Bulgaria 10% corporate tax: the honest picture beyond the headline

10% corporate tax and a flat 10% personal income tax. Bulgaria attracts with its 10% corporate tax, but you only get it if you actually move. Real costs, residency, banking and a fair comparison with the US LLC.

Bulgaria comes up over and over when someone searches for "European country with low taxes". The argument is always the same: 10% corporate tax, 10% personal income tax, inside the European Union, no movement restrictions. On paper it looks unbeatable. The reality, as always, has important nuances.

At Exentax we work with clients who incorporated companies in Sofia and tell us, two years later, why they are considering migrating to a US LLC. This guide summarizes what is worth knowing before making the decision.

Available company types

The most common structure for foreign entrepreneurs is the OOD (Дружество с ограничена отговорност), the equivalent of a limited liability company. There is also the EOOD (single-member version) and the AD (joint-stock company), the latter reserved for larger projects.

Minimum share capital: 2 BGN (just over 1 EUR) after the most recent reform. Incorporation takes 1-2 weeks. Approximate setup cost: EUR 500-1,500 depending on the firm.

Real taxation, beyond simplified headlines

The corporate income tax is a flat 10%. It is one of the lowest in the EU and applies to net accounting profit after tax adjustments.

Personal income tax on labor income and dividends is also 10% (specifically 5% on dividends), but only affects Bulgarian tax residents.

Here comes the first important nuance: the 10% only matters if you, as the owner, also become a Bulgarian tax resident. If you keep your tax residency in Spain or another EU country, dividends paid by the OOD are taxed in your country of residence according to the double tax treaty rules.

For a Spanish resident, this means:

The Spain-Bulgaria treaty caps withholding at source at 5%.
Dividends are added to the Spanish savings tax base: 19% up to EUR 6,000, 21% up to EUR 50,000, 23% up to EUR 200,000, 27% up to EUR 300,000, 28% above.
A foreign tax credit applies for the Bulgarian withholding, but the combined burden lands around 25-28%.

In other words, without moving your tax residency, the "10% Bulgaria" disappears.

Becoming a Bulgarian tax resident: what it means

To pay the real 10% you need to become a Bulgarian tax resident. This implies:

Living more than 183 days a year in the country, or having your center of vital interests there.
Local registration, rented or owned home, service contracts.
Properly leaving your former tax residency. If you are Spanish, this means giving up Spanish IRPF, going through "exit tax" on latent capital gains above certain thresholds, and adapting to the new framework.
Adapting to life in Bulgaria: language, healthcare, schooling, professional networks.

It is not a minor formality. Many people who hear "10%" do not realize that the 10% requires a real move.

Recurring costs and accounting duties

A Bulgarian OOD has a meaningful administrative burden compared to a US LLC:

Mandatory monthly bookkeeping by a local accountant: EUR 100-300 per month.
Monthly or quarterly VAT returns if you cross the threshold (BGN 166,000, around EUR 85,000).
Annual corporate income tax return.
Annual accounts filed with the commercial register.
External audit if you exceed certain thresholds. And if a notice does land, at Exentax we keep the dossier ready so you reply in hours, not weeks.

Realistic annual floor: EUR 2,000 to 4,500 in fees and filings alone. Well above the ~USD 600 per year of a US LLC.

Banking: better than Hong Kong, worse than the US

Bulgarian banking works, but opening an account as a foreigner usually requires physical presence in Sofia, a rental contract, business activity evidence and, in many cases, a prior personal account. UniCredit Bulbank, DSK Bank, Postbank and Raiffeisenbank are the usual options.

Wise Business and Revolut Business also work, but as EMIs. For Stripe and other processors, a Bulgarian company with a BG IBAN is eligible, but the European fintech ecosystem is neither as broad nor as agile as the US one.

Honest comparison with the US LLC

For the typical profile we serve at Exentax (freelance, digital agency, SaaS, content creator, ecommerce):

Effective taxation: a US LLC allows 0% federal for non-residents and profit distributions without additional US tax (pass-through). The total bill depends only on your country of residence.
No need to relocate: the LLC can be operated from any country. Bulgaria is only optimal if you are willing to live there.
Annual cost: USD 500-800 vs EUR 2,000-4,500 in Bulgaria.
Banking and payments: Mercury, Wise, Wallester, Stripe USA and Adyen, with no physical presence required, vs the more limited Bulgarian ecosystem.
International reputation: a US LLC is perceived as neutral and professional in any market.

