DEV Community: Daniel Malbašić

Sole trader, Bulgarian EOOD or Estonian OÜ? The 2026 tax math for a freelance developer

Daniel Malbašić — Sat, 12 Sep 2026 07:10:30 +0000

If you freelance from inside the EU and bill more than about €50,000 a year, at some point someone tells you to "just open a company in Estonia" or "just open a company in Bulgaria". Both sentences skip the part that decides the bill: what you do with the money.

I run an accounting and company-formation practice in Bulgaria, so I see the three structures below side by side every month. Here is the arithmetic, with the honest parts left in.

The three structures

For a solo developer selling services or running a small SaaS, the realistic options are:

Registered freelancer in Bulgaria (a "free profession", a personal registration, no company)
Bulgarian EOOD (single-owner limited company)
Estonian OÜ through e-Residency

Everything below uses 2026 rates. Bulgaria has been in the eurozone since 1 January 2026, so all figures are in euro.

Headline rates are not the bill

Most comparisons stop at the corporate tax rate. That is not enough. What you actually pay is three layers stacked on top of each other:

tax at the company level (or on your personal income, if there is no company)
tax when the money leaves the company and reaches you
social contributions, which behave very differently in the three cases

	Freelancer (BG)	EOOD (BG)	OÜ (EE)
Tax on profit kept in the business	n/a, it is all personal income	10%	0%
Tax on profit you take out	10% on 75% of gross (7.5% effective)	10% corporate, then 5% dividend tax (14.5% combined)	22/78 of the net distribution (22% of the gross)
Social contributions	~28%–31% of income, on a base capped at €2,300/month	Owner self-insures on a chosen base, minimum €620.20/month	33% social tax on any salary, no ceiling
Personal income tax on salary	10% flat	10% flat	22%
Standard VAT	20%	20%	24%
Minimum capital	none	about €1	€0.01

The freelancer row surprises people. Bulgaria lets self-employed professionals deduct a flat 25% of gross as statutory expenses, no receipts asked, and taxes the remaining 75% at the flat 10%. Contributions you paid are deducted as well. The catch is in the third row: contributions scale with income until the cap.

What that does to €60,000 and €120,000

Assume all the money is yours at the end of the year, which is how most freelancers operate. Contributions are taken at the rate without the sickness fund (27.8%) and rounded.

€60,000 gross, everything taken out

Freelancer: contributions capped at about €7,700; income tax about €3,700; you keep roughly €48,600
EOOD: corporate tax €6,000, dividend tax €2,700, owner contributions on the minimum base about €2,100, accounting roughly €1,200–€3,000 a year; you keep roughly €46,000–€48,000
OÜ: distribution tax €13,200; contributions and accounting on top; you keep at most €46,800 before those

€120,000 gross, everything taken out

Freelancer: contributions still capped at about €7,700; income tax about €8,200; you keep roughly €104,000
EOOD: corporate tax €12,000, dividend tax €5,400, contributions about €2,100, accounting as above; you keep roughly €98,000–€100,000
OÜ: distribution tax €26,400; you keep at most €93,600 before contributions and accounting

Two things fall out of this.

First, on pure tax, a Bulgarian company is not cheaper than being a Bulgarian freelancer. The contribution cap does the work. Above roughly €45,000–€50,000 the freelancer registration is the cheapest of the three for money you take out, and it stays that way as income grows.

Second, Estonia never wins on money you take out. It wins on money you keep in.

When Estonia actually wins

This section is not a straw man. There are four cases where the OÜ is the right answer and Bulgaria is the wrong one.

You reinvest. A company that earns €120,000 and keeps it pays €0 in Estonia and €12,000 in Bulgaria. If you are building a product and paying yourself little for two or three years, that is real money. The crossover is at about 57% distributed: take out more than that and Bulgaria costs less, take out less and Estonia does.

You will raise money. Investors know the OÜ. Standard documents exist, diligence is routine, and 0% on retained profit fits a company that will not distribute anything for years.

You want the whole thing online. e-Residency costs €150, the company is set up online and the share capital can be €0.01. A Bulgarian EOOD needs notarised documents, which a power of attorney can handle remotely, but it is not a web form.

