Freelancer or company? It's the first decision every entrepreneur faces when setting up in Bulgaria. Both structures offer the EU's lowest tax rates — but they work differently, cost differently, and suit different income levels. Pick the wrong one and you overpay by thousands of euros per year. Pick the right one and Bulgaria becomes the most tax-efficient base in Europe.
This guide compares the two structures head-to-head: registration, taxes, social security, liability, accounting costs, and — most importantly — net income at every income level so you can see exactly which one puts more money in your pocket.
The Two Structures at a Glance
👤 Freelancer (Svobodna Profesiya)
- Natural person, personal activity
- Registered in 1 day at the NRA
- 7.5% effective income tax
- 25% automatic expense deduction
- Unlimited personal liability
- Simple bookkeeping
- ~EUR 60-80/month accounting
🏢 EOOD (Company)
- Legal entity, separate from you
- Registered in 3 days via Trade Registry
- 10% + 5% combined tax (10% corp + 5% div)
- Actual business expenses deductible
- Limited liability (EUR 1 capital)
- Double-entry bookkeeping
- ~EUR 150-200/month accounting
Tax Comparison: The Real Numbers
How Freelancer Tax Works
Bulgarian law grants freelancers an automatic 25% expense deduction on gross income — no receipts, no justification. You pay 10% tax on the remaining 75%:
EUR 100,000 gross → EUR 75,000 taxable → EUR 7,500 income tax (7.5% effective)
This flat deduction applies regardless of your actual expenses. If your real costs are lower than 25% (which is typical for consultants, developers, designers), you benefit from a tax break on phantom expenses.
How EOOD Tax Works
A company pays 10% corporate income tax on profit. When you distribute that profit to yourself as dividends, you pay an additional 5% dividend withholding tax:
EUR 100,000 profit → EUR 10,000 corporate tax → EUR 90,000 after-tax → EUR 4,500 dividend tax → EUR 85,500 net (10% + 5% combined)
The key advantage: as a company director, you set your own salary. You can pay yourself the minimum salary (~EUR 620/month) and take the rest as dividends — which are not subject to social security contributions.
Net Income Comparison: Side by Side
This is the table nobody else publishes. Real net income after all taxes and social contributions, at every income level:
| Monthly gross | Freelancer net | EOOD net | Winner |
|---|---|---|---|
| EUR 2,000 | EUR 1,540 | EUR 1,410 | Freelancer |
| EUR 3,000 | EUR 2,370 | EUR 2,280 | Freelancer |
| EUR 4,000 | EUR 3,260 | EUR 3,190 | Freelancer (marginal) |
| EUR 5,000 | EUR 4,160 | EUR 4,100 | ~Equal |
| EUR 7,000 | EUR 5,870 | EUR 5,830 | ~Equal |
| EUR 10,000 | EUR 8,500 | EUR 8,380 | Freelancer |
| EUR 15,000 | EUR 12,850 | EUR 12,620 | Freelancer |
Why freelancer wins at most levels: The 25% automatic expense deduction lowers the taxable base more efficiently than the corporate structure, and social security is capped at the same ceiling for both. The EOOD gains an edge only when you have significant real business expenses to deduct or when you retain profits inside the company.
Social Security: Where It Gets Interesting
Social security contributions are the hidden variable. Both structures are subject to the same rates (~32-33% total), but they are calculated on different bases:
| Parameter | Freelancer | EOOD Director |
|---|---|---|
| Contribution base | Declared monthly income (min EUR 550.66) | Director's salary (can be set at min EUR 620.20) |
| Maximum base | EUR 2,111.64/month | EUR 2,111.64/month |
| Max monthly contributions | ~EUR 700 | ~EUR 700 (on salary portion only) |
| Dividends subject to social security? | N/A | No |
| Annual true-up required? | Yes (in annual tax return) | No (salary-based only) |
The EOOD dividend strategy: Pay yourself the minimum monthly salary (~EUR 620), pay social contributions on that low base (~EUR 200/month), and distribute remaining profit as dividends. Dividends are taxed at 5% but carry zero social security. This strategy works best above EUR 5,000/month where the savings on social contributions offset the higher corporate tax rate.
Freelancer trap: Freelancers pay social security on their declared income, and the NRA reconciles this against your actual annual income in your tax return. If you declared the minimum but earned significantly more, you will owe a lump-sum adjustment. Budget for this.
Registration: Speed and Cost
| Detail | Freelancer | EOOD |
|---|---|---|
| Timeline | 1 day | 3 business days |
| Where | NRA (National Revenue Agency) | Trade Registry + NRA |
| Government fees | Under EUR 50 | ~EUR 30-60 (online filing) |
| Legal setup cost | EUR 100-300 | EUR 400-900 |
| Remote registration | Possible with PoA | 100% remote with PoA |
| Minimum capital | None | EUR 1 |
| Requirements | Residency card + diploma | Residency card + PoA |
Both structures require a Bulgarian residency card (EU citizens) or valid residence permit (non-EU). We handle both registration types on behalf of clients via Power of Attorney — see our services.
