Bulgaria vs Puerto Rico Act 60 for US Founders (2026)

Every US founder considering an offshore-ish structure runs into two names within a week: Puerto Rico Act 60 and Bulgaria. On paper they look similar - low single-digit corporate rates, tiny dividend taxes, and no federal income tax on the profits if you play it right.

In practice they are almost opposite products. Act 60 is a relocation package that requires you to live in Puerto Rico. Bulgaria is a corporate structure that works from most of Europe. This guide is the honest comparison for a US citizen or green-card holder trying to pick between them in 2026.

The 30-second version

	Puerto Rico Act 60	Bulgarian EOOD
Headline corporate tax	4%	10%
Dividend tax to owner	0% (PR bona-fide resident)	5%
US federal tax on operating profits	0% (via Act 60 grant)	Still applies via GILTI
Where you must live	Puerto Rico (183+ days, closer-connection tests)	Anywhere in the EU with substance in Bulgaria
Setup cost	$5,000-$15,000 + $10,000 annual charity donation + $5,000 filing fee	~€1,000-€1,500 one-off, ~€1,500-€2,400/year
Employees required	1 full-time PR resident (for Export Services grant)	0 required, 1 recommended for substance
Time to set up	6-12 months (grant approval + relocation)	5-10 business days
IRS scrutiny level	Very high - active audit campaign	Normal CFC reporting (5471, GILTI)

Act 60 wins on rate if you actually move. Bulgaria wins on flexibility, speed, and cost if you do not want to live in San Juan.

What Act 60 actually requires

The Act 60 headline of "4% corporate tax and 0% dividends" is real, but it is gated by three hard conditions most founders underestimate:

1. Bona-fide Puerto Rico residency. You must pass the presence test (183 days in PR, or one of the alternative day-count tests), the tax-home test, and the closer-connection test. The IRS has a dedicated Puerto Rico Act 22/60 audit campaign and they check flight records, credit-card geolocation, and utility bills.
2. A real Puerto Rico operation. Export Services grants require an office in PR and at least one full-time PR-resident employee. Passive holding structures do not qualify.
3. Ongoing costs. The Act 60 grant itself carries a $5,000 filing fee, a $5,000 annual compliance fee, and a mandatory $10,000/year donation to a PR nonprofit. Before you have earned a dollar you are $20,000 in.

If you can genuinely live in Puerto Rico and run your business from there, the math is unbeatable. If you are hedging - "I will spend a few months a year" - the IRS will win that argument and you will owe full US federal tax plus penalties.

Where Bulgaria is different

A Bulgarian EOOD does not require you to move to Bulgaria. It requires the company to have substance in Bulgaria: a registered address, a local accountant, and ideally a Bulgarian-resident director or one employee. You can live in Portugal, Italy, Spain, or Bulgaria itself and the structure works the same.

The trade-off: you still owe US federal tax. As a US citizen the Bulgarian company is a Controlled Foreign Corporation (CFC), and its active earnings flow through to your US return as GILTI (Global Intangible Low-Taxed Income). At the 10% Bulgarian rate, GILTI adds roughly another 10.5% federal effective rate on the same profits, so you land at ~20-21% total on operating income.

Compared to a plain Delaware LLC at ~37% federal + state, that is still a large saving. Compared to Puerto Rico Act 60 at ~4%, it is not close.

Which one fits which founder

Puerto Rico Act 60 is right when:

• You are ready to physically move and stay 183+ days per year
• Your business is location-independent (software, consulting, funds)
• You are earning enough that a $50k+ setup + relocation cost is a rounding error (usually $500k+ net profit)
• You have no strong ties to a specific European market

Bulgaria is right when:

• You want to live in Europe (or already do) and need an EU operating base
• Your profit is $100k-$500k where PR relocation cost does not pay back fast
• You want the option of EU market access, EU banking, and EU VAT registration
• You want a structure you can set up in a week without a grant application
• You do NOT want to leave the US and just want a foreign operating company: honestly, neither - stick with a US S-corp or C-corp. A foreign CFC without any relocation is compliance overhead without much saving.

The compliance reality on the US side

Both structures require heavy US filings. Do not let anyone tell you either one is "set it and forget it":

• Puerto Rico: Form 8898 (move to PR), Form 1040-PR, Act 60 annual compliance report, IRS audit-defense file.
• Bulgaria: Form 5471 (CFC), Form 8938 (FATCA), FBAR (FinCEN 114), GILTI calculation on Form 8992, plus the Bulgarian corporate return.

Budget $3,000-$8,000/year for a US international tax CPA on either path. If you skip this, the $10,000-per-form penalties on 5471 or the Act 60 grant revocation are far worse than the tax you saved.

Our take

If you can move to Puerto Rico and you actually will, Act 60 is the lower-tax option. If you want to live in the EU - or you are already there - a Bulgarian EOOD is the more honest structure: predictable, cheap, no residency lock-in, and it survives IRS scrutiny cleanly as long as your 5471 and GILTI filings are done properly.

For everything else (you like California, you have kids in US school, you are not ready to leave) the correct answer is not Bulgaria or Puerto Rico. It is a US entity with proper tax planning at home.