Is EOOD the only way for high earners??

Geetings @CaptainS, and welcome to Expat.com. And congratulations on your successful career!

Before your specific questions, there are some general points that might be helpful:

- A limited company (TAP EOOD/OOD) is not the only option, but I think it's the one that will get recommended in your situation.

- The headline income tax rate in Bulgaria is 10%. It's a flat tax applying to pretty much all forms of income. However, the effective tax rate will be higher due to other contributions (dividends, social security, health, pension).

- 100k euros is over the VAT threshold, so you'll have to consider the VAT issue too (whether as company or self-employed). But this is a pretty general EU thing, so I'd imagine it's pretty similar in Greece.

- A Bulgarian company can be owned by a resident or non-resident company or individual. So, separate from having a Bulgarian company, you have to consider your own tax residence situation. I think it could get tricky if you try to have a Bulgarian company and remain as a tax resident in Greece.

If you want the benefits of Bulgaria's low tax rate, you'll most likely need to obtain legal residence in Bulgaria (easy as you're an EU citizen), and then become tax resident too. Typically, tax residence is more than 183 days in the country each year. I don't know the Greek tax rules as to whether (after you become a Bulgarian tax resident) you would still be able to continue to live (for less than 182 days) in Greece. If the tax savings are significant, then it's probably not worth the risk, and you should probably base yourself in Bulgaria, and just visit Greece occasionally.

This is particularly an issue with dividends. You are correct that there is a 5% "withholding tax" (WHT) rate for dividends. But then Greece wants a chunk of your received dividends, I'm sure. While Bulgaria wouldn't.

- At its simplest, you can be self-employed and "make" 100k, then pay 10% income tax (=90k net). Or you can have a company that "makes" 100k, then pays 10% corporate income tax (=90k net), then deducts WHT from full dividend distribution (= 85.5k). That looks like a win for self-employment, but this requires more social security contributions, and has less flexibility in terms of costs (and hence profitability).

- It's nice to have a regular paycheck, but as an independent, such high income concentration is not desirable. So you might want to consider whether you want to diversify your client base, or create a separate revenue stream (a software product, blog, website, "side hustle", or whatever), or whether you might actually be better off (security-wise) as an employee (albeit a remote one) of a Swiss company. I'm not sure if Bulgaria cares, but sometimes there is an issue with people claiming to be "self-employed" but only working for one company (i.e. quasi employees). Having a company avoids this issue.

- Bulgaria has the lowest (or certainly one of the lowest) tax rates in the EU. But it's also a nice place to live, and it has a good international airport in Sofia with easy access to Swizerland and other European destinations. Its other big advantage for remote workers like yourself is the very low cost of living (one of the lowest in the EU, again) enabling you to live well on a relatively small income. In your case, it's particularly good as it's geographically convenient, allowing you to base yourself here, but still be able to drive down to Greece for a long weekend when you feel like it.

1. Yes, of course, you can be the sole shareholder of TAP. TAP can have as few as 0 employees, but in this case, it can only distribute funds to the shareholder as dividends (and this is taxable). More typical is to have the owner (or sole shareholder) as an employee with a regular salary (typically significantly less than the company's revenue). Yes, TAP can invoice entities around the world.

2. You are correct that the corporate income tax is 10% and the dividend witholding tax (WHT) is 5%.

However, TAP will, most likely, invoice 100k euros. As per general comments above, probably 120k euros (inc. VAT). My guess is that your current "employer" won't care if you are charging VAT. But maybe they will, and will insist on only paying 100k euros inc. VAT (in which case your non-VAT income is lower at only 83,333 euros).

I'll assume the former. So, you'll pay the 20k euros of VAT. And you'll show income of 100k euros, as you said.

Even with a simple business as you've described, you should be able to include some legitimate business costs (maybe a lease car, office rental/expenses, internet, computers, printers, stationery, professional subscriptions, travel to client, accounting expenses, etc.) which reduce the profit. Almost certainly in your situation you would contribute to some kind of company pension scheme or company private medical insurance, and most likely these could also be deductible expenses. As you said, TAP must pay 10% of its net profit.

Software engineering is very profitable, but, even so, I'd have guessed you could show at least 30k of business expenses. Hence your net profit is 70k, and your net profit after tax is 63k. (And this is based on you taking your income as dividends. If you pay yourself a salary, this is also a business expense and reduces your profit further,)

Yes, you are correct, the company can distribute this entirely to the shareholder(s) by deducting (and paying to the tax authorities) the 5% WHT. So the final amount might be 59.85k euros.

3. Good question, and I'm not sure. But if you're the sole shareholder, and you only receive income as dividends, then I don't think you have to pay any social security contributions. But it's advisable, so this leads neatly to your next question...

