corporate Income Tax Act (CITA).
- To transfer company funds to personal ownership, a 5% dividend tax must be paid.
Freelancer (Self-Employed Professional)
Advantages:
- Easy registration process.
- The individual is fully self-insured at their own expense.
- Recognized business expenses.
- Flexibility in income management.
- Legally recognized expenses for freelancers amount to 25% of their income, reducing the taxable base.
Disadvantages:
- Must possess a document proving professional qualification to practice the profession.
- Without such a document, registration as a freelancer is not possible.
The Impact of YouTube on Influencer Marketing
YouTube is another key platform that has significantly changed the game for influencers. Many of them create video content that attracts millions of viewers and generates substantial revenue from ads and sponsorships. According to YouTube data, more than 2 billion users visit the platform monthly, with over 1 billion hours of video content watched daily on average. This makes YouTube a powerful tool for influencers looking to expand their audience and increase their earnings.
Additionally, YouTube influencers must consider the specific tax requirements and income reporting obligations associated with this platform.
VAT Law and Influencer Marketing
Influencers registered as Sole proprietorships with a limited liability company (EООD) or sole proprietors (ET) must monitor their VAT registration obligations. If their income exceeds the VAT registration threshold (166,000 BGN in the last 12 months), they must register with the National Revenue Agency (NAP). Working with taxable entities within and outside the EU also requires compliance with VAT regulations.
Legal Sanctions for Non-Declaration of Income
If an influencer fails to declare income and pay the required taxes, the National Revenue Agency (NAP) may subject them to tax audits and sanctions. These can include fines, interest charges for late tax payments, and other administrative measures.
Why? What Motivates Influencers to Exit the Shadow Economy?
Business Legalization
Registering and declaring income allows influencers to legalize their business. This is especially important for the long-term stability and growth of their brand. A legal status opens up opportunities for collaborations with larger and more reputable companies that require transparency and compliance from their partners.
Financial Security and Credit Access
Declaring income enables influencers to access various financial services, including loans and leasing options. Banks and financial institutions prefer working with clients who have stable and declared income, as it reduces the risk of insolvency.
Social Security and Pensions
One key benefit of registration is that influencers begin making social security contributions, ensuring access to healthcare and pension services. This provides financial stability and security in the long run.
Professional Reputation
Registering and declaring income also contributes to building a professional reputation. Compliance with the law fosters trust among both business partners and followers, enhancing credibility and brand image.
Pro Tip
Influencers who can register as copywriters or other self-employed professionals may leverage this opportunity to optimize their tax obligations. Self-employed professionals benefit from a 25% legally recognized expense deduction, which reduces their taxable income.
Conclusion
Influencer marketing in Bulgaria offers numerous opportunities for creative individuals looking to monetize their popularity and influence on social media. Whether you choose to work under an employment contract, a civil contract, as a sole proprietor (ET), a sole proprietorship with a limited liability company (EООD), or as a freelancer, being informed about tax obligations and legal requirements is crucial.
Registering as a self-employed professional offers significant advantages in terms of tax optimization and income management flexibility. For influencers looking to maximize their earnings and avoid legal issues, choosing the right business structure is essential.
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