US Company Formation from Bulgaria (2026): 10% Flat Taxes, 5% Dividend Tax, the Euro, the US–Bulgaria Treaty and When a US LLC or C-Corp Beats an EOOD

Bulgaria has the lowest headline taxes in the EU: 10% corporate tax, 10% flat personal income tax and 5% dividend tax. On 1 January 2026 it adopted the euro, which removed currency risk for businesses that earn in euros and dollars. Sofia and Plovdiv have large IT outsourcing and product companies, and Bulgarian freelancers sell development, design and support worldwide.

With rates that low, a US LLC rarely saves a Bulgarian resident any tax. What it can do is give US clients a US counterparty, give a Bulgarian company a US subsidiary, or give investors the Delaware structure they expect. This guide explains Bulgaria's rules, how it treats a US company, the US–Bulgaria treaty and its anti-abuse rules, and how US LLC formation compares with US C-Corp formation.

In short: Bulgarians can own 100% of a US LLC or C-Corporation, formed remotely. Bulgaria taxes companies at 10%, individuals at a flat 10%, and dividends at 5%. The government dropped a planned rise in dividend tax to 10% from its revised 2026 budget, after mass protests in December 2025. A US company managed from Bulgaria can be treated as a Bulgarian tax resident. The US–Bulgaria treaty (in force since 2008) limits US withholding on dividends to 10% (5% for companies owning 10% or more), and on interest and royalties to 5%, subject to a limitation on benefits. With UCB, a Wyoming LLC with EIN is $249 and a Delaware corporation with EIN is $358, all-in.

Bulgaria's rates and the euro

Since 1 January 2026, the lev has been replaced by the euro at the fixed rate of 1.95583 lev per euro. Contracts, accounts and tax returns are now in euros.

The combined burden of an EOOD that pays out its profits is about 14.5% (10% corporate tax, then 5% on the remaining 90%). That is the benchmark a US structure has to beat.

How Bulgaria treats a US company

Classification

A US LLC is a legal person under its state law, with limited liability. Bulgarian practice generally treats it as a foreign legal entity, comparable to an OOD or EOOD, not as transparent. Distributions to a Bulgarian individual are then foreign dividends, taxed at 5%. The US withholds nothing on a disregarded LLC's distributions, so the full 5% is due in Bulgaria.

Place of effective management

Bulgaria taxes foreign companies as residents when their place of effective management is in Bulgaria, and the anti-abuse rules look through arrangements that lack substance. A single-member LLC run by its owner from Sofia, with no presence in the USA, can be treated as Bulgarian-resident:

• 10% corporate tax on its profits;
• Bulgarian bookkeeping and filings;
• 5% dividend tax on distributions.

That is the same burden as an EOOD, with extra compliance costs.

CFC rules

Bulgaria's CFC rules apply to Bulgarian companies that control low-taxed foreign entities with mainly passive income. Because Bulgaria's own corporate rate is only 10%, a foreign company counts as low-taxed only if its tax is below half of what it would pay in Bulgaria, so a disregarded US LLC paying no US tax qualifies. An EOOD owning a passive US LLC needs advice.

The US–Bulgaria treaty

The treaty signed in 2007, with its protocol, has been in force since 2008. It is a modern treaty with a detailed limitation on benefits (LOB) article.

The treaty also limits US tax on business profits to a US permanent establishment. Because Bulgaria is a low-tax EU country, the LOB article is drafted to stop third-country owners from routing US income through a Bulgarian company. A Bulgarian individual or a Bulgarian company owned by Bulgarian residents with a real business qualifies. A Bulgarian holding company set up by foreign owners mainly to reduce US withholding often does not.

US LLC formation from Bulgaria

US tax position

A single-member LLC with a non-resident owner pays no US income tax if the owner works from Bulgaria and the LLC has no US office, employees or dependent agents (see effectively connected income explained). The LLC files Form 5472 with a pro forma Form 1120 every year, and the penalty for missing it is $25,000 (see Form 5472 explained).

Example: a QA lead in Plovdiv

These are illustrative figures, not a client case, at €0.92 to the dollar.

Ivana is a QA lead in Plovdiv who earns US$75,000 (about €69,000) a year from two US software companies.

