Working with international clients from Bulgaria: legal and accounting aspects

A practical guide to exporting software services and remote work

Bulgaria is one of the most attractive destinations in the EU for software development – low taxes, quality specialists and good internet infrastructure. But when working with clients from abroad, specific challenges arise – from invoicing in English to currency risk and international translations.

In this article, we will look at the practical aspects of working with international clients – what documents are needed, how to invoice correctly, what taxes you owe, and how to receive your payments quickly and cheaply.

Main advantages of Bulgaria for international IT business

Tax advantages

• 10% corporate tax – lowest in the EU
• 10% income tax – also the lowest in the EU
• 0% VAT on export of services outside the EU
• Double taxation agreements with over 70 countries

Operational advantages

• Time zone GMT+2 – convenient for working with both Asia and the USA
• EU membership – free movement of services within the Union
• Quality technical education – strong universities and IT staff
• Excellent internet connectivity – one of the fastest in Europe

Legal basis for working with international clients

Option 1: Direct contract with a foreign company

What is needed:

• Contract in English (or the client's language)
• Clear terms for scope, terms and payment
• Choice of applicable law and jurisdiction
• Intellectual property clauses

Recommended clauses in the contract:

1. Scope of Work
- Detailed description of services
- Deliverables and milestones
- Acceptance criteria

2. Payment Terms
- Currency and amount
- Payment schedule
- Bank details
- Who bears the bank charges

3. Intellectual Property (IP Rights)
- Transfer of rights after payment
- Retention of rights on base code
- Licenses for use

4. Confidentiality
- NDA clauses
- Confidentiality period
- Exceptions

5. Governing Law
- Recommended: EU country law
- Arbitration vs. court adjudication

Option 2: Working across platforms

Popular platforms:

• Upwork – 10% fee, built-in payment protection
• Toptal – higher rates, strict selection
• Remote.com – employer of record services
• Share – management of international contracts

Advantages:

• The platform takes the legal risks
• Guaranteed payment
• Dispute resolution

Disadvantages:

• High Charges (5-20%)
• Communication limitations
• Platform dependency

VAT on international services – a complete guide

Services to countries outside the EU

Rate: 0% VAT

Conditions:

• The customer is established outside the EU
• The service is used outside the EU
• Do you have evidence of export?

Required documents:

• Contract with the foreign client
• Invoice with text "Art. 21, para. 2 of the VAT Act - export of services, 0% VAT"
• Proof of payment from abroad

Services to EU countries

For B2B (business to business):

Applies chargeback (reverse charge):

• You issue an invoice without VAT
• You indicate the customer's VAT number
• Text: "Art. 21, para. 2 of the VAT Act – reverse charge"
• The customer charges the local VAT

For B2C (to individuals):

• You charge Bulgarian VAT 20%
• Or register for VAT in the customer's country
• Or you use OSS (One Stop Shop) mode

VIES declaration

For services to EU companies, you must submit:

• VIES declaration – monthly by the 14th
• You indicate the turnover to each EU customer
• Fines for failure to file: 500-2000 BGN

A practical example

Case 1: Software development for a US startup

• Monthly contract: $5,000
• Invoice: $5,000, 0% VAT
• Text: "Export of services under Art. 21(2) VATA"
• Payment: bank transfer or PayPal

Case 2: Consulting for a German company

• Project base: €10,000
• Checking VAT number in VIES
• Invoice: €10,000, excluding VAT, reverse charge
• VIES declaration by the 14th of the following month

Invoicing in English – templates and requirements

Required details (in English and Bulgarian):

INVOICE

No.: 0000000001
Date: 01.01.2025

Supplier:
[Your Company] Ltd.
UIC: 123456789
VAT No.: BG123456789
Address: [Your address]

Client:
[Client Company Name]
VAT No. (if EU): [VAT number]
Address: [Client address]

Description of services:
Software development services for [project/period]

Amount: EUR 5,000.00
VAT: 0% (Export of services)
Total: EUR 5,000.00

Bank details:
Bank: [Your bank]
IBAN: [Your IBAN]
SWIFT/BIC: [SWIFT code]

Common billing errors:

1. Missing customer VAT number – leads to VAT being charged
2. Wrong tax event date – problems with the NRA
3. Untranslated details – the invoice may be invalid
4. Missing SWIFT code – delayed translations

Receiving payments – methods and costs

Bank transfer (SWIFT)

Advantages:

• Reliability and security
• Suitable for large amounts
• Directly to bank account

Disadvantages:

• Fees: €15-50 for incoming transfer
• Time: 2-5 business days
• Currency conversions at bad rates

Tips:

• Agree on who pays the fees (OUR, SHA, BEN)
• Use multi-currency accounts
• Negotiate fees with the bank for volumes

PayPal

Advantages:

• Speed – instant translations
• Payment protection
• Wide acceptance

Disadvantages:

• Fees: 2.5-4.5% + currency conversion
• Funds hold on new accounts
• Risk of account blocking

Optimization:

• Business account for lower fees
• Withdrawal to a Bulgarian bank in euros
• Avoiding microtransactions

Wise (formerly TransferWise)

Advantages:

• Real exchange rate
• Low fees (0.5-1%)
• Local bank details in different countries
• Multicurrency account

Disadvantages:

• Not all customers know it
• Limits for new accounts

How it works:

