Start A Company in Bulgaria
An attractive destination-Start A Company in Bulgaria
Bulgaria, situated right in the middle of the Balkans. In southeastern Europe, on important world cross-roads, has become an attractive destination for both foreign professionals seeking employment and businessmen searching new opportunities and ways to establish new companies. Strategic location, affordable living costs, and a growing economy – these are the most important features that Bulgaria can offer to individuals and businesses alike.
Bulgaria has signed Double Taxation Treaties with 58 countries all over the world. Another attractive feature is the opportunity to buy land. The EU citizens can buy land as individuals and non-EU citizens can buy land through their Bulgarian company. Bulgaria has become a popular jurisdiction for new company formation with many business opportunities. Popular industry sectors include the chemical industry, electronics, engineering, IT and human health care. The county offers affordable rents, excellent real estate bargains, and fast internet connections make it accessible from major European cities. The World Bank classified Bulgaria’s economy as an ‘upper-middle-income economy’.
The Bulgarian law:
The Bulgarian law does not discriminate foreigners. They can open companies in Bulgaria if they comply to the Bulgarian Law and the administrative regulations. Foreign nationals who would like to work in Bulgaria must obtain the appropriate residence and work permits. EU/EEA citizens have the right to work in Bulgaria without a work permit. But they are required to register with the local authorities if they intend to stay longer than 90 days. Non-EU/EEA citizens typically need to aquire a residence permit and a work permit.
The employment relationship in Bulgaria are described by the Bulgarian Labor Code. Which outlines relations between employers and employees, their rights and obligations. Employment contracts have to include details. About working hours, wages, benefits, and other relevant terms and they must be in writing. The standard working week is 40 hours, and employees are entitled to paid leave, sick leave, and other benefits.
Employees and employers:
Both employees and employers are subject to taxation and social security contributions. Bulgaria has a flat income tax rate of just 10% – not only the corporate tax but also personal income tax is the same rate – making it the lowest tax in Europe. Dividend tax of 5% is also the lowest in Europe. Employment income earned in Bulgaria is also subject to various social security insurance contributions. Social security contributions are divided between employers and employees and fund various benefits, including healthcare, pensions, and unemployment insurance. In total the employee pays 12.9% and the employer contributes what corresponds to 17.9%.
Under Bulgarian tax legal regime, individuals who are considered tax residents in Bulgaria are required to pay taxes on their income from all sources worldwide. On the other hand, non-residents are only subject to taxation on their income derived from Bulgarian source. Either through a permanent establishment or by means of withholding tax, depending on the specific circumstances. In the case of corporate entities, the general rule is that their corporate income is liable to corporate income tax at a flat rate of 10%. Collective investment schemes, national investment funds, other alternative investment funds, as well as organizers of gambling games are exempt from levy of corporate tax.
Further, income generated by organizers of gambling games, wherein the bet amount is already incorporated into the cost of a phone. Or any other telecommunication service, is subject to an alternative tax rate of 15%. This tax is calculated based on the additional amount added to the regular price of the telecommunication service as a result of the inclusion of the gambling game. The alternative tax is levied on the difference between the original price of the service and the increased price attributed to the gambling game.
Business structures:
Entrepreneurs looking to establish a business in Bulgaria can choose from several business structures. Including sole proprietorships, partnerships, limited liability companies, and joint-stock companies. The most common form of business entity is the limited liability company (LLC). As it offers a balance between limited liability protection and flexibility in management.
Registering a company in Bulgaria involves several steps. Including selecting a unique business name, drafting articles of association, and submitting the necessary documentation to the Commercial Register at the Bulgarian Registry Agency. This process is relatively straightforward and can often be completed within a few weeks.
For an LLC, the minimum required share capital is 2 BGN (2 Bulgarian Leva), which is approximately equivalent to 1 EUR. The share capital can be contributed in cash or in-kind contributions. Companies can have a single shareholder or multiple shareholders, and foreign individuals or entities can own 100% of the shares.
Bulgaria offers various incentives for businesses. Including a favorable corporate tax rate of 10%, a low-cost and skilled workforce, and access to European Union markets. Additionally, the country has made significant efforts to improve its business environment, including streamlining administrative procedures and enhancing investor protections.
Bulgaria’s strategic location, competitive tax rates, and improving business environment make it an attractive destination. For both individuals seeking employment and entrepreneurs looking to establish businesses. Understanding the legal requirements for working and starting a business in Bulgaria is crucial for making informed decisions and taking advantage of the opportunities. The country has to offer. As with any legal and business endeavor, seeking professional advice and guidance is recommended to ensure compliance with local laws and regulations.
The most popular type of company:
The most popular type of company in Bulgaria are the LLI (OOD). Or the single shareholder SMLLC (EOOD) preferred by small and medium businesses.
A Joint Stock Company is another type of popular company in Bulgarian. There are no legal limitations on the transfer of shares and shareholders. The joint stock company is an option suitable for larger companies and it is the best way to protect personal assets. The minimum capital required for the formation of a closed joint stock company is 50 000 Bulgarian Levs (25 000 Euros).Sole Trader (ET) are individuals who can do business but their personal assets are at risk in case of insolvency.
