Sole trader, Bulgarian EOOD or Estonian OÜ? The 2026 tax math for a freelance developer

If you freelance from within the EU and earn over approximately €50,000 annually, at some point someone suggests opening a company in Estonia or Bulgaria. However, this advice neglects the crucial factor: how you utilize the funds. With experience in accounting and company formation in Bulgaria, I have observed these three structures side by side regularly. Below is a breakdown of the arithmetic, incorporating realistic options and the honest truth.

For a solo developer selling services or operating a small SaaS, the practical choices are:

1. Registered freelancer in Bulgaria (a free profession, personal registration, no company)

2. Bulgarian EOOD (single-owner limited company)

3. Estonian OÜ through e-Residency

All figures in this analysis are based on 2026 rates, with the euro being the common currency. Headline tax rates do not reveal the complete picture. The actual amount paid consists of three layers: company-level tax (or personal income tax if there is no company), taxes on money leaving the company for you, and social contributions that differ significantly across the three options.

When you keep profits within the business, there is no tax on the retained amount; it is considered personal income. In contrast, when you take out profits, the tax rate is 10% on 75% of gross income (7.5% effective), plus a 10% corporate tax and a 5% dividend tax, totaling 14.5% combined. Additionally, 22/78 of the net distribution (22% of gross) is subject to social contributions, which can be as high as 31% of income.

Assuming you retain all income at the end of the year, the tax implications differ across the three structures:

For a freelancer in Bulgaria, contributions are capped at about €7,700, with income tax around €3,700, leaving roughly €48,600. For the Bulgarian EOOD, corporate tax amounts to €6,000, dividend tax to €2,700, and owner contributions on the minimum base are approximately €2,100, resulting in a net gain of roughly €46,000 to €48,000. The Estonian OÜ imposes a distribution tax of €13,200, making the maximum retained amount approximately €46,800, in addition to other accounting and contribution costs.

The key findings are twofold. First, a Bulgarian company does not offer tax advantages over Bulgarian freelancer status when it comes to the money you take out. The owner's contributions are the decisive factor, making incomes above roughly €45,000–€50,000 the most economical option for freelancers. Second, Estonia does not prevail in terms of the money you retain.

It shines when you reinvest profits or plan to raise capital. In scenarios where you reinvest or seek external investment, the Estonian OÜ proves cost-effective, with a 0% tax on retained profits and favorable investor relations.

However, the location of your personal tax residence plays a crucial role in determining the most advantageous structure. Bulgarian companies require a 183-day presence in the country annually, whereas Estonia and other EU states have comparable residence tests. If you manage your company remotely from abroad, your home country may classify the company as resident there, subjecting you to home rates and compliance costs for the foreign entity. Consequently, the structure must align with where you intend to reside.

In summary, the decision between a Bulgarian freelancer registration, Bulgarian EOOD, and Estonian OÜ should be guided by where you will live and how you plan to utilize the company's profits.