How it is calculated
The EU rule and the general principle. The EU does not set income tax or social security rates; EU law only coordinates social security when people move between countries — you are covered by one Member State's legislation at a time (Regulation (EC) No 883/2004, Article 11(1)). The steps are the same almost everywhere:
- Employee contributions = gross × the employee's rate, often within a minimum and a maximum monthly base.
- Taxable base = gross − employee contributions (where the law allows the deduction) · tax = base × the rate(s).
- Net = gross − contributions − tax · cost to the employer = gross × (1 + the employer's rate).
Example: Bulgaria (2026). For an employee born after 1959, on an employment contract, in a universal pension fund: employee contributions 13.78% (State Social Insurance 8.38% + supplementary pension 2.2% + health 3.2%) on at most €2,300 a month; a flat income tax of 10%; the employer adds 18.52% plus 0.4–1.1% for accidents at work. Each contribution is rounded to the cent, as on a payslip. Tax reliefs (for children, young families and others) are not included. Source: Module 20, checked against the Social Security Code and the Personal Income Tax Act.
Check in your country: your tax and social security authority publishes the rates, the minimum and maximum base and the reliefs. Many countries have progressive tax bands — then the tax step has several rates.
The terms in the Glossary
- Net pay — Net pay is the money you actually receive in your account: gross pay minus the employee's social security contributions
- Gross pay — Gross pay is the amount written in your employment contract before the employee's social security contributions and inco
- Social security contributions — Social security contributions are compulsory payments from income into funds for pensions, sickness and maternity, unemp
- Payslip — A payslip is a document showing which month the pay is for, the gross amount, each deduction separately (contributions,
- Minimum wage — The minimum wage is the lowest monthly (or hourly) gross pay an employer may pay for full-time work, set by law or by co
- Insurable income — Insurable income is the amount on which social security contributions are calculated; many countries set a minimum below