Bulgarian Ltd. or freelancer — which for you (2026)
Full comparison of the tax and social-insurance regimes, real numbers for different income levels, and when the switch is worth it.
In short: The two regimes have different tax mechanics — self-insured (15% on income after 25% statutory expenses and contributions) and Ltd. (10% corporate + 5% dividend = 14.5% on profit). Freelancing is simpler and often more favorable up to about BGN 50,000–70,000 of annual gross. Above that, an Ltd. becomes more attractive, especially when you have real accounting expenses. Both regimes include self-insurance — 27.80% on a chosen insurance income.
The two regimes — main differences
| Self-insured (liberal profession) | Bulgarian Ltd. (ЕООД) | |
|---|---|---|
| Income tax | 15% (on taxable income) | 10% corporate + 5% dividend = 14.5% |
| Recognized expenses | 25% statutory (no documents) | Actual, with documents (bookkeeping) |
| Social insurance | 27.80% on insurance income | Same, when personal work |
| Accountant | Optional | Mandatory |
| Registration | BULSTAT, simple | Commercial Register, fees |
| Initial capital | None | BGN 2 (minimum) |
| Personal liability | Full (including personal assets) | Limited to capital |
| Branding / formal feel | Optional | Usually yes |
Numerical comparison — three income levels
Scenario 1: BGN 30,000 annual gross
Self-insured (liberal profession)
- Insurance income: chosen BGN 2,000 / month → BGN 24,000 / year
- Social insurance: 24,000 × 27.80% = BGN 6,672
- Taxable income: 30,000 × 75% − 6,672 = 15,828
- Tax 15%: BGN 2,374
- Net: 30,000 − 6,672 − 2,374 = BGN 20,954
Bulgarian Ltd.
- Owner social insurance (same insurance income): BGN 6,672
- Accounting and maintenance: ≈ BGN 5,000
- Ltd. profit: 30,000 − 6,672 − 5,000 = 18,328
- Corporate tax 10%: 1,833
- Remainder for dividend: 16,495
- Dividend tax 5%: 825
- Net to owner: 16,495 − 825 = BGN 15,670
Self-insured is better by ≈ BGN 5,300 at this level.
Scenario 2: BGN 80,000 annual gross
Self-insured
- Insurance income: maximum BGN 4,130 / m → BGN 49,560 / year
- Social insurance: 49,560 × 27.80% = BGN 13,778
- Taxable income: 80,000 × 75% − 13,778 = 46,222
- Tax 15%: BGN 6,933
- Net: 80,000 − 13,778 − 6,933 = BGN 59,289
Bulgarian Ltd.
- Social insurance: BGN 13,778 (at maximum)
- Actual expenses (accounting, marketing, IT): ≈ BGN 12,000
- Profit: 80,000 − 13,778 − 12,000 = 54,222
- Corporate tax 10%: 5,422
- Dividend: 48,800; tax 5%: 2,440
- Net to owner: 48,800 − 2,440 = BGN 46,360
- (But actual expenses 12,000 — some can be for personal use → real pocket ≈ BGN 58,000)
Results converge — depending on how much "real" expense can be covered through the Ltd., one or the other regime is better.
Scenario 3: BGN 150,000 annual gross
At this level the Ltd. clearly wins. The ability to deduct real expenses (office rent, equipment, travel, training, marketing, subcontractor agreements) exceeds the fixed 25% for the self-insured. Also at income above BGN 100,000 the turnover triggers mandatory VAT registration — which is easier to manage through an Ltd.
Exact numbers for your case with the Ltd. vs Freelancer calculator.
Not just money — other factors
When self-insured is more convenient
- First year of self-employment — uncertainty about volume;
- Services with small expenses (consulting, translation, design);
- Work primarily for foreign clients, without complex accounting situations;
- Preference for minimal administration.
When the Ltd. is more convenient
- Stable revenue above BGN 60,000–80,000 / year;
- Real large expenses (rent, equipment, subcontractors);
- Work with corporate clients (perceived as more serious);
- Desire to limit personal liability;
- Plans for partnership, sale of shares, investment.
The transition — how it works
If you decide to move from self-insured to Ltd., the steps are:
- Register the Ltd. with the Commercial Register (fee ≈ BGN 110, accountant or lawyer ≈ BGN 300);
- Open a current account;
- Appoint an accountant;
- Register the Ltd. with the NRA (automatic from the Commercial Register);
- Terminate self-insurance as a self-insured person — declaration to the NRA;
- Register as a self-insured person through the Ltd.;
- File the annual self-insured declaration for the previous year.
The whole transition usually takes 2–4 weeks. After the Ltd. is operational, self-insured status terminates from the date of company registration.
Frequently asked questions
At what annual income does a Bulgarian Ltd. become more favorable than freelancing?
The approximate break-even is between BGN 50,000 and 70,000 of annual gross. Below that, freelancing (self-insured) is simpler and often has a lower tax burden, because the 25% statutory expense allowance without documents provides a good base. Above that, an Ltd. with real accounting expenses and the 10% + 5% dividend combination becomes more favorable.
What are the main tax rates under the two regimes?
Self-insured (liberal profession): 15% on taxable income (gross − 25% statutory expenses − social insurance). Ltd. (ЕООД): 10% corporate tax on profit + 5% dividend tax on distribution → effectively 14.5% on profit. Both regimes also include social insurance contributions (27.80% on chosen insurance income for the self-insured; mandatory self-insurance for the working owner of an Ltd.).
What are the running costs of a Bulgarian Ltd.?
Monthly: accountant (BGN 300–700), bank account fees, costs for the electronic signature. Annually: annual tax filing, Commercial Register publication (≈ BGN 50), Register fees. For a small one-person Ltd., realistic costs are BGN 4,000–8,000 per year.
Can a self-insured person switch to an Ltd. and back?
Yes. The transition self-insured → Ltd. is standard — register an Ltd. in the Commercial Register, terminate self-insurance as a self-insured person, start as an owner of the Ltd. The reverse transition is possible but requires liquidation of the company — a 6–12 month process. So the decision is usually planned for the longer term.
Do I self-insure when running an Ltd.?
Yes, if you perform personal work in the company (management, service delivery). Art. 4(3) SIC includes owners of Bulgarian Ltd. (ЕООД/ООД) among self-insured persons. The minimum monthly contribution on the minimum insurance income is the same as for a freelance self-insured person. In addition, in your Ltd. compensation as a manager you can pay part as salary (with full 32.30% contributions + 10% tax) or as dividend (5% dividend tax).
When is VAT registration mandatory?
When turnover exceeds BGN 100,000 over the last 12 months — mandatory registration under Art. 96 VAT Act. With expected revenue above the threshold, voluntary registration is possible and often advantageous (to recover VAT on expenses). The same BGN 100,000 threshold applies to both self-insured persons and Ltd. companies.
Run the numbers for your case
Ltd. vs Freelancer calculator →Sources & legal acts
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K. Todorov · Editor & founder
Editor and founder of Bulgarian Labor Law. I am not a lawyer — I built this site because I wanted to understand for myself what an employer owes during sick leave and how a freelancer contract actually nets out. Every text is based on primary sources (Labor Code, Social Insurance Code, Personal Income Tax Act) and is kept up to date when legislation changes.
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Disclaimer: This article is informational and does not constitute legal or accounting advice. Calculator results are indicative. For a specific legal or accounting situation, please consult a qualified lawyer or accountant.