from 1200 €
Strategically located in Southeast Europe, Bulgaria serves as a gateway between the East and the West, presenting myriad business opportunities to entrepreneurs globally.
Bulgaria, a member of the European Union since 2007, is often seen as a pivotal nexus for business enterprises looking to bridge European and Asian markets. Its burgeoning IT sector, competitive tax system, and steady economic growth are just a few of the highlights that make it an attractive prospect for investors. Coupled with its rich cultural heritage and history, Bulgaria offers a stable and predictable legal and business environment that is conducive to both start-ups and established businesses looking to expand their horizons.
| Country | Bulgaria |
| Language | Bulgarian (85%) Turkish (9%) Romani (4%) Other (2%) |
| Time in Bulgaria | GMT +2 (GMT +3 during daylight saving time) |
| Population | Approximately 7 million (Source: World Bank, 2021) |
| Currency | Lev (₣, BGN) |
| Religion | Eastern Orthodox Christianity |
| Tax regime | 10% personal income tax |
| VAT | 20% |
| Overage salary | Approximately 1,300 BGN (Source: National Statistical Institute of Bulgaria, 2021) |
| Types of incorporations | Limited Liability Company (OOD – “дружество с ограничена отговорност”) Single-Member Limited Liability Company (EOOD – “еднолично дружество с ограничена отговорност”) Joint-Stock Company (AD – “акционерно дружество”) Partnership Limited by Shares (KDA – “командитно дружество с акции”) General Partnership (SD – “събирателно дружество”) Limited Partnership (KD – “командитно дружество”) Sole Proprietorship (ET – “едноличен търговец”) Branches and Representative Offices |
Setting up a company in Bulgaria is a sound decision for entrepreneurs eyeing a base in Europe. The country’s competitive tax regime and strategic location make it particularly attractive for export-driven businesses. Given Bulgaria’s cost-effective operational expenses, both manufacturing and service-oriented businesses stand to benefit immensely.
Bulgaria offers a plethora of benefits for those considering company formation within its borders:
| Advantages | Details |
| Strategic Location | Bulgaria’s geographical location serves as a bridge between Europe and Asia, making it a key logistical and transit point. |
| Affordable Cost of Living | Compared to most Western European countries, Bulgaria offers a lower cost of living. This includes cheaper real estate, utilities, transportation, and dining out. |
| Competitive Tax Regime | A flat personal income tax rate of 10% is one of the lowest in Europe. |
| Growing IT Sector | The IT and tech industries have seen significant growth in recent years. Sofia, the capital, has become a budding hub for startups and tech companies. |
| Skilled Workforce | Adequate supply of well-educated and skilled professionals, especially in the IT sector. |
| Rich Cultural Heritage | Bulgaria’s history spans thousands of years, and its culture is a melting pot of Thracian, Roman, Byzantine, Ottoman, and Slavic influences. This diverse past is reflected in its architecture, traditions, and festivals. |
While Bulgaria presents numerous opportunities, it’s essential to be aware of potential challenges:
| Disadvantages | Details |
| Bureaucratic Hurdles | Doing business or navigating governmental processes in Bulgaria can be slow due to bureaucratic procedures. |
| Language Barrier | While younger generations and people in the business and tourist sectors speak English, it’s less commonly spoken among the older population or in remote areas. |
| Emerging Market | Emerging markets are economies that are transitioning from low-income, less developed structures into more advanced ones, with increasing market liquidity, industrialization, and other features of mature economies. |
| Infrastructure Needs | While major cities have seen infrastructural improvements, many rural areas still lack modern infrastructure, including roads, healthcare facilities, and internet access. |
Bulgaria’s IT, agriculture, and tourism sectors have seen significant growth over the years. The country’s skilled workforce and favorable policies have made IT outsourcing a lucrative option. Additionally, its fertile lands have made agriculture a backbone industry, while its rich history and scenic beauty draw tourists year-round.
Bulgaria boasts a transparent and straightforward fiscal system. Being a part of the EU, its policies and regulations are designed to align with broader European financial guidelines. The country offers a flat tax rate, both for corporations and individuals, making it attractive for businesses.