When does Bulgaria still make sense? When you actually want to move there, integrate into the local market and benefit from the cost of living, low labor costs and access to the European single market from inside. For operating profiles staying in their country of origin, it does not pay off.

Pitfalls and frequent mistakes

Trusting that the 10% applies without relocating: the most expensive mistake. You end up paying twice (Bulgaria and your country).
Underestimating mandatory accounting: many discover too late that they cannot run the OOD on their own.
Paying yourself a salary instead of dividends without understanding social security: Bulgarian labor costs are low, but not zero. A director's payroll involves specific contributions.
Forgetting effective control (POEM): if you make decisions from Spain, the Spanish tax authority may argue that the place of effective management is Spain and tax the company there.

Real risks

Tax inspections by the NRA (Bulgarian tax authority): rare, but when they happen they require detailed documentation in Bulgarian.
Penalties for incorrect bookkeeping: the system penalizes formal errors with significant fines. Now is the moment to ask for help. At Exentax we open the case, file what is missing and reply to the relevant authority for you.
EU regulatory changes: BEPS Pillar Two pressure and European tax harmonization may erode the 10% advantage in coming years.

Typical scenarios where it applies

Case 1: entrepreneur billing 80,000 EUR/year from Spain without relocating.

Bulgaria adds nothing. Without Bulgarian residency, profits are taxed in Spain at the applicable rate plus potential penalties. A US LLC is a simpler and more efficient alternative. We close it with you from Exentax: one call, the filing goes out, the archive is set, and the risk stays on paper.

Case 2: European entrepreneur moving to Sofia with family.

Bulgaria does pay off. Personal residency with flat 10% income tax, Bulgarian company to operate within the EU with intra-EU invoicing, reasonable quality of life at low cost. Solid combination.

Case 3: agency with 5 employees, 3 of whom are in Bulgaria.

It makes sense to set up a Bulgarian subsidiary for local employees and leverage low labor costs. The main company can remain where the founder resides. Legitimate and efficient mixed structure.

Frequently asked questions

Is 10% really the only tax burden?

No. The 10% is just corporate tax. If you take dividends you pay an extra 5%. If you draw a salary as director, Bulgarian social contributions and personal income tax apply. The realistic total load on the owner is between 14% and 22%.

Do I need to live in Bulgaria to keep the company?

No to keep it, yes for it to make tax sense. Without Bulgarian residency, your home tax authority can apply effective management and reclassify all profits as your own.

What is Bulgarian banking like for non-residents?

Complex and conservative. UniCredit Bulbank, DSK and Raiffeisen require in-person visits, signed contracts and activity justification. European EMIs (Wise, Revolut) are the more operational alternative.

Is Bulgaria in CRS?

Yes. It is an EU member and applies DAC. Bulgarian accounts are reported automatically to your country of residence, like any other European account.

When to choose Bulgaria over a US LLC?

When you will reside in Bulgaria, have a local team or sell mainly to the European market and need intra-EU VAT invoicing. Otherwise, a US LLC offers a better combination of cost and effective tax burden.

What EUR-BGN exchange rate applies to a Bulgarian company?

The Bulgarian lev is fixed to the euro via a currency board at 1.95583 BGN/EUR since 1997. No relevant FX risk for EUR operations. Bulgaria is in the euro adoption process expected in the short term.

Conclusion

Bulgaria with its 10% is a valid option if you actually want to move to Bulgaria. It is not a fiscal shortcut to keep your life in Spain, Mexico or Argentina. For that case, a US LLC delivers a better combination of taxation, operating costs and banking flexibility.

If you want to compare your specific case without commitment, at Exentax we help you compare real numbers before incorporating anything. At Exentax we review your case with real data: book a free consultation for 30 minutes.

The final decision is not comparing headline rates but estimating the real combined burden with substance, banking and compliance costs. When that calculation is done well, Bulgaria can be excellent or totally unsuitable depending on your concrete profile.

Tax compliance in your country: CFC, controlled-foreign rules and income attribution

A US LLC is a fully legal, internationally recognized vehicle. But compliance does not end at incorporation: as an owner who is tax-resident elsewhere, your local tax authority still has the right to tax what the LLC earns. The key is under which regime.

