Bulgaria Corporate Tax vs Germany: A 2026 Side-by-Side Comparison

Germany's corporate tax burden is one of the highest among EU member states. Bulgaria's flat 10% rate is one of the lowest. For an owner-managed business, the difference can amount to hundreds of thousands of euros over a decade. This article walks through the numbers honestly — including the constraints that prevent a simple "move your company to Bulgaria" shortcut.

1. Headline Corporate Tax Rates

Germany's statutory corporate income tax is 15%, but that figure is misleading in isolation. On top of it, companies pay a 5.5% Solidaritätszuschlag on the corporate tax (adding 0.825 percentage points), and the Gewerbesteuer — a municipal trade tax — which varies from around 7% in low-rate municipalities to over 17% in major cities. In Frankfurt or Munich, the combined effective rate routinely exceeds 30%.

Bulgaria's 10% flat corporate income tax rate applies to all profits, regardless of company size, industry, or municipality. There is no equivalent of the Gewerbesteuer. There is no solidarity surcharge. The rate on the tin is the rate you pay.

2. Full Tax Breakdown: Germany vs Bulgaria

Note: Germany's dividend rate assumes the 25% Abgeltungssteuer applies to the net-of-corporate-tax profit. Actual personal tax may be higher under Teileinkünfteverfahren if the shareholder-director takes a salary. VAT comparison is for illustration — cross-border B2B supplies within the EU use the reverse-charge mechanism regardless of where the supplier is registered.

3. VAT Treatment

Bulgaria's standard VAT rate (20%) is fractionally higher than Germany's (19%). For most international B2B transactions this is irrelevant: when a Bulgarian VAT-registered company invoices a German (or any EU) VAT-registered business for services, the reverse-charge mechanism applies. The Bulgarian supplier charges 0% VAT; the German buyer self-accounts for VAT in their own jurisdiction. No cash VAT changes hands.

For B2C e-commerce selling to EU consumers, the EU One Stop Shop (OSS) system applies: you charge VAT at the buyer's country rate regardless of where your company is registered. A Bulgarian EOOD selling to German consumers still charges 19% German VAT and remits it via the OSS. This is identical to what a German GmbH would do.

4. Social Contributions for Working Directors

German managing directors (Geschäftsführer) with a GmbH majority interest are generally treated as self-employed for social security, meaning they are not subject to mandatory statutory health and pension insurance — but many opt in voluntarily or carry private insurance.

In Bulgaria, the active managing director must be socially insured. The two main options:

• Management contract (Договор за управление): Social contributions on the statutory minimum base for your industry — roughly €100–250/month total, granting Bulgarian health and pension rights.
• Self-insured person (СОЛ): A lower flat monthly contribution of approximately €80–110/month. Simpler but provides lower future benefit entitlements.

These amounts are modest compared to German equivalents. A German GmbH-Geschäftsführer with a salary of €60,000 would face social insurance costs (employer + employee) of approximately €12,000–16,000/year if they opt into the statutory system.

5. Worked Example: €200,000 Profit

Consider a software consultancy generating €200,000 profit before corporate tax. The owner wants to distribute all post-tax profits as a dividend.

6. When the Advantage Disappears: German CFC Rules

Germany's Hinzurechnungsbesteuerung (§§ 7–14 Außensteuergesetz) is designed to prevent German-resident shareholders from parking passive income in low-tax foreign entities. The rules apply when:

1. A German-resident person controls more than 50% of a foreign company, and
2. That company earns "passive income" (investment returns, interest, royalties, certain intra-group service fees), and
3. The passive income is taxed at less than 25% at source.

Bulgaria's 10% rate is well below the 25% threshold, so any passive income will be CFC-attributed if those three conditions are met — effectively taxed in Germany as if it were already distributed, regardless of whether you actually took a dividend.

Active business income is treated differently. If the Bulgarian EOOD conducts genuine commercial operations — real contracts with real clients, decisions made in Bulgaria, meaningful local presence — the income is classified as active and CFC attribution is generally not triggered, even at the 10% rate. The Cadbury Schweppes precedent at EU level provides additional protection for genuine businesses.

The practical implication: a Bulgarian EOOD works well for German entrepreneurs who have relocated their tax residence to Bulgaria, or who operate a business with genuine Bulgarian substance. It is not a vehicle for routing German-source passive income offshore while maintaining full German tax residence.

7. How to Structure It Legally

Three structures are commonly used by German-connected entrepreneurs:

8. Frequently Asked Questions