Trade Representative Office is a way for a foreign company to put its foot in Bulgaria. The company runs its business abroad. But the Representative Office advertises this business in Bulgaria. The Bulgarian Chamber of Business registers this type of company.
The first steps after the registration of your company by the Commercial Register in Bulgaria would be:
- Getting a company’s stamp.
In the not so distant past companies in Bulgaria have been asked to use stamps every now and again. Gradually this practice has ceased and now the situation is completely different. The Bulgarian law does not request that companies to have a company stamp. The emphasis nowadays is on the role of the company’s director/manager who signs all documents connected to the business of the company. And this is why he provides a notarized sample of his signature. As part of the full set of the documents for the registration of a new company.
Nevertheless, some bureaucratic institutions still request the use of a company stamp. And it is a good idea to get a company’s stamp at one of the numerous stationary offices in the streets of Bulgarian cities and towns.
- Getting a license.
Depending on the nature of your business, you might need a license to have the right to operate professionally. Failure to receive the license that you need might incur hefty fines and put your business on a halt. This is why it is very important that you are aware of the specific requirements regarding the need of license for your business.
Next, you have to research in detail the requirements for the type of license that you need. And once your company is registered you have file your application at the relevant institution with all requested documents, as receiving a license requires time.
Usually businesses operating in the fields of insurance, banking, financial trading services, medicine and pharmaceutical services and trade. Travel agencies, taxi services and freight forwarding need to hold a relevant license.
Opening a Business Current Account.
Once the registration of your company is completed you have to go back to the Bulgarian bank. Where you opened the account for keeping your share-capital. After informing your bank that your company’s registration has been completed you can either take out the money of your share-capital. And close this account. Or you can transform it into a Business Current Account and if necessary, open more accounts if your business requires it.
You can also set up your online banking as this is a very useful business tool. With the help of which you can manage your funds wherever you are. Not later than seven days after you start your business you will need to file a declaration in your regional branch of the Inland Revenue.
- Getting a till/cash register.
In case that you will be trading and receiving payments in cash from your clients. You will need to buy and register a till/cash register with the Inland Revenue. Because you will have to issue a receipt for each of the payments. However, if you will conduct your business only online or by bank transfers, you will not need a till/cash register.
You will need to either employ an accountant full time or sub-contract an accountant, depending on your business strategy, so that your accounting will be up to scratch.
- Employment contracts and social security and medical insurance monthly payments.
When your company is in operation you can start employing your staff taking care of all social security and medical insurance. Monthly payments and all payroll issues connected to your employees.
- VAT registration.
The new companies registered in Bulgaria are not automatically VAT registered as the established practice is in some countries. Companies in Bulgaria can voluntarily complete their VAT registration. Or they can wait for their turnover to reach 100 000 Bulgarian levs within 12 consecutive months to proceed with their VAT registration. Once the VAT registration of a company is completed, it has to start filing monthly VAT declarations.
If you want to start a company in Bulgaria, LM Legal Services can assist you!
Steps to START A COMPANY IN BULGARIA
| Getting a company’s stamp | In the past companies in Bulgaria were required to use stamps. At this point in time, this practice is not relevant. You only need a notarized sample of your manager’s signature. |
| Getting a license | In some cases, you may need a license to have the right to operate. Not attaining a license may lead to hefty fines. The need for a license depends on the nature of your business. |
| Opening a business current account | After registering your company, you can either take out the money of your share capital and close this account. Or you can transform it into a Business Current Account. If you want to manage your funds wherever you are you can set up your online banking. Seven days after you start your business you will need to file a declaration in your regional branch of the Inland Revenue. |
| Getting a cash register | If trading and receiving payments in cash, you will need to buy and register a cash register with the Inland Revenue. This will help you in issuing receipts. You will also need to employ an accountant. |
| Employment contracts and monthly payments | After registration you can:Start employing staff.Taking care of social security and medical insurance payments.Tackle payroll issuers with your employees. |
| VAT registration | Companies registered in Bulgaria are not automatically VAT registered. They can choose to complete their VAT registration. Or, wait for their turnover to reach 100 000 Bulgarian levs. Once the registration is completed – monthly VAT declarations must be filled. |
Frequently Asked Questions
Do I need a company’s stamp to be able to do business in Bulgaria?
No, you don’t need a company’s stamp to do business in Bulgaria, as the director/manager of your company is authorised to sign documents on behalf of the company and he runs the company. However, there are some institutions or companies that might ask you to stamp a document, so it is a good idea to buy a stamp of your company.
Do I need to open a current business account of my Bulgarian company at a Bulgarian high street bank?
You are not obliged to open the current business account of your company in Bulgaria at a Bulgarian high street bank. You can open your business account at Fintech or abroad but you will have to give the bank statements of your business accounts to your Bulgarian accountant.
Is buying and registering cash register/till mandatory?
You do not need to obligatory have a cash register/till. You can receive payments from your clients only by bank transfer.
