Bulgaria gives a foreign company a simple contractor setup: most IT contractors are registered freelancers who pay a 10% flat income tax after a 25% statutory expense deduction, invoice in euros since the 1 January 2026 changeover, and charge no Bulgarian VAT to a business client abroad. The Labour Code is less forgiving about what the work looks like: labour is supposed to be provided under employment contracts, and the Labour Inspectorate can declare a services contract to be employment.
Freelancer, sole trader or EOOD
| Form | Registration | Income tax | Expenses |
|---|---|---|---|
| Freelancer (свободна професия) | BULSTAT register, €5.11 online, plus a self-insured declaration to the NRA | 10% | Flat 25% statutory deduction |
| Sole trader (ET, едноличен търговец) | Commercial Register | 15% on profit | Actual expenses, under corporate tax rules |
| One-person company (EOOD) | Commercial Register | 10% corporate tax, then 5% on dividends | Actual expenses |
Sources: registration from taxmonkey.bg (checked 2026-09-29); the ET rate and base from nra.bg (checked 2026-09-29); the corporate and dividend rates from PwC Tax Summaries (corporate, individual, reviewed 2026-08-02).
The freelancer form is the default for a developer or designer billing one or a few clients. An ET taxes profit after actual expenses at 15%, so it pays off only when real costs are well above the freelancer’s flat 25%. An EOOD suits a contractor who hires others or wants to keep profit in the company; a foreign client then contracts B2B with a company.
The 10% tax and the 25% deduction
A freelancer’s tax base is gross income less the 25% statutory deduction and less mandatory social contributions, and the rate is a flat 10% (PwC Tax Summaries, reviewed 2026-08-02). On €48,000 of annual invoices, the deduction leaves €36,000; contributions come off that before the 10% applies. The effective income tax is therefore under 7.5% of gross.
When the payer is a Bulgarian enterprise, it withholds the advance tax. When it is not, as with a foreign client, the freelancer calculates and pays 10% advance tax for each of the first three quarters by the end of the following month, and settles the year in the annual return (nra.bg, checked 2026-09-29). The annual return is due by 30 April (osigurovki.bg, checked 2026-09-29).
Social contributions
Freelancers and sole traders are self-insured and pay their own contributions monthly, by the 25th of the following month. For those born after 1959: 14.8% pension, 5% second-pillar fund and 8% health, 27.8% in total, plus an optional 3.5% for sickness and maternity (osigurovki.bg, checked 2026-09-29).
The base is insurable income between a floor and a ceiling, and both moved during 2026: €550.66–€2,111.64 a month until 31 July, €620.20–€2,300 from 1 August (PwC Tax Summaries, reviewed 2026-08-02). At the ceiling, the 27.8% comes to €639.40 a month.
VAT
Registration becomes mandatory above €51,130 of turnover in a calendar year, within 7 days of passing it; until 2025 the test ran over a rolling 12 months (nra.bg; PwC Tax Summaries, reviewed 2026-08-02). A separate rule matters more for cross-border work: a contractor supplying services to a taxable person in another EU state must register under Art. 97a(2) no later than 7 days before the tax becomes chargeable, with no threshold. The invoice then carries no Bulgarian VAT and the mention “Reverse charge”. A US or UK client does not trigger Art. 97a(2). A draft raising the general threshold to €75,000 was in public consultation in September 2026 (vatupdate.com, checked 2026-09-29).
Reclassification risk
Article 1(2) of the Labour Code states that relationships for providing labour are arranged as employment only. Under Art. 405a, the Labour Inspectorate can declare that a civil contract hides an employment relationship, fix the date it began and order the employer to offer an employment contract. Courts have upheld such declarations where the person worked fixed hours at a workplace set by the client, took instructions, received regular fixed pay and used the client’s equipment (balans.bg, checked 2026-09-29).
The National Revenue Agency cannot do this on its own. In Interpretative Decision No. 6 of 27 October 2022, the Supreme Administrative Court held that revenue authorities have no power to establish employment relationships during a tax audit; that belongs to the Labour Inspectorate (ey.com, checked 2026-09-29). A foreign client found to be an employer also has to think about whether that work creates a permanent establishment. See contractor misclassification.
Multi-client, project-scoped work on the contractor’s own schedule and equipment is low-risk. Exclusive, full-time work under your direction is where it concentrates.
Contract and IP
- A written services contract with the contractor’s BULSTAT, UIC or VAT number, the scope, a rate in euros, and payment terms. If an older contract states the rate in leva, it stays valid at 1.95583, but invoices must now be issued in euros (ruskov-law.eu, checked 2026-09-29); an addendum with the euro rate avoids rounding arguments.
- VAT details for EU clients: the contractor’s BG VAT number and reverse-charge invoicing.
- Independence markers: the contractor’s own schedule, tools and right to work for other clients; no attendance control.
- IP assignment in writing. Under Article 42 of the Copyright and Neighbouring Rights Act, copyright in a commissioned work belongs to the author unless the contract provides otherwise, and the client may use it without the author’s permission only for the purpose it was commissioned for. The rights to be named as author cannot be transferred (delchev-lawfirm.com, checked 2026-09-29). Assign economic rights explicitly, including pre-existing code and materials.
Taxes and paperwork on the client’s side
A foreign client pays gross and withholds nothing. EU clients account for VAT at home under reverse charge and keep a VIES check of the contractor’s number. US payers collect a W-8BEN (W-8BEN-E from an EOOD) and file no 1099: personal service income is sourced where the work is done (irs.gov, checked 2026-09-29). The US–Bulgaria treaty entered into force on 15 December 2008 (home.treasury.gov, checked 2026-09-29) and treats independent services as business profits; it only comes into play if the contractor works in the US.
How to pay contractors in Bulgaria
Most payments are euro transfers over SEPA to the contractor’s Bulgarian IBAN, sent from your bank, a transfer service such as Wise, or a payout platform. Since 1 January 2026 the lev payment systems are closed and banks run domestic and cross-border transfers in euros, including SEPA Instant (ibank.bg, checked 2026-09-29). USD by SWIFT still works, but the receiving bank converts it unless the contractor holds a USD account. Rails, fees, what breaks and a ranked list of platforms are on our page how to pay contractors in Bulgaria.
Contractor of Record in Bulgaria
For a few freelancers who work for several clients, a direct services contract is usually enough. A Contractor of Record earns its fee on the other cases: a full-time engagement with a single client, or a team where contracts, VAT numbers and invoices have to stay consistent. 4dev acts as Contractor of Record — the contracting party for each contractor — which reduces reclassification risk. Other providers also sign with the contractor as the counterparty; read the liability clause in the COR contract, not the product name. Where the role is a job in substance, hire through an EOR instead. Compare providers in our COR rating.