By jurisdiction

Spain (LIRPF/LIS). An operative single-member disregarded LLC (real services, no significant passive income) is generally treated under income attribution (art. 87 LIRPF): the LLC's net profits are attributed to the member in the year they arise and integrated into the general IRPF base. If instead the LLC elects corporation treatment (Form 8832) and is controlled by a Spanish resident with mostly passive income, the CFC regime (art. 91 LIRPF for individuals, art. 100 LIS for companies) can apply. The choice is not optional: it depends on economic substance, not on the label.
Information returns. US bank accounts with average or year-end balance >€50,000: Form 720 (Law 5/2022 after CJEU C-788/19, 27/01/2022, penalties now under the general LGT regime). Related-party transactions and dividend repatriation: Form 232. US-custodied crypto: Form 721. Breathe: at Exentax this is routine, we bring you up to date and the next review closes in one round, no drama.
Spain–US tax treaty. The treaty (BOE 22/12/1990, Protocol in force 27/11/2019) governs double taxation on dividends, interest and royalties. An LLC without a permanent establishment in Spain does not by itself create a PE for the member, but effective management can if all activity is run from Spanish territory.
Mexico, Colombia, Argentina and other LATAM jurisdictions. Each has its own CFC regime (Mexico: Refipres; Argentina: foreign passive income; Chile: art. 41 G LIR). Common principle: profits retained inside the LLC are deemed received by the member if the entity is treated as transparent or controlled.

Practical rule: an operative LLC with substance, properly declared in your country of residence, is legitimate tax planning. An LLC used to hide income, fake non-residence or shift passive income with no economic justification falls within art. 15 LGT (anti-abuse) or, worse, art. 16 LGT (simulation). The facts decide, not the paperwork.

At Exentax we structure the entity to fit the first scenario and document every step so your local return can be defended in case of review.

Legal and regulatory references

This article relies on rules currently in force. Main sources for verification:

United States. Treas. Reg. §301.7701-3 (entity classification / check-the-box); IRC §882 (tax on foreign income effectively connected with a US trade or business); IRC §871 (FDAP and withholding on non-residents); IRC §6038A and Treas. Reg. §1.6038A-2 (Form 5472 for 25% foreign-owned and foreign-owned disregarded entities); IRC §7701(b) (tax residency, substantial presence test); 31 U.S.C. §5336 (Corporate Transparency Act, BOI Report to FinCEN).
Spain. Law 35/2006 (LIRPF), arts. 8, 9 (residency), 87 (income attribution), 91 (CFC for individuals); Law 27/2014 (LIS), art. 100 (CFC for companies); Law 58/2003 (LGT), arts. 15 (anti-abuse) and 16 (simulation); Law 5/2022 (Form 720 penalty regime after CJEU C-788/19 of 27/01/2022); RD 1065/2007 (Forms 232 and 720); Order HFP/887/2023 (Form 721 crypto). Relax: at Exentax this is what we do every week, we close it before the letter ever lands in your inbox.
Spain–US treaty. BOE of 22/12/1990 (original DTT); Protocol in force since 27/11/2019 (passive income, limitation on benefits).
EU / OECD. Directive (EU) 2011/16, amended by DAC6 (cross-border arrangements), DAC7 (Directive (EU) 2021/514, digital platforms) and DAC8 (crypto-assets); Directive (EU) 2016/1164 (ATAD: CFC, exit tax, hybrid mismatches); OECD Common Reporting Standard (CRS).
International framework. OECD Model Convention, art. 5 (permanent establishment) and Commentaries; BEPS Action 5 (economic substance); FATF Recommendation 24 (beneficial ownership).

Applying any of these rules to your specific case depends on your tax residency, the LLC's activity and the documentation you keep. This content is informational and does not replace personalized professional advice.

Banking and tax facts worth clarifying

Fintech and CRS information evolves; here is the current state:

Before going further, put numbers on your case: the Exentax calculator compares, in under 2 minutes, your current tax bill with what you would carry running a US LLC properly declared in your country of residence.

