YouTube has established itself as a leading platform for creating and sharing video content. Many people see this as an opportunity for significant income. In this article, we will analyze how Bulgarian legislation treats YouTube earnings, the tax and legal aspects to consider, and offer helpful advice on optimizing these earnings.
How does the Bulgarian tax law classify YouTube earnings?
YouTube earnings are generated through various mechanisms, including advertising, sponsorships, and paid subscriptions. Bulgarian law classifies these earnings as taxable income. The relationship between YouTube and users who manage their channels is based on contractual terms, including revenue sharing and compliance with the platform’s general terms.
YouTube and Freelancing
Registering as a freelancer or not
If you create content on YouTube, you can report your YouTube earnings as an individual or as a freelancer. Registering as a freelancer is recommended when your earnings exceed a certain threshold and you regularly engage in content production and distribution activities.
YouTube channel owners may present various documents to prove their activity as freelancers. Below are some of the key documents that may be required and used:
- Qualification and Experience Documents:
- Diplomas and Certificates: Copies of diplomas and certificates proving completed courses or training in areas related to content creation, video production, marketing, and other relevant fields.
- References: Letters from clients or partners confirming professionalism and the quality of services provided.
- Documents Related to the Channel and Activity:
- YouTube Analytics Data: Screenshots or excerpts from YouTube Analytics showing subscriber numbers, views, ad revenue, and other key channel metrics.
- Contracts and Agreements: Copies of contracts with sponsors, advertisers, or multi-channel networks (MCNs) confirming income from activities.
- Financial Documents:
- Bank Statements: Bank statements showing income received from YouTube and other platforms.
- Invoices and Receipts: Issued invoices for services provided and receipts for expenses related to the activity.
- Social Security Contribution Evidence:
- Social Security Documents: Submitted documents to the National Revenue Agency (NRA) for self-insured individuals, including the chosen social security income and contributions made.
- BULSTAT Registration:
- BULSTAT Registration Certificate: A document issued by the Registry Agency confirming the person’s registration as a self-insured individual.
The difference between payment for content and advertising revenue
It is important to distinguish between payment for creating content and earning money from ads placed on already created content. The tax treatment may vary depending on the nature of the earnings.
Pros and Cons
Reporting YouTube earnings as an individual is more straightforward and involves fewer administrative requirements. However, registering as a freelancer or a company can provide more opportunities for expense deductions and more effective tax planning.
Motivation for registering as a freelancer
- Recognized Expenses: One of the main advantages of registering as a freelancer is the ability to deduct. According to Article 31 of the Personal Income Tax Act (PITA), these expenses are 25% of total income, reducing the taxable base and, consequently, the taxes owed.
- Proof of Professionalism: Registering as a freelancer can enhance your reputation and increase trust among partners, sponsors, and advertisers. This can lead to better contract terms and higher earnings.
- Social Security and Pensions Freelancers can make social security contributions that cover health insurance and pension funds, ensuring protection in case of illness and accumulating pension benefits.
- Easier Access to Funding: Many banks and financial institutions prefer working with freelancers or businesses as they can more easily assess their income and expenses, facilitating access to loans or financial investments.
- Stability and Long-Term Growth: Registering as a freelancer allows for better financial planning and management, ensuring greater stability and long-term business prospects.
What taxes are owed on your YouTube income?
Tax Rates and Deductible Expenses
The applicable income tax rate for YouTube earnings in Bulgaria is 10%. Statutorily recognized expenses related to YouTube advertising revenue may vary, but generally, expenses linked to content production and promotion are deductible. According to Article 50, Paragraph 1, Item 4 of the Personal Income Tax Act (PITA), business income, including that from YouTube, must be declared and taxed annually.
Examples of Deductible Expenses:
- Technical Equipment: Cameras, microphones, lighting, computers.
- Software: Video editing, graphic design software.
- Consumables: Batteries, hard drives, memory cards.
- Internet and Communication Costs: Internet subscriptions, mobile data.
- Advertising and Marketing: Costs for content promotion.
- Travel and Accommodation: Expenses related to attending events and conferences.
Calculating the Taxable Base
The taxable base is calculated as the difference between income and statutorily recognized expenses. Under Article 50 of PITA, YouTube income must be included in an individual’s annual tax return.
Social Security Contributions on YouTube Income
Social Security Contributions and Registration
YouTube earnings are subject to social security contributions if the individual is registered as a freelancer or a business. According to the Social Security Code (SSC), contributions are calculated based on declared income and depend on the type of registration. Timely submission of tax declarations and forms is crucial to avoid penalties and fines.
Is VAT Registration Required for YouTube Work?
VAT Registration
In Bulgaria, VAT registration is mandatory when an individual’s taxable turnover exceeds 166,000 BGN within the last 12 consecutive months. This includes all business income.
Legal Grounds:
- According to Article 96 of the Value Added Tax Act (VATA), any individual engaged in independent economic activity with taxable turnover exceeding 166,000 BGN within the last 12 months must register for VAT.
When dealing with YouTube, it is important to consider that if a Bulgarian business receives income from the EU, VAT registration is required regardless of the previously mentioned threshold.
Since YouTube is owned by Google and registered in Ireland, a VAT registration obligation arises automatically.
Avoiding VAT Registration
It is possible to avoid VAT registration if income is below the threshold or if certain tax reliefs are used. The size of the channel and the nature of the business also have a bearing on VAT registration.
YouTubers who still want to report their expenses and recognise them for tax purposes must fill in different forms and documents depending on the form of their activity – as an individual, freelancer or company. Here are the forms to be filled out in different cases:
1. Individual
If the YouTube-er reports the income as an individual, the following forms should be completed:
- Annual Tax Return (Form 2001): Includes all business income, including that from YouTube. Expenses are reported in the appropriate boxes.
- Expense Journal: Keep a journal in which all expenses related to the business (technical equipment, software, internet, supplies, etc.) are reported.
Expenditure diary (example)
| Date | Description of expenditure | Amount (BGN) | Document number | Type of expenditure | Note |
|---|---|---|---|---|---|
| 01.01.2024 | Purchase of camera | 1,200 | Invoice number 12345 | Technical | Canon EOS 90D |
2. Freelance
If the YouTuber is registered as a freelancer:
- VAT registration declaration (if income exceeds £50,000): VAT registration form.
- Sales diary and purchase diary: Used to record income and expenditure.
- Annual tax return (Form 2001): Includes all income from the business. Expenditure is declared in the relevant sections.
- Invoices: Issue invoices for all services rendered and materials purchased.
Pro Tips
- Income Reporting: To avoid issues with tax authorities, maintain detailed records of all YouTube-related income and expenses. Use accounting software to automate the process.
- Statutorily Recognized Expenses: According to Article 31 of PITA, freelancers can deduct 25% of total income, reducing their taxable base without needing to prove expenses.
- Tax Reliefs: Check if you qualify for tax benefits, such as Article 35 of PITA for young families and children.
- Alternative Registrations: YouTube content creators may register as videographers, an alternative freelance profession covering video shooting, editing, and production.
- Expert Consultations: Consulting with a tax professional or accountant ensures compliance with legal requirements and maximizes tax savings.
Final Thoughts
Managing YouTube earnings in Bulgaria requires a solid understanding of tax laws and proper planning. We hope this article has provided useful insights and guidelines for successful tax compliance.
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