You live in Estonia. Then the residence problem below disappears.

What e-Residency does not do: it does not give you the right to live in Estonia, it does not make you an Estonian tax resident, and it does not come with a bank account. Non-resident founders mostly end up with a payment institution rather than a bank.

The part both camps skip: where you sleep

None of the three structures work the way the calculator says unless your personal tax residence matches. The rules that bite:

Personal tax residence in Bulgaria needs, among other tests, 183 days in the country in a 12-month period. Estonia and every other EU state have an equivalent test.
If you run an Estonian or Bulgarian company from your sofa in Berlin or Amsterdam, your home country can treat the company as resident there, because that is where it is managed. Then you pay home rates plus a compliance bill for the foreign entity.
Dividends from the foreign company are taxed where you live, at your home rate, with the treaty deciding what credit you get.

So the honest ordering is: decide where you will actually live, then pick the structure. A structure picked first and a residence found later is how people end up paying twice.

The freelancer registration is the most extreme case. It is a personal registration in the BULSTAT register, so it only exists if you are resident in Bulgaria. There is no remote version of it.

When a Bulgarian company beats the Bulgarian freelancer

Since the freelancer wins the pure tax comparison, the EOOD has to earn its keep somewhere else:

Retained profit at 10% instead of everything being personal income
Limited liability, which matters the day a client's production database goes down on your code
Enterprise clients and marketplaces that will not onboard a private individual
Hiring, subcontracting and later selling the business
VAT registration and cross-border B2B reverse charge, which a company handles more cleanly (I wrote up how the same SaaS subscription gets taxed four ways in the EU in a previous post)

Which of those applies to you decides it, not the rate. I keep a longer breakdown of when a Bulgarian company makes sense for a freelancer and when it doesn't on our site, including the cases where we tell people not to incorporate.

FAQ

Is it true that Estonia has 0% corporate tax?
Only on profit that stays in the company. The moment you distribute, the company pays 22/78 of the net amount, which is 22% of the gross. Salary is taxed at 22% plus 33% social tax with no ceiling.

What is the real tax rate for a freelancer in Bulgaria?
10% on 75% of gross, so 7.5% effective, plus social contributions of roughly 28%–31% on a base capped at €2,300 a month. The total burden falls as income rises because the cap is fixed.

Can I open a Bulgarian company without living in Bulgaria?
Yes, the company can be formed by power of attorney. Whether it is taxed only in Bulgaria is a separate question and depends on where it is managed from and where you are resident.

Which is cheaper for a SaaS that reinvests, Bulgaria or Estonia?
Estonia, as long as less than about 57% of profit is distributed. Above that, Bulgaria's 10% plus 5% is cheaper. The full comparison with the crossover maths is in Bulgaria vs Estonia company comparison (2026).

Sources

Estonian Tax and Customs Board, 2026 tax rates: https://www.emta.ee/en/private-client/taxes-and-payment/declaration-income/tax-rates
Bulgarian social contribution bases and rates for self-insured persons, from 1 August 2026: https://ruskov-law.eu/bulgaria/article/social-security-contributions-self-insured-persons.html
e-Residency application fee: https://www.e-resident.gov.ee/become-an-e-resident/

I run a company formation and accounting practice in Bulgaria, so Bulgaria is the jurisdiction I can write about at this level of detail, and Estonia is the one our clients most often compare it against. If your case is a software company rather than a personal freelance registration, the service page is IT company formation in Bulgaria. Rates change, the Bulgarian contribution bases moved mid-2026, and your home country's rules sit on top of all of this, so treat the numbers as a model, not as advice for your case.

The same SaaS subscription is taxed four different ways in the EU

Daniel Malbašić — Wed, 02 Sep 2026 13:04:21 +0000

If you sell a software subscription from an EU country, the price on your pricing page is not the price. What you owe depends on who clicked subscribe, where they are, and whether they typed a VAT number into your checkout form.