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Notes by provider

Mercury operates with several federally chartered partner banks and FDIC coverage via sweep network: mainly Choice Financial Group and Evolve Bank & Trust, with Column N.A. still in some legacy accounts. Mercury is not itself a bank; it is a fintech platform backed by those partner banks. If Mercury closes an account, the balance is typically returned by paper check mailed to the account holder's registered address, which can be a serious operational problem for non-residents; keep a secondary account (Relay, Wise Business, etc.) as contingency.
Wise ships two clearly different products: Wise Personal and Wise Business. For an LLC you must open Wise Business, not the personal account. Important CRS nuance: a Wise Business held by a US LLC sits outside CRS because the account holder is a US entity and the US is not a CRS participant; the USD side operates via Wise US Inc. (FATCA perimeter, not CRS). In contrast, a Wise Personal opened by an individual tax-resident in Spain or another CRS jurisdiction does trigger CRS reporting via Wise Europe SA (Belgium) on that individual. Opening Wise for your LLC does not bring you into CRS through the LLC; a separate Wise Personal in your own name as a CRS-resident individual does report.
Wallester (Estonia) is a European financial entity with an EMI/issuing-bank licence. Its European IBAN accounts are within the Common Reporting Standard (CRS) and therefore trigger automatic reporting to the tax administration of the holder's country of residence.
Payoneer operates through European entities (Payoneer Europe Ltd, Ireland) that are also in scope for CRS for clients resident in participating jurisdictions.
Revolut Business: when paired with a US LLC, it operates under Revolut Technologies Inc. with Lead Bank as its US banking partner. The account delivered is a US account (routing + account number); no European IBAN is issued to a US LLC. The European IBANs (Lithuanian, Belgian) belong to Revolut Bank UAB and are issued to European clients of the group. If you are offered a European IBAN tied to your LLC, confirm exactly which legal entity holds that account and which regime it reports under.
Zero tax: no LLC structure delivers "zero tax" if you live in a country with CFC/tax transparency or income attribution rules. What you achieve is no double taxation and correct reporting at residence, not elimination.

Legal & procedural facts

FinCEN and IRS reporting requirements moved recently; the current state is:

BOI / Corporate Transparency Act: your LLC is NOT required to file (a competitive advantage). After FinCEN's March 2025 interim final rule, the BOI Report obligation was narrowed to "foreign reporting companies" (entities formed OUTSIDE the US and registered to do business in a state). A US-formed LLC owned by a non-resident does NOT file the BOI Report: one fewer filing on your calendar, less paperwork, and a cleaner structure than ever. If your LLC was formed before March 2025 and you already filed BOI, keep the acknowledgement. The regulatory status can change again: we monitor FinCEN.gov on every filing and, if the obligation comes back, we handle it at no extra cost. Current status verifiable at fincen.gov/boi.
Form 5472 + pro-forma 1120. For a Single-Member LLC owned by a non-resident, the final regulations of Treas. Reg. §1.6038A-1 (in force since 2017) treat the LLC as a corporation for 5472 purposes. Procedure: pro-forma Form 1120 (header only: name, address, EIN, tax year) with Form 5472 attached. It is filed by certified mail or fax to the IRS Service Center in Ogden, Utah, not e-filed via standard MeF. Due date: April 15; extension via Form 7004 to October 15. Penalty: $25,000 per form per year, plus $25,000 per additional 30 days of non-filing after IRS notice.
Substantive Form 1120. Only applies if the LLC has filed a check-the-box election to C-Corp (Form 8832): it then pays 21 % federal corporate tax and files a substantive 1120. A standard disregarded LLC does not file a substantive 1120 and does not pay federal corporate tax.
EIN and notice. Without an EIN you cannot file 5472 or BOI. The IRS does not warn before imposing penalties; you find out when an EIN is flagged or a later filing is rejected. Now is the moment to ask for help. At Exentax we open the case, file what is missing and reply to the relevant authority for you.

Bulgaria at 10%: what the brochure does not say and what actually pays off

Bulgaria has a 10% flat corporate tax — the lowest in the EU — and a 10% personal income tax, inside the EU, with OSS, no service restrictions and accessible banking. Sounds perfect. What the brochure does not say: economic substance, real personal residency and how the Spain-Bulgaria treaty applies. Here is what actually pays off.

Real effective taxation. 10% corporate on profit + 5% withholding on dividends = ~14.5% effective if you extract everything. Low, not "0". If your personal residency stays Spain, dividends go into Spanish savings income (19-28%) with credit for the Bulgarian withholding — the edge dilutes considerably.
Mandatory economic substance. Bulgaria is whitelisted in the EU but the UBO's country applies CFC rules (Spain: art. 100 LIRPF / art. 91 LIS): if the EOOD has no office, employees or real local management, passive income is attributed directly to the partner. A Bulgarian shell billed from your home in Madrid does not work.
Banking and ops. Accessible accounts at DSK Bank, UniCredit Bulbank, Postbank with standard KYC — easier than Bulgarian banking 5 years ago. Local accountant mandatory for monthly VAT and TBI, cost EUR 200-400/month. Language: official documentation in Bulgarian, invoices in EN/BG accepted.
Spain-Bulgaria treaty 1990. Active, with MLI ratified: dividends 5/15%, interest 0%, royalties 0%. Mitigates double taxation but requires the PPT clause (principal purpose) — if the only reason for the EOOD is tax, AEAT can deny treaty benefits.

