Legal Framework for Consultants in Bulgaria
Freelancer Status
Most consultants in Bulgaria choose freelancer status (свободна професия), which offers simplified administrative procedures and low registration costs. Under this status, consultants pay 10% personal income tax on net profit and mandatory health and pension contributions. This option is particularly suitable for consultants starting their practice or working part-time with limited turnover.
Single Member Limited Liability Company (EOOD)
Alternatively, consultants can establish an EOOD, which provides greater legal protection and tax flexibility. Under this structure, you pay 10% corporate income tax on net profit and 5% tax on distributed dividends. An EOOD is better suited for consultants with higher income, international clients, or those looking to scale their consulting business.
Invoice Requirements in Bulgaria
Mandatory Invoice Elements
Every invoice issued in Bulgaria must contain certain mandatory elements according to the VAT Act 7. The invoice must be clearly marked as “Invoice” and have a unique sequential ten-digit number with Arabic numerals. The issue date, full name, and address of the supplier, and the Unified Identification Code (UIC) are mandatory elements.
For international clients, it is particularly important to include the exact name and address of the recipient, as well as the corresponding VAT number if the client is VAT-registered. The service description must be clear and detailed, along with the price excluding VAT and the VAT amount if applicable.
Currency Requirements
Invoices can be issued in both Bulgarian leva (BGN) and foreign currency. When using foreign currency, the tax base and VAT amount must also be stated in BGN. The exchange rate is determined according to the Bulgarian National Bank’s rate on the date of the taxable event.
Language Requirements
Invoices for international clients can be issued in a foreign language, but it is recommended to include a Bulgarian version as well. For accounting purposes, invoices must be archived in Bulgarian. Many consultants issue bilingual invoices to meet the requirements of both parties.
Free 30-minute consultation for new clients.
VAT for International Consulting Services
Article 21 VAT Act Principles
Determining the place of VAT liability for consulting services is regulated by Article 21 of the VAT Act. When the recipient is a taxable person (company), the place of service provision is where the recipient is established. This means that when working with EU or US companies, the Bulgarian consultant usually does not charge Bulgarian VAT.
EU Clients
When providing consulting services to VAT-registered clients in another EU country, the reverse charge mechanism applies. The Bulgarian consultant does not charge VAT on the invoice but must include both their own and the client’s VAT numbers. The transaction is reported in the VAT return, and the client accounts for VAT in their own country.
Non-EU Clients
Services provided to clients outside the EU are generally outside the scope of Bulgarian VAT. Export of services to third countries is taxed at 0% VAT, provided the necessary documentary requirements are met. This makes working with American or Asian clients tax-advantageous from a VAT perspective.
VAT Registration and Thresholds
Mandatory Registration
VAT registration becomes mandatory when turnover exceeds 100,000 BGN over the last twelve months. This threshold is calculated based on total turnover, regardless of whether clients are from Bulgaria, the EU, or outside the EU. Consultants must carefully monitor their monthly income to avoid missing the registration deadline.
Voluntary Registration
Some consultants choose voluntary VAT registration even when their turnover is below the threshold. This can be beneficial if they have significant business expenses and want to recover input VAT, or if they work primarily with corporate clients who expect VAT invoices.
Article 97a Registration
Consultants who receive services from foreign providers must register under Article 97a of the VAT Act. This applies when purchasing services from platforms like Google, Facebook, or software subscriptions from abroad. Registration must be completed at least 7 days before receiving the first service.
Tax Obligations for International Income
Personal Income Tax
Freelance consultants in Bulgaria pay 10% personal income tax, but the effective rate is 7.5% due to 25% recognized expenses. This means tax is charged on 75% of income. Income from international clients is included in the total tax base and declared quarterly and annually.
Social Security Contributions
Freelancers are self-insuring persons and must make monthly Social Security contributions. The minimum insurance income is 1,077 BGN per month from April 2025. The maximum monthly insurance income is 4,130 BGN from April 2025. Contributions are calculated on actual monthly income, but with minimum and maximum thresholds applied.
Practical Tips for International Invoicing
Documentation and Reporting
Proper documentation is crucial when working with international clients. Consultants must maintain organized files with all invoices, contracts, and correspondence. For consulting services, it is important to document the nature of the service provided and the time spent for each client.
Bank Transfers and Foreign Exchange Operations
When receiving payments from international clients over 30,000 BGN, additional documents are required for the bank transfer. For amounts over 100,000 BGN, a statistical form from the Bulgarian National Bank is required. Consultants must be familiar with these requirements to avoid payment delays.
Working with an Accountant
Specialized accountants who understand the unique challenges of the consulting sector can help with the proper reporting of international income. They can advise on the most efficient tax structure, proper record-keeping, and compliance with all regulatory requirements. For specialized accounting services tailored to consultants working with international clients, consider working with experts like smetalnik.com, who understand the complexities of cross-border consulting work.
Free 30-minute consultation for new clients.
Electronic Invoicing and Future Changes
Preparing for Electronic Invoicing
Bulgaria is preparing to introduce mandatory electronic invoicing per European requirements. Real-time tax reporting based on e-invoicing is set to become mandatory for all EU member states by 2028. Large companies with a turnover of over 300 million BGN will be required to use electronic invoicing from January 2026, with full implementation for all companies by January 2029.
Implementation Timeline
The electronic invoicing system will use standardized XML formats and require digital certificates. Consultants should prepare for these changes, especially if they work with large international clients who may require electronic invoices. The system will require maintaining accurate records for at least 10 years and submitting monthly reports.
Tax Treaties and Double Taxation
Benefits for Consultants
Bulgaria has signed double taxation treaties with many countries, which can benefit consultants working with international clients. These treaties help avoid double taxation on the same income and provide procedures for claiming foreign tax credits. When Bulgarian companies realize passive income from foreign sources, this should be recorded as gross income with foreign taxes recognized as expenses.
Reporting Foreign Income
Local legal entities are taxed on profit and income from all sources within Bulgaria and abroad. For income earned abroad, the provisions of relevant double taxation treaties take precedence over Bulgarian legislation. Proper documentation of foreign taxes paid is essential for claiming credits under these treaties.
Conclusion
Invoicing international clients as a consultant in Bulgaria requires careful compliance with multiple regulations and requirements. From properly determining the place of VAT liability to complying with currency and language requirements, every aspect is important for successful work with foreign clients. Regular monitoring of turnover for VAT registration under the new 100,000 BGN threshold, proper documentation of income, and working with a qualified accountant are key to avoiding problems with tax authorities. With the growing popularity of international consulting, investing in proper procedures will pay off in the long term.
This article is for informational purposes only and does not constitute legal or tax advice. For personalized guidance, consult a qualified accountant or tax advisor.
Author