The same EUR 49 plan, sold from a Bulgarian company, is taxed in four different ways:

Buyer	Treatment	What your invoice says
Business in another EU state, valid VAT ID	Reverse charge, you charge nothing	0%, with a reverse-charge note
Consumer in another EU state	VAT of their country	their national rate, reported through OSS
Anyone in Bulgaria	Bulgarian VAT	20%
Business or consumer outside the EU	Usually outside EU VAT scope	0%

Four branches, one product. This is not a tax problem that lives in your accountant's spreadsheet. It lives in your checkout.

The branch your code gets wrong first

The EU B2B case looks like the easy one, no VAT, move on, but it has a precondition that is easy to skip: the customer's VAT number has to be valid, and you have to have checked it.

If it is valid, the reverse charge applies and the buyer accounts for the tax in their own country. If it is not valid, or you never checked, you are selling to what the rules treat as a consumer, and you owe VAT in the buyer's country. The difference between those two outcomes is one API call at checkout, and it is not one you can make retroactively when the customer is long gone.

So the first thing your billing logic needs is not a tax table. It is a validation step, and a stored record of what that validation returned and when.

The B2C case is the one that scales badly

Sell to a consumer in another EU country and you charge that country's rate, not yours. A consumer in Hungary pays Hungarian VAT; one in Luxembourg pays Luxembourgish VAT. Your price is the same, your liability is not.

Without the One Stop Shop scheme, that means registering for VAT in every member state where you have a single consumer. OSS collapses that into one return filed in your own country, and it is the difference between a solvable problem and an unmanageable one.

The engineering consequence: you need the customer's location established and stored as evidence, not merely inferred at render time. Pick which pieces of evidence you keep, billing address, IP country, card issuer country, and keep them with the transaction, not in a log that rotates out.

Non-EU is not automatically nothing

Selling to a business outside the EU generally falls outside EU VAT scope. Selling to a consumer outside the EU is where it stops being simple: many countries tax digital services supplied to their residents under their own rules, and those rules are not yours to ignore because you are elsewhere.

That is a monitoring obligation rather than a coding one, but it belongs in the same decision tree so that it is a deliberate branch rather than a fallthrough.

What this looks like as logic

if buyer.country == home_country:
    charge(home_rate)                    # Bulgaria: 20%
elif buyer.in_eu:
    if buyer.vat_id and validated(buyer.vat_id):
        charge(0, note="reverse charge")
    else:
        charge(rate_of(buyer.country))   # report via OSS
else:
    charge(0)                            # outside EU scope, check local rules separately

Four branches, and every one of them has an evidence requirement attached. The code is trivial. The record-keeping is the part that fails audits.

Deadlines are a systems constraint, not an accounting one

In Bulgaria, VAT returns are monthly and payment is due by the 14th of the following month. Records, invoices, the customer's location evidence, VAT number validation results, any adjustments, are kept for ten years.

Ten years is longer than most SaaS billing systems survive without a migration. If your evidence of why you charged 0% to a customer in 2026 lives only in a third-party service you later replace, you have a problem that surfaces years after anyone remembers the decision.

Export it. Store it with the invoice. Treat it as part of the financial record, not as telemetry.

The compliance around the rate

The VAT branch above is one obligation among several. If you are running a Bulgarian company rather than only selling into it, the same evidence discipline applies to VIES reporting, monthly bookkeeping, payroll filings and the statutory annual accounts, which are due by 30 June.

We recorded a walkthrough of what that actually covers, including the ten-year retention rule referenced above:

The rate is the least interesting number

Most guides lead with 20%. The rate matters least. What decides your actual liability is:

whether you validated a VAT number, and whether you kept the result
whether you can prove where a consumer was
whether you registered for OSS before you needed it rather than after
whether your evidence outlives your billing provider

None of those are tax questions. They are all storage and validation questions, and they are all decided in code long before an accountant sees them.

I run a company formation and accounting practice in Bulgaria, so this is the jurisdiction I can write about at article level. The full version, including registration thresholds, OSS mechanics and the official source for each rule, is on our site: VAT for SaaS Companies in Bulgaria. The rules here derive from the EU VAT Directive as implemented in Bulgaria; specifics differ by member state and change, so check the current position for yours before shipping billing logic.