German IT Freelancers Relocating to Bulgaria: Exit Tax on GmbH Shares and How a Bulgarian EOOD Handles Residual DE Activity

You've built an IT freelance business in Germany — possibly through a GmbH — and you're looking at Bulgaria's 15% combined tax rate (10% CIT + 5% dividend) compared to Germany's ~48% on distributed GmbH profits. The math is clear. But moving isn't just a flight ticket: Germany's exit tax under § 6 AStG will try to collect a final bill on your GmbH shares before you go, and if you continue serving German clients through your new Bulgarian EOOD, you need to understand exactly where that income gets taxed. This guide covers both.

What Triggers Germany's Wegzugsbesteuerung on Your GmbH?

Germany's exit tax — formally Wegzugsbesteuerung, codified in § 6 des Außensteuergesetzes (AStG) — is triggered the moment you cease to be a German unlimited tax resident and you hold, or held within the past 5 years, a direct or indirect shareholding of 1% or more in any corporation: a GmbH, an AG, or a foreign equivalent.

The logic is straightforward. Germany treats your departure as a deemed disposal: on the day you leave, your GmbH stake is deemed sold at its current fair market value (Verkehrswert). The taxable gain is the difference between that value and your original acquisition cost. The rate is governed by § 17 EStG via the Teileinkünfteverfahren: 60% of the deemed gain is included in your taxable income and taxed at your individual marginal income tax rate (up to ~45%), plus the 5.5% Solidaritätszuschlag on the tax. The flat 25% Abgeltungsteuer does not apply to § 17 EStG shareholdings — the progressive income tax scale does. This produces an effective rate on the full gain of roughly 26–28.5% depending on your tax bracket, rising further if church tax applies.

Since January 2025, § 6 AStG was extended to cover investment fund units (Investmentfondsanteile) where the holder owns ≥1% of the fund or whose acquisition costs exceeded EUR 500,000. For most IT freelancers the classic GmbH shareholding is the primary concern, but if you also hold significant fund positions, flag these with your German Steuerberater before departure.

Not sure how much exit tax you're facing? We'll calculate your exposure — free →

ATAD Deferral: Paying the Bill Over 7 Years

The good news: because Bulgaria is an EU member state, your relocation qualifies for the deferral mechanism mandated by Council Directive (EU) 2016/1164, Article 5 (the Anti-Tax Avoidance Directive — ATAD), as implemented into German law via the 2021 ATAD-Umsetzungsgesetz amendments to § 6 AStG.

In practice this means you can apply to your Finanzamt to pay the Wegzugsbesteuerung liability in 7 equal annual installments rather than as a single lump sum on departure. Under the ATAD-Umsetzungsgesetz reforms to § 6 Abs. 4 AStG (effective 2022), these installments are interest-free for EU/EEA moves; the Finanzamt may however require a Sicherheitsleistung (security or bond) as a condition of granting the deferral. You must actively apply for this installment arrangement — it is not granted automatically — and your Finanzamt must be notified in advance of your departure.

Be aware of clawback triggers: if you sell or transfer the GmbH shares while installments are running, the remaining balance typically becomes due immediately. Similarly, if you return to unlimited German tax liability during the deferral period, the exit tax assessment may be reversed — but so would your Bulgarian tax residence.

For a full country-by-country comparison of EU exit tax rules, see our EU Exit Tax 2026: What You Owe Before Bulgaria guide.

How a Bulgarian EOOD Works for IT Freelancers

An EOOD (Еднолично дружество с ограничена отговорност) is Bulgaria's single-member private limited company — the direct functional equivalent of a GmbH, but leaner and significantly cheaper to run. Here is what the numbers look like as of 2026:

The EOOD is incorporated at the Търговски регистър (Commercial Register) under the Bulgarian Commercial Code. Minimum share capital is EUR 1 (BGN 2, ~EUR 1.02 at the fixed 1:1.95583 rate, rounded to EUR 1 minimum capital). Registration takes 3–5 business days once all documents are filed, and our team handles the process entirely remotely — you don't need to fly to Sofia.

Once profitable, the EOOD pays 10% corporate income tax on its annual taxable profits under чл. 20 от Закона за корпоративното подоходно облагане (ЗКПО). When you draw dividends from the EOOD as a Bulgarian tax-resident individual, a 5% final withholding tax applies under чл. 38, ал. 1 от Закона за данъците върху доходите на физическите лица (ЗДДФЛ). Combined: 15% on every euro of gross profit that reaches you as a dividend. No solidarity surcharge. No Gewerbesteuer. No progressive personal income tax on dividends.

For a deeper look at how to structure your salary and dividend split inside a Bulgarian EOOD to minimize social security contributions while maintaining reasonable remuneration, see our guide on how to pay yourself from an EOOD in Bulgaria.

Ready to model your EOOD structure? We'll run the numbers — free →

Germany vs Bulgaria: IT Freelancer Tax Comparison (2026)

The table below compares the typical total tax burden on EUR 200,000 of annual IT business profit for a sole-director owner who draws all after-tax profit as dividends, as of 2026. German figures use average Gewerbesteuer multiplier of 3.5× and exclude church tax.

The differential of approximately EUR 64,000–70,000 per year on a EUR 200,000 profit base illustrates why German IT freelancers consistently rank among the most motivated relocators we work with. The one-time Wegzugsbesteuerung cost is typically recovered within 12–18 months of operating in Bulgaria at these rates.