• As a freelancer under a civil contract (liberal profession), 25% of her income is deemed costs and she pays 10% tax on the rest, plus social contributions on a capped base. Her effective income tax is about 7.5%.
• Through an EOOD, she pays 10% corporate tax on profit, then 5% on dividends, about 14.5%, and pays contributions on a salary she sets.
• Through a US LLC run from Plovdiv, the LLC is likely treated as a Bulgarian-resident company: the same 14.5% as an EOOD, plus US compliance.

She keeps freelancing. One client insists on a US vendor, so she forms a small Wyoming LLC, which she declares to her accountant. The LLC signs with the client and pays her as a freelancer for her work. No US tax arises, and her Bulgarian position is unchanged.

US C-Corp formation from Bulgaria

US tax position

A US corporation pays 21% federal tax on its profits plus state tax, and files Form 1120 and Form 5472 every year (see the 21% corporate tax explained and the C-Corp guide for non-residents). Its dividends to a Bulgarian company owning 10% or more are withheld at 5% under the treaty and are generally exempt in Bulgaria under the participation exemption.

Example: a Sofia outsourcing company

Take an illustrative case: a 200-person Sofia software outsourcing company wins US healthcare and fintech clients. They want contracts with a US entity carrying US insurance, and the company hires two US delivery managers. It forms a Delaware corporation:

• The US subsidiary signs master service agreements, employs the managers and pays 21% US tax on its sales margin.
• The EOOD delivers the work and invoices the subsidiary at cost plus a margin, taxed at 10% in Bulgaria.
• Interest on any loan from the EOOD to the subsidiary carries at most 5% US withholding.
• Dividends from the subsidiary carry 5% US withholding.

The gap between US (21%) and Bulgarian (10%) corporate tax means the IRS will look closely at whether the US subsidiary's margin is high enough. Keep a transfer-pricing study on file. See US subsidiary for a foreign company.

Start-ups

Bulgarian start-ups raising money from US investors usually need a Delaware C-Corporation at the top, with the Bulgarian company as a subsidiary. See raising US investment as a foreign founder.

Which state

• Wyoming or New Mexico for a small LLC.
• Delaware for a subsidiary or start-up.
• The state where US staff work.

See best state for non-residents and the state selector.

What it costs

UCB's prices include state fees and the first year of registered agent service:

• Wyoming LLC with EIN: $249, or $348 with a US bank account application.
• Delaware corporation with EIN: $358.

A Wyoming LLC costs $121 a year to keep active, or $421 with the annual federal return. A Delaware corporation costs $578 a year. A US business address with your own suite number is $60 a year. See what a US LLC costs every year.

Documents and banking

For an individual, a Bulgarian passport or ID card and proof of address. Use the Latin spelling in your passport on every document, not your own transliteration from Cyrillic. For an EOOD, a current extract from the Commercial Register (Търговски регистър), translated into English, and the owner's decision approving the US company. US fintech banks accept Bulgarian owners readily. See US business bank accounts for non-residents and Stripe for non-residents.

Mistakes to avoid

• Expecting a US LLC to lower tax below Bulgaria's 10% and 5%.
• Running a US LLC from Bulgaria and forgetting that it may be Bulgarian-resident.
• Using a Bulgarian holding company owned by foreigners to claim treaty rates without passing the LOB.
• Thin US subsidiary margins, given the gap between US and Bulgarian tax rates.
• Missing Form 5472 in a year when no US tax was due.

Frequently asked questions

How does Bulgaria treat a US LLC? Generally as a foreign legal entity. Distributions are dividends taxed at 5%.

Did Bulgaria raise its dividend tax to 10% in 2026? The original 2026 budget proposed it, but the revised budget approved in December 2025 dropped the increase. Check the current rate with your accountant.

Is there a US–Bulgaria tax treaty? Yes. Dividends 10% (5% for companies owning 10% or more), interest 5%, royalties 5%, subject to the limitation on benefits.

Does the euro change anything? Your Bulgarian accounts and taxes are now in euros. The US side is in dollars as before.

Does my US LLC pay US tax? Not if it has no US office, staff or agents. It files Form 5472 and a pro forma 1120 every year.

How UCB can help

We form US companies for Bulgarian owners and EOODs remotely: the state filing, EIN, registered agent, US business address and bank application. We prepare W-8BEN-E treaty forms, and each year we file the US returns through our US tax filing service. See our formation, EIN and bank account package and the Romania guide for comparison.

Setting up a US company from Bulgaria? WhatsApp us at +1 315 961 2956 or email enquiries@ucbsolutions.com.