Bonuses are an excellent way to incentivise employee performance, retain a loyal workforce, and solidify your reputation as a company that truly values its staff. Many employers in Bulgaria choose to adopt an employee bonus system, but understanding the legislation around the taxation of employee bonuses is vital.
Since 1 January 2026, Bulgaria has been part of the eurozone. All salaries, social security contributions, and bonuses are now calculated and paid in euro at the fixed rate of 1 EUR = 1.95583 BGN. In this article, we will explore the latest rules and regulations, so you can reward your valued employees with confidence.
What Types of Bonuses can be Awarded in Bulgaria?
Bonuses can be discretionary (not guaranteed) or non-discretionary (guaranteed, as set out in the employment contract). Discretionary bonuses are paid on a performance-based evaluation. Bulgarian law does not set a fixed range, but many employers use bonus schemes ranging from 0% to 200% of salary, depending on the degree to which goals are achieved. Employers do not guarantee a minimum bonus amount, nor do they owe advance payments during the year.
What Legislations Govern Employee Bonuses in Bulgaria?
In Bulgaria, employee bonuses are treated and taxed in the same way as salaries: 10% income tax, plus social security contributions. Since 2023, bonus income must be taxed retrospectively in the months in which the work was performed, not only in the month it is paid. For example, if a bonus is granted at the end of the year for results achieved across the year, it must be taxed across every month, not just December.
Act. 6, para. 2 of SSC /in force from 01.08.2023/
“The income on which insurance contributions are due includes all remuneration, including accrued and unpaid or unaccrued and other income from employment. Remuneration relating to work done for the past time as quarter, annual and other bonuses is allocated to the days worked during which the work was done.”
Social Security and Health Insurance Contributions in Bulgaria
What are the Current Thresholds for Social Security and Health Insurance?
From 1 January 2026, the minimum monthly insurance base for employees is EUR 620.20 (equal to the national minimum wage), before adding the length-of-service supplement. This is an increase from EUR 550.66 in 2025. The maximum monthly social security income is EUR 2,111.64 (the euro equivalent of the BGN 4,130 ceiling carried over from 2025) under the transitional budget rules in force through July 2026. Under the 2026 State Budget, this ceiling is set to rise to EUR 2,300 from 1 August 2026, so confirm the current figure before running payroll. Any gross pay, including bonuses, above the applicable ceiling is not included in social security calculations.
These figures reflect the rules in force at the time of writing. The maximum insurance income is scheduled to increase to EUR 2,300 from 1 August 2026 under the 2026 State Budget.
How Much Social Security and Health Insurance do Employees Contribute?
13.78% of an employee’s gross monthly salary (above the minimum and up to the maximum social security income) goes towards social security and health insurance. This is inclusive of bonuses, and is deducted and paid by the employer on behalf of the employee.
What Social Security and Health Insurance Contributions Must the Employer Make?
Alongside the employee contribution of 13.78%, employers in Bulgaria are required to contribute a minimum of 18.92% (up to a maximum of 19.62%) towards the employee’s social security and health insurance. As with the employee’s contribution, this is calculated on the total social security income for the month, which includes bonuses.
What Tax Reliefs or Deductions can be Applied to Bonuses?
While tax reliefs are not directly linked to bonuses, they can be applied to the overall amount of tax paid through the calendar year, including tax paid on bonuses.
- Child tax relief reduces the annual tax base by EUR 3,067.75 for one child, EUR 6,135.50 for two children, and EUR 9,203.25 for three or more children.
- Employees with a documented disability can receive tax relief of EUR 33.74 net per month.
- If an employee has donated to an officially listed charity, the amount donated can be deducted from their annual tax base.
- Any amounts paid for health insurance, social security, and life insurance can also be deducted from the tax base.
What are the Rules of Holiday Compensation in Regard to Bonuses?
Holiday compensation is calculated using the employee’s remuneration from a qualifying reference month, in line with the Labour Code, rather than simply the previous month’s pay. Whether a bonus is included depends on its nature: bonuses that form part of the employee’s regular remuneration are generally included, while genuine one-off bonuses usually are not. Compensation for unused paid leave is charged only 10% tax, with no social security. To find out more about holiday compensation and public holidays in Bulgaria, read our article here.
What Best Practices can Employers use to Ensure Correct Taxation of Bonuses?
Measures such as clear internal policies, accurate payroll processing, timely reporting, and regular training help employers stay compliant with the latest regulations on the taxation of employee bonuses.
How can Leinonen Bulgaria Help?
With 17 years of experience in Bulgaria, Leinonen’s expert tax advisors are fully equipped to support employers with the taxation of employee bonuses. Our financial specialists have already assisted 1,500+ satisfied customers, helping them successfully navigate ever-changing accounting laws across the European Union (EU).
Get in touch today to arrange a consultation and ensure your business is compliant with Bulgaria’s latest accounting, tax, and payroll regulations.
