You have a client ready to sign, your service is clear, and new projects are already in the pipeline. Then comes a practical question: should you work under Bulgaria’s free profession regime or establish an EOOD? The decision may look administrative, but it affects taxation, social security, business expenses, access to money and future growth.
When comparing EOOD vs freelancer in Bulgaria, looking only at the headline tax rates rarely gives the full answer. The better choice depends on how your business actually works, what costs you have and what you plan to do with the income you generate.
Does your activity qualify for the free profession regime?
Working as a freelancer does not automatically create a specific Bulgarian tax status. Your actual professional activity needs to meet the applicable requirements. The free profession regime can cover consultants, translators, architects, engineers, medical professionals and various other independent professionals, but not every self-employed activity automatically falls within this category.
Before choosing this route, check whether your activity qualifies. A person working under the free profession regime normally registers with BULSTAT and declares the start of activity as a self-insured person. Official guidance on registration and tax obligations is available through Bulgaria’s National Revenue Agency.
How does taxation differ?
A free professional generally pays 10% personal income tax on the taxable base. For many free professions, statutory recognised expenses are applied when calculating taxable income. This can make the model relatively straightforward, especially when actual operating costs are limited.
An EOOD pays 10% corporate income tax on taxable profit. If the remaining profit is later distributed as a dividend to an individual owner, dividend tax generally also applies. This is why simply comparing “10% versus 10%” can be misleading. The tax bases are different, and the way the owner accesses money is different as well.
Company money is not automatically personal money
Money held by an EOOD belongs to the company. The owner should not simply use the company account as a private bank account. Payments to the owner need an appropriate legal and accounting basis, such as remuneration, reimbursement of properly documented expenses, repayment of a loan or a lawfully distributed dividend.
- Remuneration for work or management.
- Reimbursement of documented business expenses.
- Repayment of a properly documented loan.
- Lawfully distributed dividend.
Poor separation between business and private spending can create accounting and tax risks. This is one of the practical differences that often matters more than the headline tax rate.
Your real expenses can change the comparison
Consider an independent consultant who works mainly from a laptop and has only a few subscriptions. The statutory expense approach available to a free professional may be convenient. The administrative burden can also be lighter, which matters when the business is still relatively simple.
Now consider a business that regularly pays for advertising, specialist software, equipment, subcontractors, travel or office costs. In that situation, actual business expenses become much more important. With an EOOD, properly documented expenses related to the activity can reduce taxable profit when they are recognised for tax purposes.
However, paying for something through the company does not automatically make it tax deductible. There still needs to be a clear business purpose and proper documentation.
EOOD and freelancer at a glance
| Area | Free profession | EOOD |
|---|---|---|
| Legal status | Individual professional activity | Separate legal entity |
| Main tax | 10% personal income tax on taxable base | 10% corporate income tax on taxable profit |
| Expenses | Usually statutory recognised expenses | Actual tax-recognised business expenses |
| Administration | Generally lighter | Company accounting and reporting |
| Use of funds | Personal professional income | Payments to the owner require a proper basis |
Social security should be part of the calculation
One common mistake is choosing an EOOD simply because it is assumed that a company eliminates social security obligations. In reality, if the owner personally works in the company, social and health insurance obligations may still arise. The exact treatment depends on how the owner works for the company and how remuneration is arranged.
A free professional also has social security obligations as a self-insured person and may need to complete an annual reconciliation. For that reason, the decision should be based on the total burden rather than the income tax or corporate tax rate alone.
VAT can apply to both structures
VAT does not depend only on whether you work as an individual professional or through a company. Both structures can have VAT obligations, and cross-border services require particular attention.
For example, receiving services from foreign software providers or advertising platforms, or providing certain B2B services to EU customers, may create a registration requirement before the general domestic turnover threshold becomes relevant. This is particularly important for consultants, developers, designers and other professionals who work internationally from the beginning.
Common mistakes when choosing a structure
A structure that works well for another freelancer may not work well for you. Two professionals with similar revenue can have very different costs, clients, risks and reinvestment plans. Copying someone else’s structure without running your own numbers can therefore lead to unnecessary tax, administrative work or cash-flow problems.
- Choosing only on the basis of the headline tax rate.
- Ignoring social security contributions.
- Assuming every freelance activity qualifies as a free profession.
- Mixing company and personal money.
- Overlooking VAT on international services.
- Registering without estimating future operating costs.
What should you compare before registering?
Before making a final decision, prepare a realistic forecast for the next year. It does not need to be complicated. What matters is that it reflects the way you actually expect to work, not an idealised scenario.
- Expected annual income.
- Actual business expenses.
- Your current social security position.
- Bulgarian and international clients.
- Plans for employees or subcontractors.
- Profit you want to withdraw personally.
- Profit you want to reinvest.
- Your contractual and commercial risk.
Choose around how your business will actually operate
A qualifying free profession may suit an individual professional with relatively limited costs and straightforward operations. An EOOD may deserve closer consideration when you have larger business expenses, greater contractual risk, investments or plans to retain profit in the business.
If you are already comparing EOOD vs freelancer in Bulgaria, focus on the complete financial and operational picture rather than one tax percentage. You can also review the accounting and business support available from T&G Consulting before selecting the structure that best fits your work. 👉 For useful and interesting information, visit our partners’ channel.
This material is for general information only and does not constitute individual tax, accounting or legal advice. The correct treatment depends on the specific facts and circumstances.