Residual German Activity: What the DBA Says

Here is where most German IT freelancers making this move ask the critical question: "I still have German clients. My EOOD will invoice them. Where does that income get taxed?"

The answer is governed by the Doppelbesteuerungsabkommen zwischen Deutschland und Bulgarien (DBA Deutschland-Bulgarien), which follows the OECD Model Tax Convention. Article 7 of the DBA — the business profits article — establishes the foundational rule: profits of a Bulgarian enterprise are taxable only in Bulgaria, unless that enterprise carries on business in Germany through a permanent establishment (Betriebsstätte).

What this means in practice: your Bulgarian EOOD invoices German IT clients. Those clients pay EUR-denominated invoices to your EOOD's Bulgarian bank account. No German corporate tax is withheld. The EOOD declares the revenue in its Bulgarian annual tax return and pays 10% CIT in Bulgaria. The German clients have no German withholding obligation on the payment — assuming there is no German PE and the payments are for services (not royalties).

The Royalties Distinction: Why Contract Wording Matters

IT freelancers often deliver both services and intellectual property. If your German clients pay for the use of software you've created (a license fee), rather than for the performance of a service, German tax law may classify that as a Lizenzgebühr (royalty). Royalties paid from German sources to a foreign company can be subject to German withholding tax under § 50a EStG — even without a German PE — at the applicable DBA-reduced rate. This distinction between a service contract and a license agreement is therefore commercially important and should be reviewed before you restructure.

We regularly review German client contract structures for IT freelancers relocating to Bulgaria. Questions about your specific contracts? Ask our team →

Permanent Establishment Risk: When Does Your EOOD Have a German PE?

The permanent establishment question is the most under-appreciated risk in German-to-Bulgaria IT freelancer relocations. Under § 12 der Abgabenordnung (AO) — Germany's domestic PE definition — and the corresponding article of the DBA Deutschland-Bulgarien, a PE arises if your EOOD has a fixed place of business in Germany through which its business is wholly or partly carried on.

Concrete PE risk scenarios for a relocating German IT developer:

• Home office PE: You keep your German apartment and regularly work on EOOD client projects from there. Even a room in a private residence can constitute a PE if used regularly and exclusively for the business — particularly if you're there for significant periods.
• Agent PE: You have a German-based sub-contractor or employee who habitually concludes contracts on behalf of your EOOD in Germany, or who maintains a client-facing role with authority to bind the EOOD. This creates a dependent agent permanent establishment under the DBA.
• Service PE: Some DTAs include a service PE provision — if you personally provide services in Germany for more than 183 days in any 12-month period through the EOOD, this may create a PE even without a fixed location. Review the DBA text carefully with your advisor.

The safest approach: after relocating, manage your EOOD exclusively from Bulgaria. Conduct negotiations, sign contracts, and perform work from Sofia. German client meetings can happen, but the EOOD's management and control functions should be demonstrably Bulgarian. Document this through your EOOD's management records, board resolutions, and invoice/contract origination trail.

Step-by-Step: The German IT Freelancer's Relocation Timeline

1. Assess your Wegzugsbesteuerung exposure (T−6 months). Obtain a current valuation of all GmbH stakes of ≥1%. Calculate the exit tax liability. Decide whether to sell the GmbH before departure (realizing the gain at the applicable German rate rather than the exit tax rate, and extinguishing the Wegzugsbesteuerung) or to defer via installments. Both paths are valid — the choice depends on your GmbH's liquidity and your post-move income projections.
2. File Abmeldung and notify the Finanzamt (T−2 months). Deregister your German residential address (Abmeldung) at your local Einwohnermeldeamt. Notify your Finanzamt in writing of your departure date and intended new country of residence. Apply for installment deferral of the § 6 AStG liability at the same time.
3. Establish Bulgarian residence (T=0 to T+30 days). Register your Bulgarian address with the Migration Directorate (for EU citizens this is the standard EU Citizen residence registration — no visa required). Securing a long-term rental contract and registering your address creates the documentary foundation for your tax residency claim.
4. Register the EOOD (T+1 to T+5 days). Incorporate your Bulgarian single-member LLC via the Commercial Register. We prepare and file all documents; you sign a notarized power of attorney if you prefer fully remote setup. The company receives its EIK (registration number) upon entry in the register.
5. Open a corporate bank account (T+1 to T+30 days). Bulgarian banks require in-person presence for EOOD accounts at most major banks, or a notarized power of attorney. Our team assists with bank introductions. For the interim period, Wise Business or Revolut Business accept Bulgarian EOODs and can receive EUR payments while your primary account is being set up.
6. Obtain your NRA tax residency certificate (after December 31 of your first full calendar year). After spending 183+ days in Bulgaria in a full calendar year (or establishing your centre of vital interests here), you apply to the National Revenue Agency (НАП) for a certificate of Bulgarian tax residency. This certificate is the document you present to German clients and the Finanzamt to confirm your residency status has changed. See our guide on deregistering tax residency in Germany before relocating to Bulgaria for the full Finanzamt notification process.

For the complete Germany-to-Bulgaria relocation checklist including accommodation, health insurance, and banking, see our Moving to Bulgaria from Germany: Residence, Tax & Full Checklist.

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