OLX has established itself as one of the leading platforms for buying and selling goods and services in Bulgaria, including for freelancers. Whether you are offering handmade products, electronics, or even personal items, as a registered freelancer, it is essential to follow proper accounting and tax practices and accurately declare the income you receive from sales on OLX.
This will not only help you remain compliant with local regulations but will also allow you to optimize your earnings and avoid potential issues with the National Revenue Agency (NRA). Properly accounting for revenue generated through platforms like OLX is crucial, as every freelancer is legally required to declare their income and expenses in accordance with the law.
Legal and Accounting Aspects of Sales on OLX
Sales on OLX by Individuals Registered as Freelancers
Sales made on OLX by individuals registered as freelancers are considered part of their professional activity. Such individuals may include:
- Artists selling their artwork;
- Craftsmen selling their handmade products;
- Handmade creators offering their custom-made items;
- Others engaged in similar activities.
You can find a full list of all recognized freelance professions [here].
Every income generated from sales must be properly recorded and declared as part of the freelancer’s professional activity.
Reporting Income from OLX
Accounting for income from OLX in Bulgaria depends on whether you are selling goods and services as an individual or if you are registered as a freelancer or a business. Here are some key points to consider:
Taxable Income
If you are registered as a freelancer, any income from sales through OLX is considered taxable. These earnings must be properly recorded and declared in your annual tax return.
For example, if you sell goods worth 5,000 BGN through OLX over the course of the year, this income must be included in your annual tax declaration and accounted for in accordance with the legal requirements.
Documenting Sales
For every sale made through OLX, you are required to issue an invoice if the buyer is a company or a taxable person. If the buyers are individuals, a cash receipt can be used in cases where the payment is made in cash.
VAT Registration
If your total annual revenue exceeds the 166,000 BGN threshold, you are obligated to register for VAT. VAT must be charged on the goods or services you sell through the platform, and you are responsible for submitting monthly VAT declarations.
Self-Insurance Contributions
If you are registered as a self-employed person, you must pay social security contributions on your income from OLX activities. These contributions include health and pension insurance and are calculated based on your declared income.
Expenses Deduction
You can deduct statutory recognized expenses (25% for self-employed professionals) from the revenue you generate through OLX, reducing your taxable income.
To avoid issues with the National Revenue Agency (NAP), it is crucial to maintain accurate records of your income and expenses. The best approach is to consult an accountant to ensure that you comply with all legal requirements and that your taxation is optimized.
Free 30-minute consultation for new clients.
Taxation on Sales via OLX
For individuals registered as self-employed professionals in Bulgaria, all income—including revenue from OLX sales—is considered part of their total annual income. These earnings are subject to a 10% income tax, after deducting the statutory recognized expenses (25% for most freelance professions). Keeping track of all income sources is essential, including small one-time sales, as they are also subject to taxation.
Failure to declare or misreport OLX income can result in fines from the National Revenue Agency (NRA). Furthermore, revenue from OLX affects social security contributions, making it important to keep all relevant documents (invoices, receipts) for accurate reporting and tax optimization.
Social Security and Taxable Income from OLX
For self-employed individuals, social security contributions are calculated based on taxable income, including earnings from OLX sales. Contributions are not limited to the minimum insurance threshold but are based on actual income if they exceed the minimum. Higher earnings lead to higher social security contributions.
OLX revenue and other income sources must be declared in the annual tax return to ensure accurate social security calculations. Higher income levels may require additional health insurance contributions. Proper tax reporting guarantees access to social and health benefits, including pension entitlements, unemployment benefits, and sick leave compensation if additional coverage is chosen.
Maintaining correct bookkeeping of all income sources is essential for ensuring full social protection.
Examples of Revenue Accounting Based on Different Payment Methods
Sales via Cash on Delivery
When selling products through cash on delivery (COD), it is essential to maintain a strict record of each transaction. In addition to keeping courier receipts that indicate the amount received, it is crucial to store all accompanying documents, such as invoices or shipping receipts.
These documents serve as proof of income received for tax purposes and help maintain accurate accounting records.
For example, when selling an item worth 200 BGN, not only should you record the income in your accounting system, but you should also keep documents confirming the sale and shipment of the item.
When accounting for cash on delivery payments, it is crucial to consider the moment of revenue recognition. Revenue is typically recognized when the customer receives the product and makes the payment to the courier, rather than at the moment of shipment. This distinction is important to avoid accounting errors and to ensure accuracy in calculating due taxes and social security contributions. Proper revenue recognition helps maintain compliance with tax regulations and prevents potential issues with tax authorities.
Sales via Bank Transfer
One of the main advantages of bank transfers is that every transaction can be easily tracked through bank statements. However, it is essential to establish a clear link between the completed sale and the received payment, especially when dealing with multiple customers and transactions. To achieve this, it is advisable to maintain a detailed sales register that matches each bank transfer with its corresponding sale.
For example, if you receive 300 BGN via bank transfer for a sale on OLX, this income should not only be recorded in your accounting system but also matched with the specific sale, ensuring clear tracking for each transaction.
Additionally, bank statements should be archived and stored together with other relevant documents, such as invoices or contracts, to ensure full transparency for tax authorities in the event of an audit. This method of payment provides greater security for both parties, as all payments are easily traceable and verifiable in banking records.
Examples of Tax Expense Optimization for Freelancers
Freelancers are only able to optimise their tax liabilities using 25% of their statutory costs.
Allowable expenses are a fixed percentage of a person’s income that can be deducted without the need to provide specific documentation for each expense. For most freelance jobs, this percentage is usually 25%.
For example, if you earn 10,000 BGN from OLX sales for the year, you can automatically deduct 25%, or 2,500 BGN, as a recognised expense. This is an easy and convenient way to reduce your taxable amount without the need for detailed accounting for each expense.
Recognized expenses are especially useful for individuals who don’t have many documented expenses or have a hard time proving all the expenses they incur. They provide a simple and effective tax optimisation option while reducing the administrative burden.
The risks of selling on OLX
Failure to report OLX revenue can lead to serious consequences, including fines and penalties from the National Revenue Agency (NAP). If you are unsure how to properly account for your sales or what tax liabilities you have, consulting an accountant is essential.
Professional advice will help you avoid mistakes and optimize your tax liability while complying with all legal requirements.
Free 30-minute consultation for new clients.
Conclusion
When it comes to earnings from OLX sales, one thing is certain – they can be a significant source of finances for freelancers. At the same time, it is important to comply with all accounting and tax requirements.
Regardless of the amount of revenue, properly accounting for OLX revenue is essential to maintaining law and order in your business. Consulting with an accountant is the best way to ensure compliance with all requirements and optimize your tax liability.
