Bulgaria has become one of Europe's most attractive jurisdictions for SaaS founders. A 10% corporate income tax, 5% dividend tax (15% combined), EU membership, euro adoption since January 2026, Schengen access since January 2025, and a simplified VAT compliance path through the EU One Stop Shop (OSS) make it possible to run a fully compliant EU-based SaaS business at a fraction of the cost you would face in Western Europe. This guide covers the VAT mechanics, OSS registration, Merchant of Record options, invoicing rules, and the EOOD vs freelancer decision for SaaS founders operating from Bulgaria.
Why SaaS Founders Choose Bulgaria
The appeal is straightforward: Bulgaria offers the lowest combined corporate tax rate in the EU (10% CIT + 5% dividend = 15%), an EU legal framework that gives your company full single-market access, and a growing ecosystem of English-speaking developers and professionals.
- 10% corporate income tax (CIT) — the lowest flat CIT rate in the EU. Your EOOD (single-member limited liability company) pays 10% on net profits.
- 5% dividend withholding tax — when you distribute profits to yourself. Combined with CIT, the total tax on distributed profits is 15% (10% + 5%).
- EU single market access — your Bulgarian EOOD is an EU company. You can sell to all 27 EU member states, use EU payment infrastructure, and benefit from EU trade agreements.
- Euro since January 2026 — no more currency risk within the eurozone. Your invoices, bank accounts, and accounting are in EUR.
- Schengen since January 2025 — free movement for you and your team across the Schengen area.
- OSS simplification — the EU One Stop Shop lets you handle VAT for all EU B2C sales through a single quarterly return filed in Bulgaria, instead of registering in every EU country.
- English-speaking talent pool — Sofia has a strong developer community, and English proficiency among Bulgarian tech professionals is high.
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Book Free Consultation →B2B vs B2C: How VAT Works for SaaS
The single most important distinction for VAT on SaaS is whether your customer is a business (B2B) or a consumer (B2C). The rules are fundamentally different:
B2B sales (business customers with a VAT ID)
- EU B2B: the reverse charge mechanism applies. You issue an invoice with 0% VAT, noting "reverse charge" on the invoice. The customer self-accounts for VAT in their own country. You do not collect or remit VAT on these sales.
- Bulgarian B2B: if your customer is also a Bulgarian VAT-registered business, you charge 20% Bulgarian VAT on the invoice. Standard domestic supply rules.
- Non-EU B2B: outside the scope of EU VAT. No VAT charged. Note on invoice that the supply is outside the scope of EU VAT.
B2C sales (individual consumers, no VAT ID)
- Bulgarian consumers: charge 20% Bulgarian VAT.
- EU consumers (other countries): if your total B2C cross-border EU sales are below EUR 10,000/year, you can charge Bulgarian 20% VAT. Once you exceed the EUR 10,000 threshold, you must charge the consumer's local VAT rate (ranging from 19% to 27% across the EU) and report through the OSS or register for VAT in each country.
- Non-EU consumers: generally outside the scope of EU VAT. No VAT charged.
Practical rule of thumb for SaaS: if you sell primarily to businesses (B2B), VAT compliance is simple — reverse charge handles most EU sales, and non-EU sales are outside scope. If you sell to consumers (B2C), you need either the OSS or a Merchant of Record. Most B2B SaaS companies find VAT compliance in Bulgaria straightforward.
| Customer type | Location | VAT treatment |
|---|---|---|
| B2B (valid VAT ID) | EU (not Bulgaria) | 0% — reverse charge |
| B2B (valid VAT ID) | Bulgaria | 20% Bulgarian VAT |
| B2B | Non-EU (US, UK, etc.) | Outside EU VAT scope |
| B2C (no VAT ID) | Bulgaria | 20% Bulgarian VAT |
| B2C (no VAT ID) | EU (below €10K threshold) | 20% Bulgarian VAT |
| B2C (no VAT ID) | EU (above €10K threshold) | Consumer's local rate (19-27%) via OSS |
| B2C | Non-EU (US, UK, etc.) | Outside EU VAT scope |
The EU One Stop Shop (OSS)
The One Stop Shop is the EU's solution to the nightmare of registering for VAT in 27 countries. Before OSS (introduced July 2021), a Bulgarian SaaS company selling to consumers in Germany, France, and Spain would need to register for VAT in all three countries, file returns in each, and remit VAT to each tax authority separately. OSS eliminates this.
How OSS works
- Single registration: you register for OSS through the Bulgarian National Revenue Agency (NRA). One registration covers all EU member states.
- Quarterly returns: you file one OSS return per quarter through the Bulgarian NRA portal, listing all B2C sales by country, the applicable local VAT rate, and the VAT amount.