4. Yes, this is probably the more typical situation, and I'd recommend it. The Bulgarian minimum salary is about 300 euros per month, so this gives you an idea of the cost of living here. So a salary of "only" 1,500 euros per month, is still a generous 5 times the minimum, and probably, for many, a very comfortable amount to live on.

This salary is a corporate expense and reduces TAP's net profit and income tax payment. (Based on the gross numbers below, from the salary calculator, it's just under 22,000 euros. (So costs rise to 52k, and hence net profit drops to 41k. Corporate income tax drops to 4.1k, and leaves 37k to distribute as divideds or retain as profits.)

Yes, there are now social security/pension contributions which are shared between the employee (you) and the company. The total is, approximately, 25%-30% of the salary, divided between the company (i.e. an additional cost), and the employee (i.e. as monthly deductions). And the company also deducts the 10% income tax. So, your net monthly salary would be around 1,200 euros.

These deductions would put you in the Bulgarian system for a state pension and for free healthcare (and an EHIC card for use when travelling in the EU). However, I'd consider, based on your income, that these would be nice to have, but not sufficient. Hence my suggestion above to supplement with a company pension/private health care.

Even with this salary, you can still receive further income as dividends as above. Or, the company can simply "retain" the profits without further tax payment.

There is an employee calculator here:
https://sb-bg.com/calculators-and-tax-g … alculator/

So, based on 3,000 leva (approx. 1,500 euros) monthly employee salary this is what it shows:

Component     Value
Gross salary          3000.00 BGN     1533.88 EUR
Insurance sum (paid by employee)     13.78%     413.40 BGN     211.37 EUR
Tax base         2586.60 BGN     1322.51 EUR
Income tax     10%     258.66 BGN     132.25 EUR
Net salary         2327.94 BGN     1190.26 EUR
Insurance sum (paid by employer)     18.52%     567.60 BGN     290.21 EUR
Total expenses for the employer         3567.60 BGN     1824.08 EUR

Hey @gwynj, thanks for taking the time and writing all this. I really appreciate it!!

I think the best thing for me to do in this situation is to move to Bulgaria create TAP EOOD(single shareholder) hire myself and become a tax resident.

You mentioned something about VAT threshold and I was wondering what that is exactly. Currently I am invoicing the Swiss company with 0% VAT cause its liable to Intra Community supply.

My current gross salary is 75k euro, and I am estimating that my business expenses (rent, car, salary, etc) will be around 25k euro.

That means that TAP will get taxed 10%, leaving me with 45k that I can pay it as dividends with a 5% (WTH) which is around 42k in my pocket to do whatever I want.

I am just trying to understand if I am right cause that's a lot of money in my pocket haha.

On that note, dividends can be paid whenever I want, right? Or is there a law that says, divdends are paid only once per year or per quarter?

The numbers I mentioned above was a rough estimation cause hopefully my next job will pay me around 100k 😂

Hi,

I don't have the time to read the previous post, so here are the short answers to your initial questions:

1.  Yes. This is the basic idea of an EOOD or a "TAP". Here we have another option - the so called free professional / kind like a self employed/.

2. No. And this is just the short answer.
If your company has 100 k turnover, then you're not getting exactly the 85.5 k. If it is an EOOD, then you will have to define a salary for yourself. Social security contributions are calculated on the basis of this salary, an these are around 34 %. Then comes the corporate tax. All this reduces your company's net profit. On the company side, finally you will get a 5 % divident tax. On the side of your salary is only the income tax and the social contributions.
If you're working as a free professional, then calculations are a bit different.
In both cases you will need an accountant to best calculate your optimal parameters to reach a lower taxation level.
3. Social security contributions are calculated entirely on the basis of your salary, if you're an employee of your EOOD. These are split between the employer and the employee, and amount roughly to 34 %. It is almost the same for a free professional, just the basis for calculations is different.
4. Pros probably not many more(excluding the lower taxation), but cons - yes. To work with an EU entity you will have to register under the VAT law. Then you will have to submit monthly VAT reports. This requires an accountant.

[Post deleted]

VAT is a tricky area, and many prefer to avoid VAT registration if possible.

Greece and Bulgaria are both in the EU, so if you checked the VAT situation before for Greece, then it should be the same in Bulgaria.

However, I'm suspicious of 0% for "Intra Community supply". That doesn't sound right, as Switzerland, while belonging to the single market, is not part of the EU or EEA, so its VAT rules are different from the EU countries, and wouldn't classify as an "intra community supply".

You should note that, more generally, intra community supplies are NOT usually exempt from VAT.

The Swiss Authorities Online has useful info:
https://www.ch.ch/en/who-pays-vat/

It says that for "businesses based abroad" (i.e. you/TAP) "In principle, businesses that supply goods or services in Switzerland are liable to pay VAT on all turnover in Switzerland."

Fortunately, Switzerland is a very rich country, so their threshold for VAT registration is quite high: 100,000 CHF (about 90,000 euros).

