Quick Answer
Managing director remuneration in Bulgaria is governed by the Commercial Act and social security and tax legislation, not the Labour Code. In practice, a director is typically structured either under a DUK (Management and Control Contract) or as a self-insured person. Where a director performs active management, social security obligations usually arise under one of these grounds, and remuneration under DUK is subject to social security contributions and 10% personal income tax.
Article Overview
Legal framework and director setup
Managing directors of Bulgarian limited liability companies (OOD/EOOD) are appointed under the Bulgarian Commercial Act (Търговски закон). The appointment is made by shareholders’ resolution and registered in the Commercial Register. This act grants representation authority.
However, corporate appointment alone does not regulate:
- remuneration,
- duties and liability allocation,
- termination terms,
- the director’s social security classification.
A separate structuring step is needed to ensure payroll, social security, and tax compliance.
DUK contract explained
A DUK (Договор за управление и контрол) is a Management and Control Contract used in Bulgaria to regulate the relationship between a company and its managing director.
A DUK is:
- a civil-law management contract,
- not governed by the Labour Code,
- concluded between the company and the director.
It does not create an employment relationship.
Despite its civil-law nature, remuneration under DUK is treated as employment-type income for social security and personal income tax purposes.
For broader payroll mechanics, see:
Payroll in Bulgaria (internal link)
Is remuneration mandatory?
Bulgarian law does not explicitly require a managing director to receive remuneration in every case.
In practice, where an appointed director performs ongoing management, the National Revenue Agency (NRA) generally expects that either:
- DUK remuneration is in place, or
- the person is registered under a self-insured ground,
even if the company is not yet profitable.
Zero-remuneration arrangements may exist but become a compliance risk if active management and economic activity are clearly present.
Do I need payroll as a foreign founder?
This is one of the most frequent questions from foreign entrepreneurs.
Bulgarian law does not require a company to have employees.
However, when a company begins operating, its management must be legally structured.
If the founder:
- is appointed as managing director,
- actively manages the company,
- signs contracts and represents the company,
then social security classification becomes necessary.
The determining factor is not profit or turnover. The determining factor is active management.
There are two compliant models:
1) DUK (Management and Control Contract)
The company signs a DUK with the managing director and pays agreed remuneration. The company:
- withholds social security contributions,
- withholds 10% personal income tax,
- files monthly payroll-type declarations.
2) Self-insured managing director
The director registers as a self-insured person and pays contributions directly.
This is common where:
- the founder is sole shareholder,
- the business is early-stage,
- monthly remuneration is not desired.
Failing to register under either regime while operating the company increases compliance risk. This may result in liability for unpaid social security contributions, statutory interest, and administrative penalties identified during audit.
Social security: thresholds, rates, and example
When remuneration is paid under DUK, social security applies under the Social Security Code, typically including:
- pension,
- general illness and maternity,
- unemployment,
- health insurance,
- employer-only accident-at-work fund (rate varies by sector).
Even if a company has no turnover, contribution obligations may arise depending on the director’s legal and insurance classification.
2026 thresholds: minimum and maximum insurable income
As of early 2026 (subject to annual budget updates):
- Minimum monthly insurable income (self-insured baseline): €550.66
- Maximum monthly insurable income (cap): €2,111.64
Under DUK:
- Contributions are calculated on agreed remuneration up to the cap.
Under self-insured status:
- The chosen base must fall within statutory minimum and maximum ranges.
Contribution rates
For employment-type income (including DUK remuneration), total social security and health insurance burden is typically:
- 32.70%–33.40% of gross remuneration
Of which:
- Employer portion: 18.92%–19.62%
- Insured person portion: 13.78%
Exact employer percentage depends on the accident-at-work fund category.
Worked example: €1,500 monthly DUK remuneration
Assumptions:
- Gross remuneration: €1,500
- Insured person rate: 13.78%
- Employer rate: 18.92%–19.62%
- Income tax: 10%
Director:
- Gross: €1,500
- Social security (13.78%): €206.70
- Taxable base: €1,293.30
- Income tax (10%): €129.33
- Net: approximately €1,163.97
Company total cost:
- Gross remuneration: €1,500
- Employer social security: €283.80 – €294.30
- Total cost: approximately €1,783.80 – €1,794.30
Income tax and reporting
DUK remuneration is subject to 10% flat personal income tax, withheld at source by the company.
