EOOD vs Freelance — Which Is More Profitable?

EOOD or Freelance Profession?

Short answer: At lower incomes (up to ~15,000 EUR/year), a freelance profession (свободна професия) may be more advantageous due to 25% normatively recognized expenses. At higher incomes, an EOOD usually wins due to 10% corporate tax + 5% dividend tax. The key factor is the level of income and the need for limited liability.

Criterion	Freelance Profession	EOOD
Income tax	10% (after 25% normative expenses)	10% corporate + 5% dividend
Effective rate (low income)	~7.5%	~14.5%
Effective rate (high income)	~10%	~14.5%
Social security	Mandatory	Mandatory (similar)
Liability	Personal (unlimited)	Limited to capital
Administrative burden	Lower	Higher
Client trust	Lower	Higher

Detailed Comparison

Taxes and Social Security

Freelance Profession:

Tax: 10% on income after deducting 25% normatively recognized expenses (НПР)
Effective tax rate: 7.5% of gross income
Social security: based on a chosen insurable income (min. 933 BGN/month for 2026)

EOOD:

Corporate tax: 10% on profit
Dividend tax: 5% when distributing profit
Effective rate with full distribution: 14.5%
Manager's social security: similar to a freelance profession

ℹ️

With an EOOD, you have the option to retain profits in the company and not pay dividend tax. This is an advantage if you reinvest in the business.

Example Comparison at 30,000 EUR Annual Income

	Freelance Profession	EOOD
Gross income	30,000 EUR	30,000 EUR
Normative expenses (25%)	-7,500 EUR	N/A
Taxable base	22,500 EUR	30,000 EUR (minus actual expenses)
Tax	2,250 EUR (10%)	~3,000 EUR (10% + 5% dividend)
Social security	~2,700 EUR	~2,700 EUR

At a net income of 30,000 EUR with no significant actual expenses, the freelance profession is slightly more tax-efficient. But at higher incomes, the difference narrows, and an EOOD offers other advantages.

Liability

This is the most important difference for many people:

Freelance Profession: You are liable with all your personal assets for the obligations of your activity. If you accumulate debts, creditors can claim against your personal property.
EOOD: Liability is limited to the contributed capital (minimum 1 EUR). Your personal assets are protected from business risks.

⚠️

The limited liability of an EOOD does not apply to tax obligations and social security contributions of the manager — the manager is personally liable for these.

When to Switch from Freelance Profession to EOOD

Typically, it's time for an EOOD when:

Your income exceeds 30,000–40,000 EUR/year — tax optimization starts working in favor of the EOOD
You work with corporate clients — many companies prefer to work with a legal entity
You want to limit your liability — for riskier businesses
You plan to hire employees — an EOOD is more convenient for hiring staff
You want to reinvest profits — with an EOOD you can retain profits without additional tax
You need better access to credit — banks more readily lend to legal entities

💡

You can be both a freelance professional and an EOOD owner at the same time. Many people start as a freelancer and gradually transfer their activity to the company.

Frequently asked questions

Which is more tax-efficient — EOOD or freelance?▼

It depends on income. At low income (up to ~15,000 EUR/year), freelance may be more efficient due to the 25% standardized deduction. At higher income, EOOD is usually more beneficial with 10% corporate tax + 5% dividend tax.

Can I be both a freelancer and an EOOD owner?▼

Yes, there is no legal obstacle. Many people start as freelancers and register an EOOD in parallel, gradually transferring their activities.

What are the social contributions for freelancers?▼

Self-insured freelancers pay contributions on a chosen income (minimum 933 BGN/month for 2026) — similar to an EOOD manager.

When is the right time to switch from freelance to EOOD?▼

Usually when: your annual income exceeds 30,000–40,000 EUR, you work with corporate clients who require invoices from a legal entity, or you want to limit your personal liability.

All guides

EOOD vs Freelance — Which Is More Profitable?

EOOD or Freelance Profession?

Criterion	Freelance Profession	EOOD
Income tax	10% (after 25% normative expenses)	10% corporate + 5% dividend
Effective rate (low income)	~7.5%	~14.5%
Effective rate (high income)	~10%	~14.5%
Social security	Mandatory	Mandatory (similar)
Liability	Personal (unlimited)	Limited to capital
Administrative burden	Lower	Higher
Client trust	Lower	Higher

Detailed Comparison

Taxes and Social Security

Freelance Profession:

Tax: 10% on income after deducting 25% normatively recognized expenses (НПР)
Effective tax rate: 7.5% of gross income
Social security: based on a chosen insurable income (min. 933 BGN/month for 2026)

EOOD:

Corporate tax: 10% on profit
Dividend tax: 5% when distributing profit
Effective rate with full distribution: 14.5%
Manager's social security: similar to a freelance profession

ℹ️

With an EOOD, you have the option to retain profits in the company and not pay dividend tax. This is an advantage if you reinvest in the business.

Example Comparison at 30,000 EUR Annual Income

	Freelance Profession	EOOD
Gross income	30,000 EUR	30,000 EUR
Normative expenses (25%)	-7,500 EUR	N/A
Taxable base	22,500 EUR	30,000 EUR (minus actual expenses)
Tax	2,250 EUR (10%)	~3,000 EUR (10% + 5% dividend)
Social security	~2,700 EUR	~2,700 EUR

Liability

This is the most important difference for many people:

Freelance Profession: You are liable with all your personal assets for the obligations of your activity. If you accumulate debts, creditors can claim against your personal property.
EOOD: Liability is limited to the contributed capital (minimum 1 EUR). Your personal assets are protected from business risks.

⚠️

The limited liability of an EOOD does not apply to tax obligations and social security contributions of the manager — the manager is personally liable for these.

When to Switch from Freelance Profession to EOOD

Typically, it's time for an EOOD when:

Your income exceeds 30,000–40,000 EUR/year — tax optimization starts working in favor of the EOOD
You work with corporate clients — many companies prefer to work with a legal entity
You want to limit your liability — for riskier businesses
You plan to hire employees — an EOOD is more convenient for hiring staff
You want to reinvest profits — with an EOOD you can retain profits without additional tax
You need better access to credit — banks more readily lend to legal entities

💡

You can be both a freelance professional and an EOOD owner at the same time. Many people start as a freelancer and gradually transfer their activity to the company.

Frequently asked questions

Which is more tax-efficient — EOOD or freelance?▼

Can I be both a freelancer and an EOOD owner?▼

Yes, there is no legal obstacle. Many people start as freelancers and register an EOOD in parallel, gradually transferring their activities.

What are the social contributions for freelancers?▼

Self-insured freelancers pay contributions on a chosen income (minimum 933 BGN/month for 2026) — similar to an EOOD manager.

When is the right time to switch from freelance to EOOD?▼

Usually when: your annual income exceeds 30,000–40,000 EUR, you work with corporate clients who require invoices from a legal entity, or you want to limit your personal liability.

EOOD vs Freelance — Which Is More Profitable?

EOOD or Freelance Profession?

Detailed Comparison

Taxes and Social Security

Example Comparison at 30,000 EUR Annual Income

Liability

When to Switch from Freelance Profession to EOOD

Frequently asked questions

Related topics

All guides

EOOD vs Freelance — Which Is More Profitable?

EOOD or Freelance Profession?

Detailed Comparison

Taxes and Social Security

Example Comparison at 30,000 EUR Annual Income

Liability

When to Switch from Freelance Profession to EOOD

Frequently asked questions

Related topics

All guides