Running a software company from Bulgaria: an honest ledger

Companies and taxes · Last reviewed: 2026-08-23

What is genuinely an advantage

The first and most durable advantage is the rate itself. Corporate income tax is 10 per cent under Article 20 of the Corporate Income Tax Act, and it is flat — it does not climb with profit. Withholding tax on distributed dividends and liquidation shares is 5 per cent under Article 194 of the same Act, and personal income tax is likewise a flat 10 per cent. That makes the arithmetic of retaining versus distributing profit predictable in advance, which is not the case in countries with progressive schedules.

The second advantage is EU membership itself. A Bulgarian company sits inside the single market: services invoiced to a business customer in another member state generally carry no VAT, because the customer accounts for it under the reverse charge. For digital services sold to consumers there is an annual 10,000 euro threshold for cross-border supplies; above it, VAT is due in the customer's country and can be declared centrally through the One Stop Shop rather than by registering in each country separately.

The third advantage is currency and cost level. Bulgaria joined the euro area on 1 January 2026, which removes conversion and currency risk when working with euro-denominated customers and suppliers. On the cost side, the National Statistical Institute reported average monthly gross wages for the first quarter of 2026 of 1,381 euro in January, 1,365 euro in February and 1,475 euro in March. That is an economy-wide average; software pay is visibly higher, but we do not print a sector figure because none could be verified from an official source.

Five costs that are not on the label

• •Language: legislation, the register, tax correspondence, the courts and much of banking operate in Bulgarian. Without the language, every official contact adds a translation step — a cost in time as much as money.
• •Bank account: the step where foreign founders most often stall. Banks want the business explained, the beneficial owner declared and, usually, your physical presence; remote opening is not available everywhere and can take weeks.
• •Accounting load: the person compiling the financial statements must meet statutory qualifications, and once VAT-registered the rhythm is monthly. Even a dormant period produces filings.
• •VAT with non-EU customers: the reverse-charge convenience applies within the EU. For a customer outside it, determining and documenting the place of supply is separate work. „I export, so there is no VAT“ hides exactly this distinction.
• •Employer burden: hiring adds roughly 19 per cent employer contributions on top of gross pay. A low tax rate does not remove that line.

The most expensive misunderstanding: company address versus your residence

Incorporating in Bulgaria does not make you a Bulgarian tax resident. On the National Revenue Agency's definition, a person present in the country for more than 183 days in any 12-month period is a local individual; a permanent address in Bulgaria or a centre of vital interests there can also establish residence. Days of arrival and departure both count, and time spent solely for education or medical treatment is excluded. Local individuals are taxed on worldwide income, foreign individuals only on Bulgarian-source income.

The practical consequence: if you keep living elsewhere, the company's profit is taxed in Bulgaria, but how the dividend paid to you is taxed depends on the rules of your country of residence and on the treaty between the two states. That is precisely the problem double taxation agreements exist to solve, so read both sets of rules before building the structure.

Five measurements to take before deciding

1. 1

   Map where your customers are

   If they are mostly in the EU, the VAT advantage is real. Outside it, much of the advantage falls away and documentation grows.
2. 2

   Decide where you will actually live

   The 183-day test and the centre of vital interests follow from this. The answer matters more than the tax rate.
3. 3

   Compare your turnover with the VAT threshold

   If you will cross it, put the monthly filing rhythm and accounting fee in the budget from day one.
4. 4

   Put the bank step in the timeline

   Formation is fast; banking is not. Plan account opening as the longest step in the process.
5. 5

   Secure your Bulgarian-language contact points

   An accountant, a bank contact and, where needed, a lawyer. Those three, not a translation app, are the real answer to the language barrier.

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