Setting Up a Business in Bulgaria
Bulgaria has an advantageous geographical location, opening the way for trade with the European Union and Asia.
Hot investment sectors in Bulgaria: transport and logistics, information technology, business process outsourcing, health and tourism associated with a healthy lifestyle.
Leading Industries: transport equipment and mechanical engineering, electronics and electrical engineering, chemical industry, food industry and agriculture.
The leading resource sectors in Bulgaria are mining and alternative energy.
General information about Bulgaria
| Population | 6.5 million and 61% of the population are of working age |
|---|---|
| Territory | 110 910 km2 |
| Capital | Sofia |
| City population | 74% |
| Languages | Bulgarian is used by 85% and Turkish by 9% |
| National currency | Bulgarian Lev (the exchange rate against the euro is 1 euro - 1.95 ~ lev) |
| Membership in international unions and alliances | EU (since 2007), NATO (since 2004), WTO (since 1996) |
| GDP | 70.7 million euros for 2021 |
| GDP growth | 4.2% for 2021 |
| Inflation rate | 7.8% for 2021 |
| FDI | 1.04 billion euros in 2021 |
Labor force in Bulgaria
| Average salary | 500 Euro |
|---|---|
| Labor productivity per hour | 50.2% |
| Unemployment rate | 5.3% |
| City population | 74% |
The main privileges of Bulgaria
- Bulgaria has been a member of the European Union since 2007;
- The Bulgarian government is trying to create the most comfortable conditions for foreign investors;
- Investment rice is very low;
- The Bulgarian Lev is a stable currency that was pegged to the euro in 1998;
- The probability of a budget deficit is extremely low;
- All major European banks have a representative office in Bulgaria;
- Opening a company in Bulgaria takes only a couple of days, obtaining VAT takes 10 days, and the required start-up capital is 1 euro (2 leva).
- Bulgaria has signed double tax treaties with more than 60 countries.
Low taxation and potential
- Fixed personal income tax rate - 10%, corporate income - 10%
- 0% tax in municipalities with unemployment above 25% of the national average
- The growth of Business Process Outsourcing in Bulgaria has been double-digit in the last 10 years, with 40,000 employees in this field
- Sofia ranked in the top 10 cities for startups according to Forbes
Highly qualified and multilingual population
- According to the Bulgarian Ministry of Education, about 25,000 students study abroad;
- About 22% of the population has higher education according to the National Institute of Statistics;
- About 46% of the population speak at least one foreign language;
Strategically important geographic locations
- Bulgaria provides 5 pan-European transport corridors;
- It is a bridge between Europe and Asia;
- Direct access to trading markets (Turkey and the Middle East);
Starting a business
Business incorporation is controlled by The Commercial Act. Foreigners wishing to open their business in Bulgaria have the same rights as Bulgarians, including no share limits for foreign legal entities and entrepreneurs.
- You can make your choice among the list of company formation types
- Sole shareholder limited liability company
- limited liability company with more than one shareholder
- Sole shareholder joint-stock company
- Unlimited partnership set up by two or more individuals who carry unlimited responsibility
- Limited partnership, responsibility is set according to the agreement;
- Partnership limited by shares
- Branch
- Representative office
Contact our team to have your company incorporation carried out by professionals, as for foreigners this process must be carried out through a permanent establishment.
All businesses opening in Bulgaria, regardless of the nationality of the founders, are treated as Bulgarian in accordance with local legislation.
Lear more about company establishment in our article!
Bulgarian legislation is in line with European Union legislation and all companies must keep their accounting records in accordance with the law. The fiscal year is equal to the calendar year and all registered companies must file their annual financial statements no later than June 30 of the following year.
Penalties for not submitting the report on time:
- For companies - 0.5% of net sales proceeds;
- For directors - individual financial sanctions;
An audit is mandatory for companies for those companies that during the previous and current year meet at least two of the three requirements:
- Balance value of the assets as at 31 December is BGN 2 million;
- Net income from the activity for the year - 4 million leva;
- The average number of employees is 50 people per year.
