How French Entrepreneurs Use Bulgarian Companies Legally

Q: Can a French citizen legally own a Bulgarian company?

Yes. As an EU citizen, a French national has the right to establish a company in any EU member state under Article 49 TFEU (freedom of establishment). There are no nationality or residency restrictions on owning or directing a Bulgarian EOOD.

Q: What are French CFC rules and do they apply to a Bulgarian EOOD?

France's CFC rules for corporate shareholders (Article 209 B CGI) can attribute the profits of a foreign low-tax subsidiary to the French parent if the structure lacks genuine economic substance. For individual French-resident shareholders, Article 123 bis CGI applies to passive investment vehicles. Active trading companies with real Bulgarian substance are generally outside scope, but the analysis depends on facts and should be reviewed by a French tax specialist (expert-comptable or avocat fiscaliste).

Q: What counts as genuine economic substance in Bulgaria?

Substance indicators include: a Bulgarian director making real management decisions, physical business operations (meetings, contracts, banking) occurring in Bulgaria, employees or service providers based in Bulgaria, revenue from clients outside France, and documented decision-making trails. The weight given to each factor depends on the nature of the business.

Q: What happens if the French tax authority requalifies my Bulgarian company as French?

If the Direction générale des finances publiques (DGFiP) determines that the effective place of management (siège de direction effective) is France, the Bulgarian company may be treated as a French tax resident — subject to French corporate income tax (25%), plus interest and penalties on underpaid tax. The risk is highest for companies with no genuine Bulgarian presence and whose only clients are French.

Q: Do I need to disclose my Bulgarian company to the French tax authority?

Yes. French tax residents with controlling interests in foreign companies must report them on their annual tax return (via form 2059-F or 2065 for corporate shareholders, and via the Annexe 3916-bis for bank accounts held by foreign entities). Non-disclosure of foreign accounts and entities is subject to significant fines under French fiscal law.

Bulgaria's 10% flat corporate tax and 5% dividend withholding tax make it one of the most attractive EU jurisdictions for entrepreneurs. France's combined tax burden on owner-managed businesses — IS (impôt sur les sociétés) at 25%, cotisations sociales on salary, and up to 30% flat tax on dividends — can reach well above 50% on a euro of company profit. The arithmetic drives French founders to explore Bulgarian structures. The law, however, draws clear boundaries between legitimate tax planning and abusive arrangements.

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1. Why France's Tax Burden Drives Entrepreneurs to Look Elsewhere

France's corporate income tax for companies with turnover above €10 million is 25%. Smaller companies benefit from a reduced 15% rate on the first €42,500 of profit — but anything beyond that is taxed at the full rate. When profits are distributed as dividends, the prélèvement forfaitaire unique (PFU or "flat tax") of 30% applies (including 17.2% social contributions). A founder who takes a salary from their own company faces additional charges sociales of up to 45% on the salary portion.

Bulgaria, an EU member since 2007 and Eurozone member since January 2026, levies 10% corporate income tax and 5% dividend withholding tax — a combined effective rate of approximately 14.5% on a euro of distributed profit. The difference is not a grey area or an aggressive position: it is a direct result of Bulgaria's sovereign fiscal policy, fully recognised by the EU and OECD.

2. The EU Legal Basis: Freedom of Establishment

Article 49 of the TFEU guarantees every EU citizen the right to establish a business in any member state on equal terms with nationals. As a French citizen, you have an unconditional right to incorporate in Bulgaria. The ECJ confirmed in Cadbury Schweppes (C-196/04) that CFC legislation cannot be applied to genuinely established companies in other member states — doing so would infringe Article 49 unless the company is a "wholly artificial arrangement" with no economic reality.

This ECJ precedent does not, however, prevent France from applying its CFC rules to letterbox companies with no substance. The law that protects you is the same law that demands genuine activity.

3. French CFC Rules: Article 209 B and Article 123 bis CGI

Article 209 B CGI — Corporate CFC Rules

Article 209 B CGI applies to French companies (or branches) that control at least 50% of a foreign entity subject to tax at less than half the French rate (i.e., less than 12.5%). A Bulgarian subsidiary at 10% falls within scope. When triggered, France attributes the Bulgarian entity's profits to the French parent as if they were distributed — taxed at the French corporate rate.

The key exemption: if the foreign entity "carries out effective industrial or commercial activity" in its country of establishment, Article 209 B does not apply. What qualifies as "effective activity"? The French tax authority (DGFiP) looks at: local employees, local clients, local bank accounts, premises, and documented management in Bulgaria. A company with genuine operations in Bulgaria — not just a registered address — falls outside scope.

Article 123 bis CGI — Individual Shareholder Rules

Article 123 bis CGI targets French-resident individuals who hold more than 10% in a foreign entity subject to a privileged tax regime (less than half French rate). It attributes a notional income to the individual calculated on the foreign entity's assets, regardless of whether a dividend was distributed. This rule is specifically designed for passive investment vehicles and holding structures.

Like Article 209 B, Article 123 bis has a substance exemption for entities with genuine economic activity. The CJEU and French administrative courts have consistently upheld this exemption when real operations are documented. The burden of proof lies with the taxpayer.

