Why your "gross" salary isn't your gross salary

Guest author: Dimitar Tomov

Dimitar Tomov is a young entrepreneur, owner of a small business in the technology sector, who, like many other Bulgarian entrepreneurs and workers, is puzzled by the confusing complexity of the Bulgarian tax code:

The confusion between gross and net salary in Bulgaria does not come only because of the terms used. People have long used the expression “net salary” instead of “net salary”. However, there remains uncertainty about what a “gross salary” is. To a large extent, this is due to the current legislation in the country.

First, we must emphasize that all insurance contributions under an employment contract are paid in the interest of the employee. However, the "Law on the State Social Security Budget" divides the tax burden between the employee and the employer. Thus, the employee's pay slip often does not include all the taxes that have been paid in his favor, thanks to the work he has done. The first table shows the insurance contributions due under an employment contract under the current law for 2018:

And the terms gross and net salary have short and clear widely accepted definitions, even though the Law aims and has something else in mind.

* Net salary– The money that remains with a person after all taxes are deducted.

* Gross salary– The amount of money made by a person before any taxes are deducted.

Is it possible for a law to lead to the misuse of such clear terms? The answer is "Yes."

For a person working under an employment contract in Bulgaria, the "net salary" is when the employer pays all taxes. That is, taxes are paid in both the first column and the second column of the table. So, when all taxes are paid, the amount left is what we receive in cash or usually in a bank account with a debit card.

The question remains - what is the gross salary then?

Due to the current legislation in Bulgaria, the "gross salary" is considered to be the "net salary" plus taxes due only under the second column "worker". But isn't this in conflict with the definition?

For illustration, let's take an example of a "net salary" of 1000 leva. Note how the term "gross remuneration" is used, following the logic of the law - Link to the calculator.

It turns out that the “gross salary” is the amount of 1288.69 leva. Although, in order for a “net salary” of 1000.00 leva to be paid, an additional 243.81 leva in taxes must be paid in favor of the worker. That is, the amount with all taxes is 1532.50 leva. How then is the amount of 1288.69 a gross salary?

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