Bulgarian company formation and doing business in Bulgaria have many financial and practical benefits. The real advantages start with the Bulgarian company setup procedure. First of all, the minimum required foundation capital is amounting to only 1 euro. Further on, company registration in Bulgaria is not expensive in comparison with other EU and even non-EU countries and it is really fast – a Bulgarian limited liability company (LLC or LTD) can be incorporated within a few days if the investor comes physically to Bulgaria and within several weeks if the investor prefers to arrange it from a distance. Of considerable importance is the fact that the company formation in Bulgaria can also be done remotely from any other country around the world, via a power of attorney, without the investor having to come to Bulgaria personally.
Bulgarian company registration does not automatically lead to running costs. If a LLC company has been duly registered with Bulgarian Trade Register (Companies House) but it does not operate, then it does not have any financial obligations to the state authorities. According to latest law amendments the only obligation in this case is submission of an annual declaration for non-activity and announcing that fact to Bulgarian Trade Register and Bulgarian National Statistical Institute. Accounting services are not needed in case of a dormant company, but you will need a lawyer or accountant to submit the declaration on behalf of the company unless the company has electronic signature or the manager comes physically to Bulgaria to file it personally.
If a Bulgarian company starts to do business after its initial incorporation and it generates profit the company will pay corporate income tax on annual basis. Corporate tax in Bulgaria is the lowest in the whole EU – 10 percent on net profit. And profit is something different from turnover – it does not matter how much the profit of a company is; if the company has for example a lot of expenses, then the net profit will be minimum – and hence the taxes which it will pay will be minimum. When we talk about taxes, Bulgaria has signed agreements for avoidance of double taxation with many countries in the world (such as United Kingdom, Turkey, Russia, etc.).
The profit of a company registered in Bulgaria can be easily used by the owner of the capital entirely at his own discretion and for his personal use after paying а dividend tax of 5 percent. This means that if the owner is a foreigner and the company has a net profit of 100 K euro, first of all the company will pay 10 K euro corporate tax, then 5 percent dividend tax.
Apart from taxes, other most common running costs are for salaries and social contributions. There are many trained employees in Bulgaria, who speak different languages and at the same time are paid times less than their colleagues abroad. It is a common practice a foreign owner of a Bulgarian company to hire employees in Bulgaria and then to come to Bulgaria only from time to time to inspect if they fulfil his requirements. From 2018 the minimum salary in Bulgaria is around 255 euro per month – the lowest in the whole European Union. Social contributions paid for employees are also low. For mid-level positions the social insurances for one employee per month is no more than 100 euro. They are split between company and employee.
Smaller companies in Bulgaria which are not VAT registered are allowed to provide accounting statements annually, so they can use the services of an accountant only once per year. They are obliged to file an annual tax return by the end of March each year as well as annual financial statements and balance sheets by the end of June. VAT registered company, however, need monthly accounting. Apart from the above statements, they file VAT returns every month, even their turnover for the month is zero.
Unlike the laws of some foreign countries, the laws in Bulgaria do not require a minimum number of people employed in one company. Any company registered in Bulgaria may have only one owner and the owner can be a foreigner. The owner himself may also be a manager and sign for the company – in this case there is no need to appoint another director. The manager can be appointed at the discretion of the owner
To operate a company and do business in Bulgaria, the legislation does not set as a precondition an obligatory membership in any organization (e.g. chamber of traders, industrials, etc.). The membership is entirely voluntary and the company can be a member of many organizations if it considers that useful – but the company may not belong to any organization and to operate completely legally.
Bulgarian law does not have strong requirements regarding the company’s business activities. With a few exceptions, when it refers to large businesses (banks, insurance companies, etc.) companies in Bulgaria can do whatever business they decide. For example, Bulgarian company can be registered for the production of goods but later on change its main business activities with immediate effect, without any formalities which is quite useful for business flexibility. The regime of licensing in Bulgaria is very liberal. License regimes are only few, especially in view of other countries and are only required for certain kinds of business activities. In Bulgaria licenses are not required for many activities for which such are required in other countries.
Fields for doing business in Bulgaria are many and different. Agricultural land is one of them. Primarily, it is the cheapest one in the whole EU, but also its status can be changed relatively easy in order to be used for non-agricultural purposes, e.g. building purposes. Currently there is a prohibition for foreign non-EU citizens to buy land in Bulgaria but at the same time it is legal for a foreigner who owns a Bulgarian company to purchase a plot of land in the name of the company. The newest tendency is to buy relatively small plots of land, which are later merged into larger land plots.
One of the most important advantages of Bulgarian membership in the European Union is that duties are not paid within the EU. So, a Bulgarian company may produce certain goods in Bulgaria and then sell them completely duty free to another EU country. If goods and services are traded within EU between VAT registered parties, VAT is not applied. Export to third countries is also VAT exempt. Many foreign businessmen who have registered companies in Bulgaria use production equipment imported from other countries, which is completely legal. Many companies import also raw materials from abroad and only assemble the final product in Bulgaria, which they export to EU duty free.
There is a currency board in Bulgaria and the rate of Bulgarian currency – lev (BGN) is fixed to the common European currency (euro) for more than 20 years now. Bulgaria is an island of stability in the region of Eastern Europe and has not experienced any serious economic cataclysms during this time. All this, combined with a steady political environment and optimum economic and fiscal conditions in Bulgaria for the last several years has been attracting even investors from Bulgaria’s neighbour countries. By crossing the border, they get into a highly favourable environment for Bulgarian company formation and successfully doing business in the entire European Union.
