Bulgaria is quickly becoming a hub for remote IT freelancers, including software developers, cloud engineers, DevOps specialists, and digital consultants. If you’re working independently, understanding freelance taxes in Bulgaria is essential to running a sustainable business.
This guide is designed specifically for IT freelancers, covering how to register legally, what taxes apply, how to manage VAT for foreign clients, and how to optimize your expenses.
Legal Structures for IT Freelancers in Bulgaria: How to Register
Choosing how to register as an IT freelancer in Bulgaria affects your taxes, social contributions, and client perception. The main options include:
1. Self-Employed Individual (Physical Person)
This is the simplest form of registration. You register with the National Revenue Agency (NRA) and pay social security contributions based on a chosen income threshold. You’re required to file an annual tax return.
Best for: Low-volume freelancers or those just starting out with minimal clients and income.
2. Sole Proprietor (ET – Ednolichen Targovets)
This form is more structured and allows for broader expense deductions. However, the individual is personally liable for business debts.
Best for: Mid-level freelancers with more consistent income and expenses.
3. Single-Member Limited Liability Company (EOOD)
This is the most common option for full-time IT freelancers with higher earnings. It provides legal protection, tax planning flexibility, and credibility with clients.
Many developers and remote contractors in Bulgaria choose the EOOD structure because it allows for better tax planning when working with foreign companies, especially those that require invoice compliance or reverse-charge VAT.
👉 Choosing between an EOOD, Sole Proprietor, or self-employed status is critical, as it affects how your income is taxed and what social contributions you’re required to make.
Flat Tax in Bulgaria for IT Freelancers: How It Works
Bulgaria applies a 10% flat income tax for both individuals and legal entities. For freelance software developers and tech consultants, this structure is attractive due to its simplicity and low flat rate. While the rate is straightforward, how it’s applied varies:
- Self-Employed Individuals can deduct 25% of income as standard expenses or declare actual expenses with proof.
- ET and EOOD entities are taxed with a 10% corporate income tax on profits. If profits are distributed as dividends, an additional 5% dividend tax applies.
📌 Important: Complying with deadlines for advance payments and year-end declarations is crucial to avoid penalties.
Social Contributions in Bulgaria for Freelancers in Tech
Social contributions in Bulgaria are mandatory for all freelancers, including self-employed IT professionals and owners of an EOOD. As of 2024, the minimum insurable income is approximately BGN 933/month. The rates vary depending on whether you’re contributing to maternity and illness funds.
For EOODs, it’s possible for the owner not to draw a salary and instead distribute profit as dividends—legally avoiding some insurance costs. This strategy should only be used with accounting guidance, as it has implications for long-term social coverage.
🚨 Note: Without valid health insurance, you lose access to Bulgaria’s public healthcare system, including prescription coverage and hospital treatment.
Deductible Business Expenses for IT Freelancers in Bulgaria
As an IT freelancer, you can deduct a wide range of tools and services such as GitHub, AWS, JetBrains, or coworking memberships that support your digital work., including:
- Hardware (laptops, monitors, peripherals)
- Software licenses
- Internet and mobile bills
- Coworking spaces or home office setup
- Business travel expenses
- Online courses, certifications, and books
These reduce your taxable profit, ultimately lowering the taxes you owe. Make sure all expenses are properly documented with invoices and paid via bank transfer to remain compliant.
VAT for Freelancers in Bulgaria: EU and Non-EU Clients
IT freelancers working with EU-based tech firms often benefit from voluntary VAT registration using the reverse charge mechanism.
The VAT registration becomes mandatory once they reach BGN 100,000 in annual turnover.
For non-EU clients (USA, Canada, Australia) or platforms like Upwork or Fiverr, the services are not subject to Bulgarian VAT, but invoicing and reporting remain essential.
💡 Tip: Platforms like Upwork, Fiverr, and Toptal often require VAT-registered invoices, even for non-EU clients.
Double Taxation & International Income
This is particularly important for IT professionals invoicing clients in Germany, the Netherlands, the UK, or the U.S., where tax treaties prevent you from being taxed in both countries.
Be sure to:
- Use the correct income classification codes
- Fill out the relevant fields in your tax return
- Obtain a tax residency certificate from the NRA if needed
Accounting & Best Practices
While there are DIY accounting tools on the market (e.g., Accountable, Finansi), Bulgarian tax law is complex and changes frequently. Hiring a certified accountant is strongly recommended.
An accountant can assist you with:
- Invoice preparation
- Monthly VAT filings
- Advance payments
- Annual tax declarations
- Legal tax optimization strategies
Conclusion: Freelancing in Bulgaria Made Simple
Successful IT freelancing in Bulgaria isn’t just about technical skills—it requires a clear understanding of the tax system, the right legal structure, compliant social contributions, and reliable freelancer accounting practices.
✅ With one of the lowest tax rates in the EU, Bulgaria offers great opportunities for freelancers—as long as they remain compliant.
Need help with taxes, invoicing, or setting up an EOOD?
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