US Expat Guide: Combining the FEIE with a Bulgarian EOOD (2026)

If you are a US citizen living abroad, the Foreign Earned Income Exclusion (FEIE) already lets you exclude roughly $130,000 of foreign-earned wages from US federal income tax in 2026 (the amount is inflation-adjusted each year - confirm the current figure on IRS Publication 54 before filing).

What the FEIE does not do is cover self-employment tax, and it does not cover dividend or investment income. That is the gap a Bulgarian EOOD fills cleanly - if you structure it correctly.

This guide is written for the specific case: you are a US expat who already spends 330+ days a year outside the US (physical presence test) or is a bona-fide resident of another country, and you want to know whether adding a Bulgarian EOOD is worth the compliance cost.

The mechanics in one paragraph

You form a Bulgarian EOOD. The company earns your consulting / SaaS / agency revenue. It pays you a salary as its director-employee. That salary - being paid by a foreign employer for services performed outside the US - qualifies as foreign earned income and is excludable under the FEIE up to the annual cap. The company pays 10% Bulgarian corporate tax on the profit left after your salary. When the company distributes profit to you, Bulgaria withholds 5% dividend tax.

The key move is choosing the salary. Too low, and you leave FEIE room unused and pay 10% + 5% on money you could have taken tax-free. Too high, and you pay Bulgarian social contributions on wages you did not need to draw.

Worked example: $250,000 of company revenue

Assume $50,000 of business expenses, leaving $200,000 of pre-owner-comp profit. You qualify for the FEIE.

Setup A - salary maxed to the FEIE ceiling (~$130k):

• Salary to you: ~$130,000 → US federal income tax: $0 (FEIE)
• Bulgarian social contributions on the salary: capped at ~€4,600/year total (rough)
• Bulgarian personal income tax on salary: 10% flat = ~€11,900
• Remaining company profit: ~$70,000 → 10% corp tax = $7,000
• Dividend of remaining ~$63,000: 5% BG withholding = ~$3,150
• Total tax on $200k profit: ~$27,000, effective rate ~13.5%

Setup B - minimum director salary, everything else as dividend:

• Salary to you: minimum wage-ish, ~$8,000
• Company profit: ~$192,000 → 10% corp tax = $19,200
• Dividend of ~$172,800: 5% BG = ~$8,640
• FEIE room: mostly unused
• Total tax on $200k profit: ~$36,000, effective rate ~18%

Setup A wins by ~$9,000/year because you are actively using the FEIE. This is the whole point.

What still applies from the US side

Do not confuse "excluded from income" with "invisible to the IRS". Even with a clean FEIE + EOOD setup, you file:

• Form 2555 - claims the FEIE. Required every year, includes day-count worksheets.
• Form 1040 - the FEIE is claimed on the personal return; you still file it.
• Form 5471 - the EOOD is a CFC (you own 100%). Category 4/5 filer.
• Form 8992 - GILTI calculation. Because Bulgaria taxes the company at 10%, the high-tax exception election may let you exclude GILTI entirely for years where the effective foreign rate is above ~18.9% - a threshold you can hit with the corporate + dividend layer. Talk to a CPA about the annual election.
• Form 8938 (FATCA) and FinCEN 114 (FBAR) - the Bulgarian bank account triggers both if aggregate foreign accounts exceed $10,000 at any point.

The FEIE does not eliminate Form 5471 or the GILTI calculation. It just makes your salary portion tax-free on the US side. The corporate profit still runs through CFC rules.

The mistake most expats make

They read "FEIE covers $130k" and assume that means the first $130k of company profit is tax-free. It does not. FEIE covers wages paid to you. If the company earns $130k and never pays you a salary, none of it is excluded - all $130k is CFC income and hits your US return as GILTI.

The fix is deliberate: set a real employment contract between you and the EOOD, pay yourself monthly through Bulgarian payroll, and document the work location. This is what makes the salary "foreign earned" for FEIE purposes.

Where the FEIE + EOOD combo does not help

• You still live in the US more than 35 days a year. You will fail the physical presence test and the FEIE evaporates.
• Passive income (rent, royalties, capital gains). FEIE does not apply. Bulgaria will still tax it at 10%, but the US taxes it in full.
• State tax. California, New Mexico, South Carolina, and Virginia are aggressive about keeping you as a state resident even after you leave. Terminate state residency properly before relying on this structure.
• Social security. FEIE does not exempt you from US self-employment tax if you are self-employed. Running through an EOOD as an employee (not self-employed) avoids this - which is another reason the corporate structure matters, not just tax rate.

Our take

For a US expat earning $100k-$300k of active service income from outside the US, the FEIE + Bulgarian EOOD combination is probably the cleanest structure available anywhere. You keep US citizenship, you get the FEIE, and you add a low-tax operating company that gives you EU banking, EU invoicing, and a legitimate business substance story.

Budget $3,000-$5,000/year for a dual-qualified (US + BG) accountant. Try to do this without one and you will save nothing.