- Single payment: you pay all VAT owed to the Bulgarian NRA. Bulgaria distributes the VAT to each respective member state.
- Local VAT rates: you must charge the correct VAT rate for each consumer's country. For digital services in 2026, rates range from 19% (Germany, Romania) to 27% (Hungary), with most countries between 20% and 25%.
The EUR 10,000 threshold
The EUR 10,000 threshold is a pan-EU annual limit for B2C cross-border digital sales. It applies to the total of all your B2C sales to consumers in other EU countries (not domestic Bulgarian sales). Below EUR 10,000, you can simply charge Bulgarian 20% VAT on all B2C sales. Once you exceed EUR 10,000 in a calendar year, you must switch to local rates and use the OSS (or register individually in each country). Most SaaS companies with any meaningful B2C revenue will cross this threshold quickly.
OSS registration in Bulgaria
- Your EOOD must be VAT-registered in Bulgaria (either mandatory or voluntary registration).
- Apply for OSS through the NRA's online portal.
- Once approved, file quarterly OSS returns by the end of the month following each quarter (e.g., Q1 return due by 30 April).
- Pay the VAT due within the same deadline.
OSS only covers B2C sales. Your B2B reverse charge sales are not reported through OSS — they go on your regular Bulgarian VAT return. OSS is purely for cross-border B2C supplies of digital services (and goods, if applicable) to EU consumers.
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Get Started →Using a Merchant of Record (Stripe, Paddle, FastSpring)
If managing VAT across 27 EU countries sounds painful even with OSS, there is an alternative: use a Merchant of Record (MoR). A MoR is a third-party company that acts as the legal seller to your end customers. The MoR collects payment, calculates VAT, charges the correct rate, files VAT returns, and remits VAT in every jurisdiction. Your Bulgarian company invoices the MoR — a single B2B invoice — not the end customers.
How MoR works for a Bulgarian SaaS
- Paddle / FastSpring: full Merchant of Record solutions. They are the legal seller. They handle all VAT, sales tax, and compliance worldwide. You invoice Paddle/FastSpring (B2B), they invoice your customers. Your VAT compliance is reduced to a single B2B relationship.
- Stripe: Stripe is a payment processor, not a full MoR by default. Stripe Tax can calculate and collect VAT on your behalf, but you remain the legal seller. You still need to file VAT returns (or use OSS). Stripe does not remit VAT for you. However, Stripe is the most flexible option for B2B SaaS where reverse charge handles most EU sales anyway.
MoR vs OSS: when to use which
| Factor | OSS (self-managed) | MoR (Paddle/FastSpring) |
|---|---|---|
| Who is the seller? | Your EOOD | The MoR company |
| VAT filing | You file quarterly OSS | MoR handles everything |
| Cost | Accountant fees only | 3-5% of revenue (MoR fee) |
| Control | Full control of customer relationship | MoR owns the customer billing relationship |
| Best for | B2B-heavy SaaS, low B2C volume | B2C-heavy SaaS, global consumer sales |
| Non-EU coverage | You handle non-EU tax yourself | MoR handles global sales tax |
The practical choice for most SaaS founders: if you sell primarily to businesses (B2B), use Stripe + reverse charge. OSS is your backup for any B2C sales. If you sell to consumers (B2C) globally, Paddle or FastSpring eliminates VAT compliance entirely at the cost of 3-5% of revenue. Many founders start with Stripe and switch to a full MoR when B2C volume grows.
Invoicing Rules for Bulgarian SaaS Companies
Bulgarian invoicing rules follow EU standards. Getting them right is critical for VAT deductions and compliance.
B2B invoice to an EU customer (reverse charge)
- Your company name, registered address, and Bulgarian VAT number (BG prefix + 9 or 10 digits).
- Customer's company name, address, and VAT number (verified via VIES).
- Sequential invoice number and date of issue.
- Description of the SaaS service provided.
- Net amount in EUR (no VAT amount).
- Notation: "VAT reverse charge under Art. 196 of Directive 2006/112/EC" — this is mandatory.
B2C invoice to an EU consumer (via OSS)
- Your company details and Bulgarian VAT number.
- Consumer's name and country.
- Net amount, local VAT rate of the consumer's country, VAT amount, and gross total.
- Note that the VAT is reported under the OSS scheme.
Invoice to a non-EU customer
- Your company details and VAT number.
- Customer's name and address.
- Net amount. No VAT charged.
- Notation: "Supply outside the scope of EU VAT" or "Place of supply outside the EU."