Specifically, they say: "However, businesses whose entire annual turnover from taxable supplies on Swiss territory and abroad is less than CHF 100,000 (CHF 150,000 for charitable institutions and non-profit-oriented sports and cultural associations) are not liable to pay VAT."

Currently, your anticipated level of Swiss income is below this. So that seems to be one less thing to worry about. :-)

"I am just trying to understand if I am right cause that's a lot of money in my pocket haha."

Well, that makes me think you are currently self-employed, rather than using a company incorporated in Greece. Yes?

The Greek tax rates are graduated as follows:

Below EUR 10,000     9% (tax 900)
From EUR 10,001 to EUR 20,000     22% (tax 2,200)
From EUR 20,001 to 30,000     28% (tax 2,800)
From EUR 30,001 to 40,000     36% (tax 3,600)
Above 40,000     44% (tax = 4,400   4,400   4,400   2,200)

So, for, say, 75,000 euros as a self-employed independent contractor, you should pay 24,900 euros. Which is an effective tax rate of 33.2% (and I'm ignoring social security and other contributions, which probably are significant for this level of income). Your net is therefore 50,100 (from which you still have your 25,000 of expenses to pay).

The Greece corporate income tax rate is lower than this, as it's only 24% (and drops to 22% next year). Their witholding tax on dividends is also 5%.

If you create a Greek entity, then your net profit is 50k (75k income - 25k estimated costs), less whatever salary you decide to allocate yourself. So, for simplicity, on 50k profit the tax will be 12,000, or a net of 38,000.

While 22% is significantly lower than 33.2%, it's still quite a bit higher than Bulgaria's 10%.

Moreover, your money will go further in Bulgaria because of the cost of living difference. Numbeo's cost of living index gives Bulgaria 38.67 (cost of living) and 9.56 (rent), while Greece is 58.38 (cost of living) and 13.30 (rent).

And, of course, your Bulgarian accountant will be cheaper than a Greek accountant, and I think you'll find that he'll advise you that there's a lot more flexibility in Bulgaria in terms of what you can claim for expenses, and what you can give yourself in "executive benefits" (nice lease car, company phone/laptop, private medical insurance, big pension contribution, etc.) to minimize your taxable profit.

Strange to see this again - some people are using as a starting point their desired state and not the reality. This road leas to nowhere.

And the current reality in Bulgaria is:

If you own a company, that wants to do international business, then it has to be VAT registered!!! And NO, that does NOT depend on whether the product/service are VAT taxable in the target/client country or not.

The current reality in EU countries is:

Every single country has a VAT taxing system. This is part of the so called "traditional own resources" of the EU. However some product and/or services may be excluded from VAT - e.g. education, books etc.

[Post deleted]

Well... as I said, it's tricky. :-)

Essentially, there's one regulated EU-wide VAT regime allowing companies to incorporate in any EU member state, and register for VAT in that member state, while making sales (and charging VAT) to customers in other member states. All sales, to any EU country, are reported as part of your VAT return without having to differentiate between VAT received from different countries. I believe this is essentially what @kristiann is saying.

The relevant link to EU and the "EU VAT system"
https://ec.europa.eu/taxation_customs/what-vat_en

But, as @EVTRA says, this doesn't cover non-EU sales. So for sales to a country outside the EU you don't have to charge, or remit VAT. But, of course, that doesn't stop the country of the buyer (such as China) imposing an implied sales tax (and import duties) and collecting it from the buyer. This is exactly what Bulgaria and other EU countries typically do with products purchased online from China, for example.

Here's the link to the EU guidance on selling SERVICES to non-EU customers:
https://europa.eu/youreurope/business/t … services-1

And ditto for PRODUCTS:
https://europa.eu/youreurope/business/t … ellgoods-1

In addition, and I'm sure I'm just as surprised as all y'all, Switzerland has a separate VAT regime as I detailed in my last post. I'm guessing it's because Switzerland is a special case, not officially part of EU/EEA, but part of the single market. So it's analogous to neither Spain (EU member state) nor China (non-EU country). I'd imagine the EU has adopted this, and it's enforceable within the EU, and hence would apply to both Greek and Bulgarian entities making sales to Swiss entities.

The Swiss VAT info (per my previous post) is here:
https://www.ch.ch/en/who-pays-vat/

And it seems Swizerland is not the only "exception" so there's a detailed table by EU / EU-related territory here:
https://ec.europa.eu/taxation_customs/t … itories_en

[Post deleted]

It's being fun here ... again due to mixing reality with desired state. VAT .... well if you have been involved in international sales - o.k., then I will accept it, but if it is only based on speculations - then better stop confusing people.

EOOD requires a VAT registration in order to work/trade with foreign entities, regardless whether these reside in the EU, or in Switzerland or elsewhere in the world. Period.

[Post deleted]