Freelancers all across Europe are looking for national tax regimes where they can pay lowest personal income taxes. Some have heard that Bulgaria is the right place in EU for this purpose. And they have heard right.
The good news is that Bulgaria offers the absolutely lowest personal income tax in the whole EU – 10 %. Plus there are further deductions which means that effectively freelancers pay less than 10 % of their gross income.
Bad news #1 is that any freelancer who wants to pay taxes in Bulgaria has to be in Bulgaria at least 183 days per annum. No exceptions. If you can live with this requirement, then this means that you should find an accommodation in Bulgaria. Fortunately living costs in Bulgaria are very low and many self-employed persons will find that even € 500 per month can be enough for a decent life in Bulgaria ( incl. home rent, transport expenses, etc.).
If you are OK with all this then you should consider moving to Bulgaria. But how can this happen? If you are an EU citizen then things are not that complicated at all and within a month you can apply and get a Bulgarian residency. Absolutely hassle free process. But if you are non-EU citizen then you should apply for Bulgarian long term residency – which however is not that easy. You cannot get residency on the grounds that you are a freelancer and that you want to move to Bulgaria and work and pay taxes there. No, definitely not. There are a number of options to consider if you want to get Bulgarian residency. The good news is that if you are successful and get the permit – then you will have no problems working as a freelancer, even if you have obtained Bulgarian residency permit on a quite different legal ground.
And the last bad news is that self-employed persons pay not only 10 % personal income tax but also social contributions. Which amount varies between 20 and 30 % of the income. However there are maximum amounts – around € 1000 per month – which means that if you make a big profit this should not bother you. Because even if you make € 1 M per month – you will pay the maximum which is say € 1000.
Fortunately there are different ways to avoid the social contributions requirement. The most popular is by incorporating a limited liability company. The expenses for the company setup are minor and then you can continue working as a freelancer but via your company. Which means that you will pay only 10 % corporate tax and no social contributions . Actually the manager of the company (you can be the manager instead of hiring other people) is obliged to pay social contributions but they are as low as less than € 100 per month and do not depend on the turnover of the company, i.e. even if the company has a € 1 M profit the manager of the company still pays € 100 social contributions. If you make a good profit and you want to have some official income – then Bulgarian 5 % dividends tax is right for you. Yes, that is correct – you pay 5 % over your company income and then you have a personal non-further-taxable income.