--- title: "Bulgaria vs Estonia Company: Tax, Costs and Risks | FreeMe.bg" canonical: "https://freeme.bg/en/blog/bulgaria-vs-estonia-company" language: en date: 2026-08-06 --- Taxes & VAT # Bulgaria vs Estonia: Where to Register Your Company Estonian e-Residency sells the dream of a fully digital EU company. Bulgaria sells 10% tax. Both are real, both win in different situations, and both share a risk the marketing rarely mentions. [← Blog](https://freeme.bg/en/blog) · 6 August 2026 **In short** A Bulgarian company pays 10% corporate tax and dividends add 5%, about 14.5% in total. An Estonian company pays nothing on retained profit and 22% when it distributes. Pay out most of your profit and Bulgaria is cheaper. Reinvest it and Estonia wins. Either way, if you run the company from the country you live in, that country can tax it too. ## The headline rates, and why they do not compare directly Most Bulgaria vs Estonia company comparisons line up two numbers and stop there. Bulgaria: **10%** corporate income tax (Art. 20 of the Corporate Income Taxes Act, ЗКПО) and a **5%** final tax on dividends paid to individuals (Art. 46(3) of the Personal Income Taxes Act, ЗДДФЛ). Pay out everything and the combined burden is **14.5%**: 10% on profit, then 5% on the 90% that is left. Estonia works on a different principle. Profit kept inside the company is **not taxed at all**. Tax only arises when money leaves: dividends, gifts, fringe benefits, non-business expenses. The rate is **22%**, calculated as 22/78 of the net amount paid out. The Estonian Tax and Customs Board (EMTA) gives the example: a €10,000 net dividend costs the company €2,821 in tax. Since 2025, dividends are taxed only at company level, and the old reduced 14/86 rate for regular dividends is gone. Both systems have been moving, so check the date on anything you read. Estonia raised standard VAT to 24% from 1 July 2025, repealed its planned 2026-2028 defence tax in June 2025, and on 3 December 2025 its parliament cancelled the previously legislated rise of corporate and personal income tax to 24%, so 22% applies in 2026. In Bulgaria, the draft 2026 budget proposed doubling the dividend tax to 10%; that was not adopted, and 2026 dividends are taxed at 5%. The lesson: compare each system against what you plan to do with the money. ## The math: when Estonia wins and when Bulgaria wins Take a company with **€50,000** of profit in a year, owned by someone who is tax resident in the same country as the company. - **You pay it all out.** Bulgaria: €5,000 corporate tax, then 5% on a €45,000 dividend, which is €2,250. You keep **€42,750**. Estonia: 22% of €50,000 is €11,000, and you keep **€39,000**. Bulgaria is €3,750 better. - **You pay nothing out.** Estonia: zero tax, the full €50,000 stays in the company to reinvest. Bulgaria: €5,000 tax, €45,000 stays. Estonia wins. - **You pay out part of it.** Distribute roughly 60% of the year's profit and the two systems come out about even. Below that, Estonia is cheaper. Above it, Bulgaria is. One point that gets lost in the hype: Estonia **defers** tax, it does not remove it. When you eventually take accumulated profit out, including on liquidation, the same 22% applies. In Bulgaria the 10% has already been paid, so a later distribution only costs the 5%. Salary is a separate story. In Estonia, a director's fee or salary carries 22% income tax plus 33% social tax, and KPMG notes there is no ceiling on social contributions. In Bulgaria, personal income tax is a flat 10% (Art. 48 ЗДДФЛ) and social contributions stop at a maximum insurable income. If you plan to pay yourself mainly through payroll, Bulgaria is almost always cheaper. ## Setup: Estonian e-Residency vs a Bulgarian EOOD **Estonia.** You start with e-Residency, a government-issued digital identity that lets you sign documents and run an Estonian company online. The state fee is **€150**, rising to **€165** from 1 January 2027. The card is valid for 5 years with no annual fee, but you collect it in person at a pickup location. Then you register a private limited company (OÜ) online for a **€265** state fee. Since 1 February 2023 the minimum share capital is €0.01, though if your capital is below €2,500, shareholders are liable for the gap up to €2,500. Most e-residents also need a **contact person in Estonia** under the Commercial Code, typically €200 to €400 a year through a virtual office provider. **Bulgaria.** The standard vehicle is the EOOD, a single-owner limited liability company. The electronic Commercial Register fee is about €30, the notary €10 to €25, the bank fee for the capital deposit account €10 to €25, and minimum capital is symbolic. The notary is the only step that needs you physically present (or a representative under a power of attorney), and [registration usually takes 1 to 3 business days](https://freeme.bg/en/company-formation). The company must have its registered seat and management address in Bulgaria. One misconception worth killing early: **e-Residency is not a residence permit and not tax residency.** It does not let you live in Estonia, it does not make you an Estonian taxpayer, and it does not change where you owe personal income tax. ## Running costs: accountant, filings and banking Formation is a one-off. The real cost is every year after it. - **Accounting.