Sole trader, EOOD or freelancer: which business structure to choose in Bulgaria in 2026
Your legal form decides how much tax and social security you pay, what you are liable for and how much admin you face. There's no universal answer, but there are clear criteria. Here is a comparison using 2026 Bulgarian rates.
- EOOD: 10% corporate tax + 5% dividend tax — about 14.5% on distributed profit; limited liability.
- Sole trader (ET): 15% tax on profit; unlimited personal liability.
- Freelancer: 10% tax on 75% of income — about 7.5%, but actual costs are not deductible.
- Social security applies to all three — the differences are in the base and the annual true-up.
Quick comparison
| EOOD (single-member Ltd) | Sole trader (ET) | Freelancer | |
|---|---|---|---|
| Registration | Commercial Register | Commercial Register | No commercial registration — registered with the NRA as self-employed |
| Liability | Limited to the company's assets | Unlimited — personal assets | Unlimited — personal |
| Tax on profit/income | 10% corporate tax | 15% on taxable profit | 10% on income after a 25% statutory cost allowance |
| Tax when taking profit out | 5% on dividends | none | none |
| Actual costs | Deductible | Deductible | No — only the statutory 25% |
| Owner's social security | As self-employed or under a management contract, on a chosen income within legal limits | Self-employed, trued up annually to actual income | Self-employed, trued up annually to actual income |
| Accounting and reporting | Full accounts, financial statements, tax return | Full accounts, tax return | Annual return, advance tax |
Example: €30,000 annual profit
A simplified example covering tax only — excluding social security (which applies to all three) and assuming the owner takes out all the profit:
| EOOD | Sole trader | Freelancer* | |
|---|---|---|---|
| Profit / income | €30,000 | €30,000 | €30,000 |
| Tax on profit/income | €3,000 | €4,500 | €2,250 |
| Dividend tax | €1,350 | — | — |
| Total tax | €4,350 (14.5%) | €4,500 (15%) | €2,250 (7.5%) |
* For a freelancer, €30,000 is gross income. Actual costs don't reduce the tax — only the statutory 25%. For sole traders and freelancers, social security paid reduces the tax base, which changes the numbers in a real case.
The takeaway: with few costs and low to medium income, freelancing is often cheapest. With more costs, employees, higher risk or growth plans, an EOOD is usually the better choice. A sole trader is rarely the best option today — the tax is highest and liability is unlimited.
When an EOOD is the better choice
- You have, or will have, significant costs — rent, equipment, subcontractors, staff.
- The business carries risk — contracts with penalties, goods, liability to clients.
- You want to leave some profit in the company — the 5% is only paid on distribution.
- You work with large or foreign clients who prefer contracting with a company.
- You plan to bring in partners or sell the business in future.
When freelancing is the better choice
- You work alone with few costs — consultant, translator, developer, designer.
- You want minimal admin.
- Your income is low to medium and you don't plan rapid growth.
Social security — an important difference
For sole traders and freelancers, social security is trued up at year end to actual income (up to the maximum insurable income). An EOOD owner who works in the company pays contributions on a chosen monthly income within legal limits — from the self-employed minimum (€620.20 from 1 August 2026) to the maximum (€2,300) — with no annual true-up to profit. That often makes an EOOD more predictable at higher profit levels.
VAT is the same for everyone
Whatever the structure, once taxable turnover exceeds €51,130 in a calendar year VAT registration is mandatory, and you have 7 days to apply. See VAT in Bulgaria in 2026.
How to decide
- Estimate your income and costs realistically for the next 1–2 years.
- Consider risk and whether you will hire.
- Compare the three options with your numbers — including social security.
- Think about growth: changing structure later is possible but takes a procedure.
If you like, we'll run the comparison with your numbers and register the chosen structure — see company registration.
Frequently asked questions
Can I switch from a sole trader to an EOOD later?
Yes. It is usually done by transferring the sole trader's business to a newly registered EOOD. The procedure needs preparation, so plan it with your accountant.
Does a freelancer need to keep accounts?
Freelancers don't prepare annual financial statements like companies, but they must document their income, file an annual tax return and pay social security.
Which structure suits an IT contractor working for a foreign client?
Often an EOOD — for limited liability, deductible costs and more flexible social security. But with low income and few costs, freelancing can be cheaper. Run both options with your real numbers.
Does the structure affect VAT registration?
No. The €51,130 threshold and the VAT rules are the same for sole traders, EOODs and freelancers.