Bulgaria’s tax regime is one of its primary attractions for foreign businesses and investors. The flat 10% tax rate on personal and corporate income stands as one of the lowest in the European Union. Moreover, the country doesn’t levy any additional local taxes on top of this. Dividends are also taxed at a flat rate of 5%. These rates have been designed to boost investments and stimulate economic growth. Furthermore, as part of its commitment to transparency, Bulgaria has signed double taxation treaties with numerous countries, ensuring that businesses don’t face taxation in two jurisdictions. This not only ensures a level playing field but also provides an assurance to investors about the stability and predictability of the fiscal environment. Additionally, businesses can benefit from various tax deductions and credits, especially those in the R&D sector. VAT registration is mandatory for businesses whose turnover exceeds 50,000 BGN in 12 months. Non-residents are also liable to pay tax but only on their Bulgarian-sourced income.
The standard VAT rate in Bulgaria is 20%, which applies to most goods and services. However, there are reduced rates and exemptions for specific categories. For instance, certain medical products and services, education, and some cultural events are exempt from VAT. Regular VAT returns are a requirement for businesses, ensuring compliance and transparency.
As of 2021, Bulgaria has implemented Controlled Foreign Company (CFC) rules in line with the EU’s Anti-Tax Avoidance Directive. These rules are designed to prevent Bulgarian residents from using foreign entities to shift profits and avoid taxation. Under these rules, if a Bulgarian resident has a significant (over 50%) interest in a foreign entity and that entity is subject to low taxation, its profits might be attributed to the Bulgarian resident and taxed in Bulgaria.
Companies in Bulgaria are not mandated to appoint a director who is a resident or citizen. However, having local knowledge can be advantageous.
There is no requirement for Bulgarian companies to appoint a local secretary.
All companies in Bulgaria are required to submit an annual return, detailing their financial activities throughout the year. This provides transparency and ensures compliance with fiscal regulations.
Companies exceeding certain thresholds in terms of turnover, assets, or staff numbers are required to have their accounts audited. This ensures financial transparency and adherence to international accounting standards.
| Type | Designations | Minimum Share Capital | Taxes |
|---|---|---|---|
| Limited Liability Company | OOD – “дружество с ограничена отговорност” | BGN 2 (approx. €1) | Corporate tax: 10%, Dividend tax: 5% |
The Limited Liability Company (OOD) stands out as a prevalent form of business in Bulgaria, appealing primarily due to its balanced blend of flexibility, limited liability for shareholders, and simplicity in both setup and operation.
Small and medium-sized enterprises, along with entrepreneurs and foreign investors looking to plant roots in Bulgaria, often gravitate towards the OOD. It’s a versatile structure, fitting for a wide range of business activities, including operational businesses and holding companies. The limited liability aspect is particularly enticing, offering a safety net for personal assets against business-related debts. Additionally, the low minimum capital requirement breaks down barriers for entrepreneurs with varying financial backgrounds.
Setting up an OOD in Bulgaria also opens doors to the European market, thanks to the country’s EU membership. The corporate tax rate, one of the lowest in the EU, is a significant draw for investors. Moreover, the non-public nature of shareholders’ details adds an appealing layer of privacy.
| Type | Designations | Minimum Share Capital | Taxes |
|---|---|---|---|
| Single-Member Limited Liability Company | EOOD – “еднолично дружество с ограничена отговорност” | BGN 2 (approx. €1) | Corporate tax: 10%, Dividend tax: 5% |
In Bulgaria, the Single-Member Limited Liability Company (EOOD) caters to the needs of sole proprietors and individual entrepreneurs, allowing a single owner to hold full reign over the company. This structure is an optimal choice for those who value autonomy and decision-making independence, all while enjoying the benefits of limited liability.
The allure of the EOOD can be attributed to the sole proprietor’s complete control over the company, coupled with a straightforward structure that avoids the complications of having multiple shareholders. This simplicity is further complemented by the protection of personal assets from any business liabilities, mirroring the safety offered by the OOD.