** According to the official e-Residency programme, accounting for an Estonian company starts from €50 a month, and a first year costs about €600 if you do it yourself or about €1,300 with accounting support. In Bulgaria, a traditional accountant for a small company typically quotes €100 to €150+ a month. - **Annual filings.** An Estonian company files its annual report with the Commercial Register within 6 months of the financial year end, so 30 June for a calendar year, even if it was dormant. A monthly TSD return is due by the 10th of the following month whenever you pay dividends or salaries. A Bulgarian company files its annual corporate tax return by 30 June (Art. 92 ЗКПО) and publishes its annual financial statements by 30 September, with the paperwork in Bulgarian. - **Banking.** Estonian banks typically want a significant connection to Estonia, and the e-Residency programme itself recommends starting with an EEA fintech account. In Bulgaria you open a capital deposit account at a Bulgarian bank during formation, which then becomes your current account with a monthly fee. Expect identity and source-of-funds checks either way. In short: Estonia is cheaper to run if you are comfortable doing part of the work yourself in English. Bulgaria costs more with a traditional accountant, and everything happens in Bulgarian with the National Revenue Agency (NRA), which is exactly the gap a service built for foreign founders should close. ## VAT: 24% in Estonia vs 20% in Bulgaria VAT rarely makes it into the comparison tables, yet for some businesses it matters more than corporate tax. - **Estonia:** standard rate **24%** since 1 July 2025. Registration is mandatory once taxable supplies with an Estonian place of supply exceed **€40,000** from the start of the calendar year. - **Bulgaria:** standard rate **20%** (Art. 66 of the VAT Act, ЗДДС). Registration is mandatory above **€51,130** of turnover (Art. 96 ЗДДС), and you have 7 days to file once you cross it. If you sell services to businesses in other EU countries, the difference barely matters: the reverse charge usually applies and your client accounts for VAT in their own country. If you sell to consumers locally, 4 percentage points of extra VAT means either a higher price or a thinner margin. For online sales to consumers across the EU, both countries use the One-Stop Shop (OSS), so the gap narrows there. ## The real risk: where you live and where you manage from This is the part that e-Residency marketing leaves in the small print, and it applies just as much to a Bulgarian company run from abroad. EMTA states it plainly: the income of Estonian companies is also taxed abroad when the company is managed outside Estonia, and e-Residency gives no automatic exemption from foreign tax. In that case the company's tax liability arises **primarily in the foreign country**, under the relevant double tax treaty. The e-Residency programme's own example: a solo founder running an Estonian company from a home office in Germany will most likely be treated by the German tax authority as managed from Germany, or as having a permanent establishment there. The 0% on retained profit then does not help much, because German corporate tax applies to the profit Germany claims. If you live in Bulgaria and run an Estonian OÜ from Sofia, the same logic applies with the NRA, which can treat the company as having a place of business here and tax the related profit at 10%. You then keep books in two countries instead of one. As a Bulgarian tax resident, your dividend from the OÜ is also foreign income taxed at 5% in Bulgaria, and Estonia's 22% is a company-level tax, so do not assume it offsets the Bulgarian 5%. The mirror image is true too. A Bulgarian EOOD run by someone living in Germany or France can be taxed there. The company is resident where it is registered. The tax often follows the person. [Bulgarian tax residency: the 183-day rule and the 10% flat tax →](https://freeme.bg/en/blog/bulgarian-tax-residency) [How to start a company in Bulgaria as a foreigner →](https://freeme.bg/en/blog/start-company-bulgaria-foreigner) ## Which one wins for you, and where FreeMe.bg fits **Estonia wins** if you will reinvest most of your profit for years (a product company, a growth business, an investment holding), if you actually live in Estonia, or if a fully digital, English-language setup is worth higher VAT and heavy payroll taxes to you. **Bulgaria wins** if you live here or are moving here, if you will pay out most of your profit as dividends or salary (consultants, freelancers, agencies), if you sell to consumers and 20% VAT beats 24%, or if you simply want your company, your tax residency and your life in the same country, which is the cleanest substance position there is. **Neither wins** if the goal is a company that makes you taxable nowhere. A company is not your tax residency. FreeMe.bg is built for the Bulgarian route: we set up your company and then handle the bookkeeping, tax returns and NRA deadlines, in plain English. [See how we set up a Bulgarian company →](https://freeme.bg/en/company-formation) [See how we handle your taxes and filings →](https://freeme.bg/en/vat-filings) If your situation is cross-border (you live in one country, your clients are in another and the company would be in a third), run the numbers with your real figures and with someone who knows the relevant treaty. The wrong structure costs more than any advisory fee. ## One company, one country, clear taxes Log in with your Google account and set up your Bulgarian company. We handle everything that comes after. [Get started](https://app.freeme.bg/)