1. You receive local bank details (US, UK, EU)
2. The client transfers as local transfer
3. Convert at the real rate
4. Withdraw to a Bulgarian bank

Payoneer

Advantages:

• Receiving accounts in multiple currencies
• Integration with marketplaces
• Prepaid card for direct expenses

Disadvantages:

• Annual fee $29.95
• Towing fees 1-2%

Cryptocurrencies

Advantages:

• Low fees for large amounts
• Speed (minutes to hour)
• Without intermediaries

Disadvantages:

• Volatility
• Regulatory uncertainty
• Not all customers accept

Tax treatment:

• Profit from exchange rate differences is taxed
• Declared in the GDD
• Accounting records are kept

Currency risk and hedging

Management strategies:

1. Invoicing in euros

• Safest for Bulgarian companies
• Eliminates currency risk with EU clients

2. Currency clauses in the contract

• Price adjustment in case of large exchange rate changes
• Sharing the risk with the client

3. Forward contracts

• Fixing a future exchange rate
• Some Bulgarian banks offer

4. Diversification

• Customers in different currencies
• Natural hedging

Accounting for exchange rate differences

Positive differences:

• Income from financial operations
• They are subject to 10% corporate tax

Negative differences:

• Financial transaction cost
• Recognized for tax purposes

Social and health insurance when working abroad

Scenario 1: Bulgarian company, services abroad

• You are insured normally in Bulgaria
• Minimum insurance thresholds according to position
• Maximum insured income: 4,130 BGN (2025)

Scenario 2: Posting in the EU

• Form A1 from the National Social Security Institute
• You keep your Bulgarian insurance
• Valid up to 24 months

Scenario 3: Long-term work abroad

• Local insurance
• Social security agreements
• Possible transfer of insurance experience

Intellectual property and privacy

Key points in the contracts:

Work for Hire clauses:

• Clear transfer of rights
• After receiving payment
• Exceptions for codebase and tools

NDA (Non-Disclosure Agreement):

• Mutual or unilateral confidentiality
• Term: usually 2-5 years
• Exceptions: public information

Non-compete clauses:

• Warning: may not be applicable in Bulgaria
• Limited scope and duration
• Compensation for the restriction

Practical cases and solutions

Case 1: Long-term contract with a US company

Situation: Annual contract for $120,000, paid monthly

Solution:

• Ltd. registration for limited liability
• Wise Business for receiving payments
• Monthly invoices with 0% VAT
• Distribution: 60% salary, 40% dividend

Taxes:

• Corporate: $12,000 (10%)
• Dividend: $2,160 (5% on 40%)
• Total: ~11.8% effective rate

Case 2: Multiple small EU clients

Situation: 10-15 clients, €2,000-5,000 per project

Solution:

• VAT registration mandatory
• Monthly VIES declarations
• PayPal for small customers
• Bank transfers for larger amounts

Administrative burden:

• Checking each VAT number
• Different invoicing for B2B and B2C
• Monitoring OSS thresholds

Case 3: Working through Upwork

Situation: $3,000 per month through the platform

Solution:

• Freelance for lower social security contributions
• 25% recognized expenses
• Invoice to Upwork (not to the end client)

Net income:

• Upwork Fee: $300 (10%)
• Taxable income: $2,025 (after 25% expenses)
• Tax: $202.50
• Net: ~$2,497.50

Common mistakes and how to avoid them

Mistake 1: Working without a contract

Solution: At least an email with confirmed terms. Better yet – a signed contract.

Error 2: Incorrect VAT treatment

Solution: Check the VIES number. If in doubt – consult the NRA.

Mistake 3: Mixing personal and business payments

Solution: Separate accounts and cards from day 1.

Mistake 4: Lack of tax reserve

Solution: Set aside a minimum of 15% of your income for taxes.

Mistake 5: Ignoring exchange rate differences

Solution: Monthly accounting of foreign exchange transactions.

Useful resources and contacts

Institutions:

• NRA – Information phone: 0700 18 700
• NSSI – For A1 forms and insurance
• VIES – Check VAT numbers: ec.europa.eu/vies

Banks with good conditions for international transfers:

• Look for banks with multi-currency accounts
• Negotiate fees for turnovers over €10,000 per month

Management platforms:

• Revolut Business – multi-currency accounts
• Wise Business – real exchange rates
• PayPal Business – mass adoption

Legal and accounting services:

• Look for specialists with experience in international transactions
• The investment in good consulting pays off quickly

Conclusion

Working with international clients from Bulgaria offers huge opportunities – access to larger markets, higher rates and interesting projects. With the right preparation and structure, the administrative challenges are completely manageable.

The key is in the balance between optimization and compliance – take advantage of the Bulgarian tax system, but don’t ignore the rules. Invest in good accounting and legal advice from the start.

Remember – thousands of Bulgarian IT specialists and companies are successfully exporting services all over the world. With the right approach, you can be among them.

This is the fourth article in the series "Practical Guide for IT Entrepreneurs" by BIC Innobridge. Next week: "Building a Team: From the First Employee to 10 People"

⚖️ Disclaimer: The information in this article is for educational purposes only. For specific tax and legal advice, please consult a professional.

For contact:
BIC Innobridge
tel: +359 (0)82 825 875
email: info@innobridge.org

Note: The publication was prepared with the help of generative artificial intelligence, which assisted in structuring and formulating the content. The final text is the result of the expert contribution of the author, which guarantees its accuracy and practical focus.