Privacy is another hallmark of the EOOD, as the sole proprietor’s details remain confidential. The ease of incorporation, requiring minimal paperwork, makes the EOOD an attractive option for entrepreneurs. The financial aspect is also noteworthy, with Bulgaria’s favorable corporate tax rate playing a significant role in the EOOD’s appeal.
| Type | Designations | Minimum Share Capital | Taxes |
|---|---|---|---|
| Joint-Stock Company | AD – “акционерно дружество” | BGN 50,000 (approx. €25,000) | Corporate tax: 10%, Dividend tax: 5% |
The Joint-Stock Company (AD) in Bulgaria is often associated with larger business endeavors and is known for its ability to raise capital through public stock offerings. It’s a preferred vehicle for larger investments and operations that require substantial capital, including those planning to be listed on the stock exchange.
Typically, established corporations with significant capital, or those aiming for an initial public offering (IPO), opt for the AD structure. The primary draw is the ability to secure substantial funding, making it suitable for expansive projects and growth strategies. Additionally, the AD structure mandates a supervisory board, ensuring a high standard of corporate governance and investor appeal.
Bulgaria’s favorable corporate tax climate applies equally to ADs, making the country an attractive location for large-scale corporate setups. However, it’s the potential for raising significant capital through public and private means that stands out for investors, alongside the prestige associated with this type of company.
| Type | Designations | Minimum Share Capital | Taxes |
|---|---|---|---|
| Partnership Limited by Shares | KDA – “командитно дружество с акции” | BGN 50,000 (approx. €25,000) | Corporate tax: 10%, Dividend tax: 5% |
The Partnership Limited by Shares (KDA) is a less common but intriguing business structure in Bulgaria, combining elements of a partnership with features of a stock corporation. It’s designed for businesses that prefer to have a hybrid structure, allowing for both general partners, who manage the company and assume unlimited liability, and limited partners, who are investors contributing capital and whose liability extends only to their share of the investment.
This structure appeals primarily to initiatives where certain members actively manage the operations while others prefer to be passive investors. The arrangement provides flexibility, especially for companies with diverse investor profiles, combining managerial autonomy with protection for limited partners.
The KDA benefits from the same advantageous corporate tax structure present in Bulgaria, enhancing its appeal for a specific niche of investors and entrepreneurs. The primary allure, however, lies in the unique blend of partnership and corporate features, catering to a diverse range of needs within a single business entity.
| Type | Designations | Minimum Share Capital | Taxes |
|---|---|---|---|
| General Partnership | SD – “събирателно дружество” | No minimum | Corporate tax: 10%, Dividend tax: 5% |
The General Partnership (SD) is a traditional business format where all partners have equal rights in the management of the business and share full liability for the business’s debts, making each partner personally liable for the actions of the other partners.
This type of business entity is particularly suitable for professional services firms (like law firms or accounting firms) where trust and personal responsibility are paramount. Here, all partners typically are involved in the day-to-day operations and decision-making processes, and there’s a mutual understanding and shared business vision.
The lack of minimum capital requirement makes it accessible and might appeal to professionals starting in their entrepreneurial journey. However, the key consideration here is the unlimited liability aspect, meaning all partners’ personal assets could be used to cover the business’s liabilities. The SD format fosters collective management and shared responsibility, which could be a double-edged sword, leading to strong collaboration or potential disputes.
| Type | Designations | Minimum Share Capital | Taxes |
|---|---|---|---|
| Limited Partnership | KD – “командитно дружество” | No minimum | Corporate tax: 10%, Dividend tax: 5% |
The Limited Partnership (KD) in Bulgaria is a business format that accommodates two types of partners: general partners, who manage the business and have unlimited liability, and limited partners, who invest in the business but do not engage in its management, with liability restricted to the amount of their investment.
It’s an ideal setup for businesses where some investors prefer to play a passive role, contributing capital but not getting involved in the daily operations, while others take on an active role in management and decision-making. This might be particularly appealing for ventures where silent investors are necessary, or there’s a blend of managerial and investment-only participants.
The structure allows for clear delineation between management and investment, which can be beneficial in attracting investors who prefer a hands-off approach. However, it’s crucial for general partners to understand they’re personally liable for the business’s debts. In contrast, limited partners must be cautious about not participating in management to avoid risking their limited liability status.
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