EOOD or freelance registration: which one actually costs less?

Freelance registration or EOOD: what are you actually choosing between

If you are freelancing in Bulgaria, or thinking about basing your business here, you have two honest options: register as a self-employed individual under free profession status (свободна професия), or set up a single-member limited liability company, an EOOD (ЕООД). Both let you invoice legally in Bulgaria, but the differences are not cosmetic.

Free profession registration is the closest cousin to what many countries call sole trader or self-employed status: you register yourself with the BULSTAT register, invoice clients under your own name, and pay tax and social contributions personally. There is no separate legal entity.

An EOOD is a separate legal person, incorporated at the Commercial Register with its own company number (EIK), its own bank account and its own bookkeeping. You own it, and usually manage it, but the law treats the company as distinct from you.

Most foreign founders who set up in Bulgaria pick the EOOD, and by the end of this article you will see why: it is rarely about the tax rate alone. The choice comes down to four things: how much tax you pay, who is liable if something goes wrong, how credible you look to clients and banks, and how much paperwork you carry. Let's go through them with real numbers.

The tax math: what you actually keep

This is where the biggest difference sits, so let's go slowly.

Under free profession status, your income is taxed under the Personal Income Tax Act. The law automatically recognizes a flat 25% "normative expense allowance" (Art. 29 of the Act), assuming that share of your revenue went to costs, no receipts required. Tax is then 10% on what remains. On €1,000 of revenue, the taxable base is €750 and the tax is €75, about 7.5% of revenue overall, as long as your real costs are not high enough to make itemizing them worthwhile instead.

Under an EOOD, the company's profit, revenue minus actual documented costs, is taxed at a flat 10% corporate rate (Art. 20 of the Corporate Income Tax Act, one of the lowest headline rates in the EU). If you stop there and leave the money inside the company, that 10% is all you have paid. The catch, or the advantage, shows up when you want the money personally: withdrawing it as a dividend adds another 5% tax (Art. 38 of the Personal Income Tax Act). Pulling out all the profit costs roughly 14.5% in total.

So the real question is not "which is cheaper" in the abstract, it is "how much of the money do you need right away." If you need all of it now, free profession status is often lighter on tax. If you can leave part of the profit inside the company, say to buy equipment, hold property, or simply build a reserve, the EOOD lets you pay only 10% on that part until you decide to take it out.

Social contributions: less of a difference than you'd think

A common assumption is that social contributions will tip the scale one way or the other. In practice, they rarely do.

Both a person registered under free profession status and the owner-manager of their own EOOD who works in the business personally, rather than hiring someone else to run it, fall under the same category under Bulgarian law: a "self-insured person" (Art. 4(3) of the Social Security Code, КСО). The mechanism is identical for both structures: you choose an insurable income between a minimum and maximum set each year, and pay contributions on it for pension and health insurance, plus optional sick leave and maternity cover.

The exact percentages and thresholds change annually, so check the current National Social Security Institute (NSSI) and NRA tables rather than trusting a number in an article. The burden itself, though, lands in roughly the same place either way. Contributions are not the reason to pick one structure over the other. That reason lives in the profit tax layer above.

Liability and how you look to clients

Under free profession status there is no legal separation between you and "the business": there is only you. If a project goes wrong and you owe a supplier, or a client sues you, you answer with your entire personal estate: your car, your apartment, your savings. This is a general principle of Bulgarian obligations law: under Art. 133 of the Obligations and Contracts Act, a debtor's whole estate secures their creditors, and as an individual, you are the debtor.

An EOOD is a separate legal person. Under the Commerce Act, the owner's liability is generally capped at the capital contributed to the company, usually a symbolic amount. There are exceptions: if a manager knowingly harms creditors or lets tax liabilities pile up unpaid, that shield can be pierced, but that is the exception, not the rule.

There is also a less measurable advantage. To larger clients, foreign partners, and banks, an invoice from a registered company reads as more serious than one from an individual. If you plan to hire, sign bigger contracts, or hold property through the business, that often outweighs a few percentage points of tax.

Paperwork: which one carries more admin

Free profession status is lighter on formalities. You register once with the BULSTAT register, keep records of your income and costs, and file one annual tax return by 30 April of the following year (Art. 50 of the Personal Income Tax Act). No double-entry bookkeeping, no annual financial statements to publish.

An EOOD is required by law to keep double-entry books from day one, regardless of turnover. It files a corporate tax return by 30 June and publishes an annual financial statement by 30 September. If turnover crosses the mandatory VAT threshold, about €51,130 over any 12 consecutive months (Art. 96 of the VAT Act), the company also files a monthly VAT return by the 14th of the following month. Worth knowing: that threshold is identical for both structures. VAT registration is not a difference between free profession and EOOD, it is a separate question for either one.

In short, free profession status means less paperwork, but that same lack of structure is exactly why banks, clients and partners tend to take an EOOD more seriously.

Which one actually costs less: the honest answer

There is no universal answer, only an honest read on when each one wins.

Free profession status wins when your income is modest or uneven, you work with one or two clients, you are not holding assets through the business, and you would rather not deal with double-entry bookkeeping. Less paperwork, a faster start, and the tax is baked in, so the money is fully yours from day one.

An EOOD wins when you want to reinvest part of the profit instead of withdrawing it right away, when unlimited personal liability makes you uneasy, when your clients are larger companies or foreign partners for whom an invoice from a registered company carries more weight, or when you are holding property, a car, or another asset for which a separate legal person is safer and cleaner. It is also, practically, the default pick for foreign founders who need a Bulgarian entity for banking, invoicing EU clients, or simply giving the business its own standing.

One caveat: this article covers the mechanics inside Bulgaria. Your personal tax residency, and how Bulgaria's system interacts with your home country's, is a separate question. Get advice specific to your situation before you decide.

FreeMe.bg is built exactly for the second case: small EOODs with few invoices, dormant companies, property-holding companies, and freelancers who decide to incorporate. If you are already weighing the switch, these might help:

How to register an EOOD step by step
How VAT and tax filing will work with FreeMe.bg
When you need an expert and what's included

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