Liability: Protecting Your Personal Assets
This is one area where the EOOD wins categorically.
- Freelancer: You are the business. Your personal assets — bank accounts, property, car — can be seized to satisfy business debts. If a client sues or a project goes wrong, everything is on the line.
- EOOD: The company is a separate legal entity. Your personal liability is limited to the share capital you invested (minimum EUR 1). Creditors can only pursue company assets, not your personal ones.
For low-risk activities (consulting, design, copywriting), this rarely matters in practice. For anything involving contracts with large companies, product liability, or significant financial obligations, the EOOD's liability shield is worth the extra cost alone.
Accounting: The Ongoing Cost Nobody Mentions
| Cost item | Freelancer/year | EOOD/year |
|---|---|---|
| Monthly accounting | EUR 720-960 | EUR 1,800-2,400 |
| Annual tax return | Included | Included |
| Annual financial statements | Not required | EUR 0-200 (included by most accountants) |
| Total annual admin cost | ~EUR 800-1,000 | ~EUR 2,000-2,600 |
The difference is EUR 1,000-1,600 per year. Meaningful at EUR 2,000/month income. Negligible at EUR 10,000/month. Factor this into your comparison — at lower income levels, the freelancer's lower admin cost is a genuine advantage.
VAT: Same Rules, Same Threshold
Both structures follow identical VAT rules in Bulgaria:
- Mandatory registration threshold: EUR 51,130 annual turnover (calendar year basis, updated for 2026).
- Registration deadline: 7 days after exceeding the threshold.
- Standard VAT rate: 20%.
- New EU SME regime (2026): If your EU-wide turnover stays under EUR 100,000, you can operate VAT-free across all EU member states — as either freelancer or EOOD.
If you primarily serve B2B clients in other EU countries, VAT is reverse-charged to the client regardless. In practice, VAT is rarely a deciding factor between the two structures.
When to Choose Which: The Decision Framework
Choose freelancer if:
Your monthly income is under EUR 5,000. You are a solo consultant, developer, or creative. You want the simplest possible setup. You don't need liability protection. You want to start invoicing within 1 day.
Choose EOOD if:
Your income exceeds EUR 5,000/month and you want to optimize social contributions via the salary-dividend split. You work with enterprise clients who require invoicing from a legal entity. You need liability protection. You plan to hire employees or scale. You want to retain profits inside the business for reinvestment.
Consider a hybrid if:
Your income exceeds EUR 10,000/month. Maintain both a freelancer registration and an EOOD. Route different client relationships through the appropriate structure. This requires careful planning — consult a tax advisor before implementing.
Switching: From Freelancer to EOOD
Already registered as a freelancer and want to switch to a company? Here is how:
- Register the EOOD — 3 business days. Your freelancer status remains active during this period.
- Transfer client contracts — issue new invoices from the company. Notify clients of the entity change.
- Close freelancer activity — de-register at the NRA. File a final personal tax return covering the freelancer period.
- Set up company accounting — engage an accountant for double-entry bookkeeping from day one.
The transition can be completed within 1-2 weeks. There is no penalty for switching, and you can time the transition to the start of a quarter for cleaner bookkeeping.
Real-World Scenarios
Maria — UX Designer, EUR 4,000/month from 2 EU clients
Best structure: Freelancer. At EUR 4,000/month, the freelancer structure saves her approximately EUR 70/month after accounting for lower admin costs. Her work is low-risk (no product liability), she is a solo operator, and simplicity matters more than marginal tax optimization. She invoices both clients directly, reverse-charges VAT (B2B EU), and files a single annual return.
Stefan — Software Developer, EUR 9,000/month from a US company
Best structure: EOOD. At EUR 9,000/month, the salary-dividend strategy in the EOOD saves Stefan approximately EUR 150-200/month in social contributions versus the freelancer structure. The US client prefers invoicing a company entity. Stefan pays himself EUR 620/month salary, pays ~EUR 200/month social contributions on that, and takes the rest as quarterly dividends taxed at 5%. His effective rate: approximately 16%.
Anna — Marketing Consultant, EUR 2,500/month, just moved to Bulgaria
Best structure: Freelancer. At EUR 2,500/month, the accounting cost difference alone (EUR 100+/month) makes the EOOD hard to justify. Anna registers as a freelancer in 1 day, starts invoicing immediately, and keeps things simple while she builds her client base. If her income grows past EUR 5,000/month consistently, she can switch later.
Frequently Asked Questions
Can I switch from freelancer to EOOD without losing clients?
Do I need an accountant as a freelancer?
Can a foreigner register as a freelancer in Bulgaria?
What is the 25% expense deduction for freelancers?
What happens if I exceed the VAT threshold?
Not Sure Which Structure Fits?
Book a free 15-minute call. We'll model both scenarios with your actual numbers.
Book Free Consultation →Disclaimer: This article provides general information and does not constitute legal or tax advice. The optimal structure depends on your individual circumstances, income level, and business model. Consult our team for personalized advice. Last updated: March 13, 2026.