Always verify VAT numbers via VIES before applying reverse charge. If you apply 0% reverse charge to a customer whose VAT number is invalid, you are liable for the VAT. VIES verification takes 10 seconds and should be automated in your billing system. Most invoicing tools (Stripe, Paddle, Chargebee, etc.) do this automatically.
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Book Free Consultation →Tax Structure: EOOD vs Freelancer for SaaS
SaaS founders in Bulgaria typically choose between two structures: a Bulgarian EOOD (single-member limited liability company) or registering as a freelancer (svobodna profesiya / free profession). The right choice depends on your revenue, growth plans, and whether you need to hire.
Bulgarian EOOD
- Tax: 10% CIT on net profits + 5% dividend tax on distributions = 15% combined (10% + 5%).
- VAT: mandatory registration when turnover exceeds the domestic threshold. Voluntary registration possible below the threshold (recommended for B2B SaaS to reclaim input VAT and use reverse charge).
- Liability: limited to company capital. Your personal assets are protected.
- Hiring: can employ staff. Standard employment contracts.
- Payment processors: Stripe, Paddle, and other processors prefer dealing with a company. Some will not onboard freelancers.
- Optics: an EOOD looks professional to B2B clients, especially enterprise customers.
- Best for: SaaS businesses earning above EUR 50,000-60,000/year, those planning to hire, those needing liability protection, or those selling to enterprise clients.
Bulgarian freelancer (svobodna profesiya)
- Tax: 25% flat expense deduction + 10% tax on the remaining 75% = 7.5% effective income tax rate.
- VAT: same rules apply — mandatory registration above threshold, voluntary below.
- Liability: unlimited personal liability.
- Hiring: cannot hire employees directly (can use subcontractors).
- Simplicity: lighter bookkeeping, fewer filings, lower compliance cost.
- Best for: solo SaaS founders earning under EUR 50,000-60,000/year who want minimal admin overhead.
| Factor | EOOD | Freelancer |
|---|---|---|
| Effective tax rate | 15% (10% CIT + 5% dividend) | 7.5% effective |
| Liability | Limited | Unlimited |
| Can hire employees | Yes | No |
| Payment processor access | Full (Stripe, Paddle, etc.) | Limited |
| Social security | On salary drawn (~32-33% total) | On declared income (~32-33% total, capped) |
| Admin complexity | Monthly accounting, annual filings | Lighter bookkeeping |
| Best at scale | Yes | Solo only |
Our recommendation for SaaS: if you are building a product you plan to grow, start with an EOOD. The 15% combined rate is competitive, you get limited liability, Stripe/Paddle onboarding is smoother, and you can hire when ready. The freelancer route is best for solo consultants or very early-stage experiments where you want to keep costs minimal.
Non-EU Sales (US, UK, Rest of World)
If your SaaS sells to customers in the United States, United Kingdom, or other non-EU countries, the VAT treatment is straightforward: these sales are generally outside the scope of EU VAT. You do not charge VAT on your invoices.
- B2B non-EU: invoice without VAT. Note "supply outside the scope of EU VAT" on the invoice. The customer handles any local tax obligations in their jurisdiction.
- B2C non-EU: no EU VAT charged. However, be aware that some non-EU countries have their own digital services tax or sales tax rules (e.g., US state sales tax, UK digital services rules). If you use a MoR like Paddle, they handle this. If you sell directly, consult with an adviser on whether you have obligations in specific non-EU markets at scale.
The US state sales tax question: if you sell SaaS directly to US consumers or businesses, you may have nexus-based sales tax obligations in certain US states. This is a US-side issue, not an EU VAT issue. At low volumes, the risk is minimal. At scale, use a MoR or a US sales tax automation tool (e.g., Stripe Tax, Avalara). Your Bulgarian EOOD's EU VAT obligations do not extend to US sales tax.
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Book Free Consultation →Get Your SaaS Tax Structure Plan
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Frequently Asked Questions
What VAT rate does a Bulgarian SaaS company charge?
What is the EU One Stop Shop (OSS) and how does it help SaaS companies?
What is the EUR 10,000 OSS threshold?
How does a Merchant of Record like Paddle help with VAT?
What is the total tax rate for a Bulgarian EOOD?
Is a freelancer or EOOD better for SaaS in Bulgaria?
Do I charge VAT on sales to US or UK customers?
What must appear on a reverse charge invoice?
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Book Free Consultation →Disclaimer: This article provides general information about VAT, the EU One Stop Shop, and tax structures for SaaS companies in Bulgaria. It does not constitute tax or legal advice. VAT rules are complex and fact-specific — the correct treatment depends on your customer base, sales volumes, and specific circumstances. The information reflects the legal position as of April 2026. Consult our team for advice tailored to your SaaS business. Last updated: April 14, 2026.