4. When a Bulgarian Company Is Fully Legal for a French Resident

Indicators of a legally defensible structure

Real economic activity in Bulgaria: The company has clients outside France, provides services that are genuinely delivered from Bulgaria, and generates value through Bulgarian operations.
Local management: A Bulgarian director makes real business decisions — approves contracts, manages relationships, operates bank accounts — not merely rubber-stamping instructions from France.
Documented decision trail: Board minutes, email records, and contracts demonstrate that management decisions were made in Bulgaria, not remotely from Paris.
Full disclosure: The Bulgarian entity is declared on the French tax return (form Annexe 3916-bis for bank accounts; relevant annexes for foreign company interests). Nothing is hidden from the DGFiP.
Tax residence clarity: If the founder has relocated to Bulgaria (183+ days), the substance question largely disappears — the DGFiP cannot tax a Bulgarian resident's Bulgarian company income under French rules once French tax residency is properly relinquished.

5. When It Crosses the Line

High-risk indicators

The founder remains a full-time French tax resident and makes all company decisions from France. The Bulgarian entity has no local employees, no genuine local clients, and no operational footprint beyond a registered address.
100% of the company's revenues come from French clients, with services delivered from France. The Bulgarian address is used solely to route invoices.
The foreign company is not disclosed on the French tax return. Bank accounts held by the foreign entity are not declared via form 3916-bis.
The structure has no economic reason other than the tax differential. Courts applying the abus de droit doctrine (Art. L. 64 LPF) look at whether the primary or exclusive purpose of the arrangement was tax avoidance.

If the DGFiP triggers a procedure d'abus de droit under Article L. 64 LPF, the consequences are severe: reassessment of all evaded tax, interest at 0.20% per month, and a penalty of 40–80% of the reassessed amount (80% if the fraud is deemed intentional).

6. Legal Structures for French Founders

Full tax relocation to Bulgaria

The cleanest structure. The founder formally relinquishes French tax residence: deregistration at the mairie, tax exit declaration (formulaire 2042), and establishment of genuine residency in Bulgaria (183+ days, principal home, professional activity). Once a Bulgarian tax resident, the Bulgarian EOOD is taxed entirely under Bulgarian law. French-source income (rental, French pensions) may still be taxable in France under the France–Bulgaria DTA.

Active Bulgarian operations (French-resident founder)

The founder remains in France but the EOOD conducts genuine commercial activity in Bulgaria: a local director, Bulgarian-based service delivery, international clients. The French CFC exemption for "effective industrial or commercial activity" is relied upon. Structure and documentation must be audited by a French avocat fiscaliste before implementation.

French SAS / SARL → Bulgarian EOOD subsidiary

The French company establishes a Bulgarian subsidiary that performs genuine services (IT development, operations, customer support) for the French parent. Transfer pricing rules apply: intra-group pricing must be at arm's length. The structure achieves partial tax efficiency while maintaining clear operational separation. Appropriate for companies with genuine growth in Bulgaria.

7. Step-by-Step Setup for French Citizens

1
Consult a French international tax specialist first.
Before any filing or incorporation, obtain written advice from a French avocat fiscaliste on your specific situation. The cost of advice is trivial compared to the cost of a reassessment.
2
Draft and apostille a Power of Attorney at a French notaire.
The procuration notariée must be apostilled at the Cour d'appel or the Tribunal judiciaire competent for your département. This authorises Bizport EU to act on your behalf in Bulgaria.
3
Provide a certified copy of your French passport or carte nationale d'identité.
A notarised copy is required for KYC processing.
4
Share capital deposit.
The minimum is BGN 2 (approximately €1). In practice €100–€500 is typical. The deposit is made into a Bulgarian bank accumulation account; Bizport EU can handle this on your behalf.
5
Commercial Register filing and NRA registration.
Bizport EU files at the Bulgarian Commercial Register (3–5 business days). NRA tax registration and virtual office setup follow immediately after approval.
6
Declare the foreign entity on your French tax return.
File the relevant annexes with the DGFiP disclosing your Bulgarian company interest and any Bulgarian bank accounts. This is not optional — it is mandatory under French tax law.

8. Frequently Asked Questions

Can a French citizen legally own a Bulgarian company?

Yes. As an EU citizen, a French national has the right under Article 49 TFEU to establish a company in any EU member state. There are no nationality or residency restrictions on owning or directing a Bulgarian EOOD.

What are French CFC rules and do they apply to a Bulgarian EOOD?

Article 209 B CGI (corporate) and Article 123 bis CGI (individual) can attribute foreign low-tax profits to French taxpayers. Both have substance exemptions for companies with genuine economic activity. A Bulgarian EOOD with real operations in Bulgaria is generally outside scope. Analysis depends on specific facts — consult a French avocat fiscaliste.

What counts as genuine economic substance in Bulgaria?

Substance indicators include a Bulgarian director making real decisions, physical operations in Bulgaria, revenue from clients outside France, documented decision-making trails, and Bulgarian bank account activity. The weight given to each factor depends on the nature of the business.

What happens if the French tax authority requalifies my Bulgarian company as French?

If the DGFiP determines the effective place of management is France, the Bulgarian company may be treated as a French tax resident — subject to French IS (25%), plus interest and penalties. Risk is highest for companies with no genuine Bulgarian presence serving exclusively French clients.

Do I need to disclose my Bulgarian company to the French tax authority?

Yes. French tax residents must report foreign company interests and bank accounts on their annual tax return (form 3916-bis and relevant annexes). Non-disclosure is subject to significant fines under French fiscal law.