bulgaria-tax-optimization

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# Bulgaria Tax Optimization

## Bulgaria Tax Optimization Skill v0.1

Bulgaria Tax Optimization Skill v0.1

## Bulgaria Tax Optimization Skill v0.1

Tier 2 — research-verified. Sources: NRA (National Revenue Agency), PwC Bulgaria, Innovires/NomadTax. Figures must agree with `bulgaria-income-tax.md` / `bulgaria-social-contributions.md`. NOT yet signed off by a Bulgarian tax adviser. Aggressive positions are never advised; every suggestion must be reviewed.

## Section 1 -- Quick Reference

**Section 1 Quick Reference table**

| Field | Value |
| --- | --- |
| Country | Republic of Bulgaria |
| Currency | BGN (EUR from 1 Jan 2026 at 1.95583) |
| Headline levers | Freelancer 25% normative deduction → **7.5% effective**; freelancer vs sole-trader vs EOOD; 5% dividend WHT |
| Personal income tax | **10% flat** (per `bulgaria-income-tax.md`) |
| Corporate tax (EOOD) | **10%**; dividend withholding **5%** → ~15% combined on fully-distributed profit |
| Anti-avoidance | Substance over form; freelancer must not be disguised employment |

The Bulgarian headline is the FREELANCER (svobodna profesiya) regime: a registered free-profession gets an automatic 25% "normatively recognised expense" deduction, so only 75% of gross is taxed at 10% → an effective ~7.5% income-tax rate (the lowest in the EU), before contributions.

## Section 2 -- Regime Election (the core decision)

**Regime election comparison table**

| Structure | Income tax | Best when |
| --- | --- | --- |
| **Freelancer** (svobodna profesiya, self-insured) | 10% on 75% of gross = **7.5% effective** (automatic 25% normative deduction; no need to prove expenses) | Solo professionals/consultants, low real expenses, roughly **< €100–150k/yr**, no employees |
| **Sole trader** (ET, едноличен търговец) | ~**15%** on net profit (with a 5% discount for early filing) | Rarely optimal vs freelancer for solo work |
| **EOOD** (single-member Ltd) | **10% CIT** + **5%** dividend WHT ≈ 15% on distributed profit | Higher volumes, teams, real expenses, liability/credibility; retained profit deferred until distribution |

- **Tipping point between freelancer and EOOD** — The freelancer's flat 7.5% wins for solo work up to roughly €100–150k/yr; above that, or with employees/teams, an EOOD typically nets more (real-expense deduction + retained-profit deferral). Model both around that range.  _(Innovires; NomadTax)_

## Section 3 -- Dividends & Profit Extraction (EOOD)

- **EOOD profit taxation** — EOOD profit: 10% CIT. Retained profit is not taxed again until distributed.
- **Dividend withholding tax** — 5% percent (final withholding on dividends to the owner → ~15% all-in on fully distributed profit)

A modest, deductible manager's contract salary can cover social security while the bulk is taken as low-taxed dividends — but it must be genuine. [RESEARCH GAP — reviewer to confirm minimum manager-remuneration / self-insured base rules.]

## Section 4 -- Deductions & Contributions

**Deductions and contributions table**

| Item | Treatment |
| --- | --- |
| Freelancer normative expense | Automatic 25% of gross — no documentation needed; you cannot *also* deduct real expenses. |
| EOOD real expenses | Genuine business costs deductible against the 10% CIT base. |
| Social & health contributions | Deductible from the PIT base; freelancers/self-insured pay on an elected insurable income between the floor and ceiling (see `bulgaria-social-contributions.md`) — electing the **minimum insurable income** minimises contributions (within the law). |
| Voluntary pension/life | Limited deductible allowances. |

## Section 5 -- Reliefs

**Reliefs table**

| Relief | Detail |
| --- | --- |
| Children relief | Annual PIT reduction per child (and enhanced for a disabled child), claimed via the annual return. **[RESEARCH GAP — reviewer to confirm current per-child amounts.]** |
| Early-filing discount | 5% discount for sole traders/individuals who file and pay by the deadline. |
| Personal contributions | Mandatory contributions reduce the taxable base. |

## Section 6 -- Red Lines (do not cross)

- **Disguised employment** — A "freelancer" working for a single client under employer-like control can be reclassified as an employee. AUDIT FLASH POINT.
- **Substance requirement** — An EOOD used purely to convert salary into 5% dividends without genuine business can be challenged.
- **Minimum insurable income vs under-declaring** — Electing the minimum insurable income is legal, but under-declaring real income is not.

## PROHIBITIONS

- **Combining deductions** — NEVER combine the 25% normative deduction with real-expense deductions — it is one or the other.
- **Disguised employment presentation** — NEVER present the freelancer regime for what is really single-client employment.
- **Under-declaring income** — NEVER advise under-declaring income to stay in a low band.
- **Contradicting rates** — NEVER contradict the rates in `bulgaria-income-tax.md` / `bulgaria-social-contributions.md`.
- **Research gap disclaimer** — NEVER present [RESEARCH GAP] figures as confirmed, nor optimisation as definitive advice — route to a licensed Bulgarian tax adviser.

## Disclaimer

This skill and its outputs are provided for informational and computational purposes only and do not constitute tax, legal, or financial advice. Open Accountants and its contributors accept no liability for any errors, omissions, or outcomes arising from the use of this skill. All outputs must be reviewed and signed off by a qualified professional (such as a licensed tax adviser in Bulgaria) before acting upon.

The most up-to-date, verified version of this skill is maintained at [openaccountants.com](https://openaccountants.com). Log in to access the latest version, request a professional review from a licensed accountant, and track updates as tax law changes.

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> **General reference only.** This document does not constitute tax, legal, or
> financial advice. Verify figures against the cited primary sources or with a
> licensed professional before relying on them.

## Today's figures and who stands behind this skill

This file is an AI skill (tax rules your AI follows) from OpenAccountants, copied on 2026-07-13. Rates, thresholds and deadlines change. For the current version of this skill, its official sources and the named accountant (if any) who stands behind it, call `get_skill` with slug `bulgaria-tax-optimization` on the OpenAccountants connector (https://www.openaccountants.com/connect), or read https://www.openaccountants.com/skills/bulgaria-tax-optimization. If neither is available, confirm every figure against the official source pages cited above before relying on it.

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