What we are asked the most

Is Bulgaria an alternative to a US LLC for a digital freelancer with EU clients? If clients are EU and you need OSS VAT, yes — the EOOD covers it natively. If clients are global and you do not need per-country VAT, the US LLC is usually more efficient operationally. Decision by market, not by nominal tax rate.

Can I live in Spain and run an EOOD? Yes, but the EOOD will be taxed in Spain as a Spanish tax resident (effective management in Spain = Spanish residency) plus CFC on passive income. The structure only unlocks potential if you physically move.

At Exentax we model Bulgaria with your real clients, residency and volume — and tell you whether the cost of maintaining a structure there pays off or whether a US LLC or your current self-employed status already cover the case better.

We set it up without you losing a weekend

Thousands of freelancers and entrepreneurs already operate their US LLC fully legally and properly documented. At Exentax we handle the entire process: formation, banking, payment gateways, bookkeeping, IRS filings and compliance in your country of residence. Book a free consultation and we will tell you honestly whether the LLC makes sense for your case, with no absolute promises.

On the same topic

What if HMRC, the IRS or my local tax authority asks about my LLC?

It's the question every client raises in the first consultation, and the short answer is: your LLC isn't opaque, and a properly declared structure closes any inquiry in standard forms. Your tax authority can request the state Certificate of Formation (Wyoming, Delaware or New Mexico), the EIN issued by the IRS, the signed Operating Agreement, the Mercury or Wise statements for the year, the Form 5472 plus pro-forma 1120 you filed, and the bookkeeping that reconciles income, expenses and movements. If all of that exists and is delivered in order, the inquiry doesn't escalate.

What tax authorities do pursue, and rightly, is sham ownership (nominees, paper residency) and undeclared foreign accounts. A well-structured LLC is the opposite: you appear as beneficial owner in the BOI Report when applicable (verifiable at fincen.gov/boi), you sign the bank accounts and you declare the income where you actually live. The structure is registered with the state Secretary of State, with the IRS and, when European banks are involved, inside the CRS perimeter of the OECD standard.

The mistake that really sinks an inquiry isn't having an LLC; it's not attributing the income correctly in your domestic return, not declaring foreign accounts when the year-end balance exceeds the local threshold (€50,000 in Spain via Modelo 720; the equivalent FBAR / Form 8938 in the US for residents; T1135 in Canada), and not documenting related-party transactions between the member and the LLC. Those three fronts are worth closing before any request arrives, not after.

## What an LLC does NOT do

- It does not exempt you from tax in your country of residence. If you live in Spain, France, Germany or Portugal, you are taxed there on worldwide income. The LLC organises your US side (zero federal tax for non-resident SMLLC pass-through, absent Effectively Connected Income); it does not switch off your domestic taxation. The income tax is computed on the attributed profit, not on the dividends actually paid.

- It is not an offshore vehicle or a BEPS scheme. It is a US entity recognised by the IRS, registered in a specific state with physical address, registered agent and annual informational filings. Classic offshore jurisdictions (BVI, Belize, Seychelles) leave no public trace; an LLC leaves a trace in five different places.

- It does not protect you if you commingle funds. The pierce the corporate veil doctrine kicks in as soon as a judge sees the LLC and the member behaving as the same wallet: mixed accounts, personal expenses paid from the LLC, no signed Operating Agreement, no bookkeeping. Three suspicious transactions are enough.

- It does not save you social security contributions at home. If you are self-employed in Spain, France or Germany, your monthly social contribution remains identical. The LLC handles the trading side with international clients; your personal contribution is independent.

- It does not exempt you from declaring foreign accounts. Spain residents file Modelo 720 / 721; UK residents, the SA106; Portugal residents, the Anexo J of Modelo 3 IRS; Germany residents, the Anlage AUS. Those obligations belong to the individual, not to the LLC.

At Exentax we cover those five fronts every year alongside the US federal calendar (Form 5472, pro-forma 1120, FBAR, state Annual Report and BOI Report when applicable). The goal is that no inquiry finds a loose end and that the structure withstands a 5-to-7-year retroactive review.

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