Latvia vs Bulgaria: Which Country for Your Company

Updated 2026 · Written by the Société Lettonie team, Riga

Sofia, Bulgaria, company formation comparison

Bulgaria has the lowest CIT rate in the European Union, a flat 10%. An appealing headline figure. But for an entrepreneur forming a Latvian SIA intending to reinvest, the comparison isn't so simple: it all depends on what you do with your profits each year.

10% flat vs 0%/20% deferred: it all comes down to your strategy

In Bulgaria, the 10% tax applies every year on profit, whether you distribute it or not, plus an additional 5% tax when dividends are distributed. The effective rate if you distribute all your profits comes to around 14.5%.

In Latvia, CIT is only due upon distribution: 0% as long as the money stays in the company. If you reinvest a significant part of your profits to grow your business, Latvia becomes clearly more advantageous. If you distribute nearly everything every year, Bulgaria can indeed come out cheaper.

The numbers-based comparison, point by point

Criteria	Latvia (SIA)	Bulgaria (OOD/EOOD)
CIT	0% reinvested / 20% distributed	10% flat
Dividend tax	Included in the 20%	+ 5% additional
Effective rate if fully distributed	~25%	~14.5%
Minimum capital	€1 / €2,800	~€1
VAT	21%	20%
Eurozone	Yes	Yes (since 2026)
Schengen	Yes	Yes
OECD member	Yes	No
Reputation / banking	Better	More fragile

Verdict

Bulgaria is more interesting if you distribute nearly everything every year. Latvia remains better if you reinvest a significant share of your profits, and enjoys a better image with banks.

Advantages of Latvia and Bulgaria

Advantages of Latvia

0% tax as long as profits stay in the company
OECD member, more solid reputation with banks
Much more developed international support ecosystem
Better perceived credibility with business partners

Advantages of Bulgaria

Lowest CIT rate in the European Union
Attractive effective rate if you distribute everything every year
Generally low operating costs
Eurozone since 2026, direct access to the single market

Who Latvia is the best choice for

If you reinvest a significant part of your profits to grow your business, or if your company's image with banks and international partners matters to you, Latvia wins clearly thanks to its deferred 0% and OECD membership.

Who Bulgaria may suit better

Bulgaria becomes relevant if your business model involves distributing nearly all your profits every year, with no need for reinvestment, and the roughly 14.5% effective rate suits you better than Latvia's deferred mechanism.

Go further

Another reduced-rate regime outside the eurozone: see our comparison Latvia vs Georgia, a 1% regime for small structures.

Frequently asked questions

It depends on your distribution strategy. In Bulgaria, the 10% applies every year on profit, distributed or not, plus a further 5% on distribution (~14.5% effective). In Latvia, the 0% applies as long as profits stay within the company: if you reinvest, Latvia is more advantageous.

No, unlike Latvia which has been an OECD member since 2016. This can factor into the company's reputation with banks and international partners.

Yes, Bulgaria joined the eurozone in 2026, which now simplifies transactions with Latvia and the rest of the eurozone.

For a business model that distributes nearly all profits every year without needing reinvestment, where the 14.5% effective rate can come out cheaper than Latvia's deferred mechanism.