The company must:
- withhold tax monthly,
- declare and pay it to the NRA,
- include the remuneration in annual reporting (Art. 73 statement where applicable).
DUK remuneration is not treated as a VATable supply by the director.
For cross-border tax context, see:
Double Tax Treaties Guide
Tax Residence in Bulgaria
Deadlines and compliance timing
Key compliance points:
- DUK contract: should be in place before first remuneration payment.
- Monthly social security and tax payments: generally due by the 25th of the following month.
- Annual personal tax return (where applicable): due by 30 April of the following year.
- Self-insured registration: typically required shortly after start of activity under statutory deadlines.
Failure to observe deadlines may result in interest and administrative penalties.
Comparisons and cross-border notes
DUK vs Employment Contract
| Aspect | DUK (Management & Control Contract) | Employment Contract |
|---|---|---|
| Legal basis | Commercial Act / civil law mandate | Labour Code |
| Employment status | Not an employee | Employee |
| Purpose | Corporate management of the company | Operational work or employment duties |
| Social security treatment | Treated similarly to employment income | Standard employment contributions |
| Paid leave | Only if contractually agreed | Statutory entitlement |
| Working time | Not regulated by the Labour Code | Labour Code working time rules apply |
| Termination | Contractual terms under civil law | Labour Code protections apply |
See: Hiring Employees in Bulgaria
DUK vs Self-insured managing director
| Aspect | DUK (Management & Control Contract) | Self-Insured Managing Director |
|---|---|---|
| Contract | Written DUK contract required | No management contract required |
| Social security payer | Company withholds and pays contributions | Director declares and pays personally |
| Contribution base | Agreed remuneration within statutory limits | Chosen base within minimum and maximum limits |
| Tax treatment | 10% personal income tax withheld by the company | Tax declared via annual tax return |
| Administrative burden | Company payroll reporting required | Director responsible for declarations and payments |
| Typical use case | Directors receiving regular remuneration | Founders managing their own companies |
Foreign directors
For foreign founders:
- Tax residence determines personal tax exposure.
- Within the EU, an A1 certificate may exempt Bulgarian social security.
- Cross-border group structures may require additional substance analysis.
See:
Conclusion and Next Steps
Managing director remuneration in Bulgaria sits at the intersection of corporate law, payroll reporting, and social security rules. While the appointment of a managing director is a corporate decision under the Commercial Act, remuneration must be structured correctly when it is paid — typically through a Management and Control Contract (DUK) or, in some cases, through self-insured status.
For foreign founders, the practical question often arises whether they must place themselves on payroll when their company becomes active. The answer depends on how the management role and remuneration are structured. Once remuneration exists, social security contributions and personal income tax generally apply, subject to the statutory thresholds and the maximum insurable income.
Reviewing the director’s role and remuneration structure early helps avoid compliance issues later.
If you would like to review your structure or discuss the appropriate setup for your situation, you can contact us or book a meeting with our advisory team.
FAQ
Do I have to put myself on payroll if I own a Bulgarian company?
Not necessarily under an employment contract. But if you actively manage the company, you typically need to be structured under a DUK or self-insured regime.
What is a DUK contract in Bulgaria?
A civil-law Management and Control Contract used to regulate remuneration and duties of a managing director.
Can a managing director receive no remuneration?
It may be legally possible, but it creates compliance risk if active management is clearly performed.
What happens if I don’t register for social security as a managing director?
You may face reassessment of unpaid contributions, statutory interest, and administrative penalties during audit.
Does the maximum insurable income cap apply to directors?
Yes. The statutory cap applies to employment-type income, including DUK remuneration.
Disclaimer
This article is for informational purposes only and does not constitute tax, legal, or accounting advice. Each case requires individual assessment under Bulgarian and applicable international law.
Last reviewed: March 2026
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