In addition, an audit is a prerequisite for the AD-s and KDA-s, public market issuers, insurance companies, credit institutions, social contribution funds, etc., in cases where this is required by law.
The penalties for failure to comply with such obligations are as follows:
- For company directors – from 500 BGN to 5 000 BGN
- For company – from 2 000 BGN to 10 000 BGN
Micro, Small and Medium Enterprises (the SMEs) may file National Accounting Standards, in which case newly created entities of the SMEs in the year of establishment and are required to apply the rules for the first and second years.
If the company exceeds the indicators for one of the two years, then the following standards should apply International Financial Reporting Standards (IFRS):
- Balance value as of 31 December is BGN 8 million;
- Net income from the activity for the year - 15 million leva;
- The average number of employees is 250 people per year
At the same time, credit institutions, insurance, and investment companies, pension, and medical insurance funds, as well as funds managed by these companies, can apply no matter what.
Hiring
It is stipulated that an employment contract is an agreement signed between an employee and an employer in writing in accordance with all the requirements of the law (place of work, nature of work, position, specifics of work, remuneration, both basic and additional, working hours, etc.)
All employment relationships must be noted and registered with a division of the National Revenue Agency in accordance with the following conditions:
- Statements must be submitted within three days after the conclusion and/or amendment of the employment contract, but always before the first working day of the employee;
- Within seven days after its completion;
- It should be noted that employment contracts can be definite and indefinite.
Contracts that have a term can be concluded only in cases provided for by the Labor Code. The employer has the right to evaluate the employee’s ability to work after a trial period not exceeding six months in both cases of an open-ended and fixed-term contract.
Also, the employer is obliged to report on social charges and income tax of the employee every month in the form of a declaration. This declaration must be submitted by the 25th day of the following month.
The employer assumes legal responsibility in the form of tax on each employee and social security contributions to the Bulgarian tax authorities.
The penalties for failure to comply with such obligations are as follows:
- Description of the parties involved;
- The actual location of the work;
- Position and description of the duties of the employee;
- The date of signing the contract and the date of commencement of work;
- The duration of the contract;
- Description of remuneration and conditions of remuneration for work;
- Description of annual paid holidays of all types;
- Notice period for dismissal;
Taxation
Bulgaria has two levels of taxes: state taxes (Responsible for the National Revenue Agency/NRA) and local taxes (Responsible for local authorities).
Necessary list of actions during the creation of a company:
- Register your company for taxation
- Start keeping financial records
- Start preparing a tax return
It is important to note that if you do not conduct any activity during the year and therefore do not conduct any activity, then you do not need to file an annual return if you do not have income and expense reports. This power is specified in the Bulgarian legislation on the accounting report.
Expat
The legislation provides that citizens of the EU can be employed, self-employed, or sent on a business trip to Bulgaria without restrictions and without work permits since the employee’s country is an EU member. In addition, special rules are provided for family members of an employee who are citizens of the EU.
In the case of foreigners, they must apply in advance for a residence permit or permanent residence permit. It is possible to negotiate such plans with a Bulgarian employer, enter Bulgaria, get a job, and then leave for your country to apply for a visa.
Directors or members of the Board of Directors do not require a work permit.
Foreigners have the right to rent an apartment, but only through real estate agencies.
Ready to start doing business in Bulgaria?
Opening a company can be complicated.
Only 30% of our customers go through the online incorporation process completely by themselves. It doesn’t mean the process is cumbersome, it just means that there are many nuances that need clarification before taking a step forward.
If you feel ready, we encourage you to take the online process for opening your company in Bulgaria
We can still offer assistance every step of the way, and nothing is irreversible, so you don’t have to worry about “making mistakes”
Not sure if you’re ready? you can consult one of our experts right away and they can answer all your questions and set you on the right track