Open a Company in Bulgaria - Tailored Company Formation Services
Open a Company in BulgariaUpdated on Thursday 17th June 2021
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All investors, local and foreign, who open a company in Bulgaria, are subject to the same steps as well as regulations as far as the actual business registration is concerned. Foreign investors will also need to follow the requirements for obtaining a visa and making the residency application when they plan to stay in the country for longer periods in order to run the business.
The company formation procedure has been simplified in Bulgaria in order to facilitate the incorporation of the business and to provide for the so-called one-stop-shop that allows for quick incorporation. Nevertheless, foreign investors who come to explore the various investment possibilities in Bulgaria may find that they can use specialized assistance particularly because of the language barrier. Entrepreneurs who are planning on opening a company in Bulgaria, in Sofia or another Bulgarian city, can reach our law firm in Bulgaria.
Below, we present both the main types of companies in Bulgaria as well as the general process for incorporating the chosen legal entity.
Types of companies in Bulgaria
Foreign investors can choose among several types of business entities when opening a company in Bulgaria. Even if the most popular type of company is the limited liability company, below you can find all the other types of entities that can be registered in Bulgaria:
- a single person private limited company or sole trader,
- a limited liability company,
- a joint stock company,
- limited partnership,
- general partnership.
Foreign companies can also establish a branch or representative offices. Each of these types of business entities has its own characteristics and advantages, according to the type and size of business. The limited liability company (LLC) is the preferred business form because it has relatively low requirements for the share capital, only two Bulgarian Lev, which are distributed in shares of no less than one Bulgarian Lev. One particularity of this company is that its shares cannot be publicly traded. However, this is possible with the joint stock company. The LLC is suitable for small and medium-sized businesses and, according to law, it must have an appointed manager.
The joint stock company is more suited to those who want to start a business in Bulgaria as a large one, as it has no restrictions on the transfer of shares. Because if this however it also has more complex governance and different requirements for operation and transparency. It can have registered shares and bearer shares and it does have different requirements for the minimum share capital, which is substantially larger, as described below by our lawyers.
The partnerships in Bulgaria are differentiated according to the degree of liability of the partners. In the general partnership, all of the individuals involved share the complete liability while in the limited partnership only one has to be subject to unlimited liability. Those investors who are aware of the liabilities and who are willing to share the profits as well as bring together their expertise for running a business can prefer this business form.
The branch and the representative office are two business forms suited for those foreign companies that wish to enter the Bulgarian market. The representative office’s actions are limited and it cannot engage in any commercial or trade activities but it can be used for marketing and research purposes prior to the actual company incorporation in Bulgaria. The branch will remain at all times dependent on the parent company abroad and will have generally lighter management requirements in Bulgaria.
We invite you to get in touch with our team of attorneys in Bulgaria for detailed information about each legal entity type and the procedure of opening a business in Bulgaria.
Requirements to start a business in Bulgaria
Under the Bulgarian Commercial Code, foreign investors can open a business in Bulgaria just like any other local investor. There are no special requirements when opening a company in Bulgaria, except when registering a joint stock company. The minimum share capital for setting up a joint stock company is 50,000 BGN, and the share capital requirements are raised to 100,000 BGN if the company is listed on the Stock Exchange. Limited liability companies may have only one shareholder and a director, while joint-stock companies must have at least two shareholders and a management board.
As far as the requirements for foreign investors are concerned, EU entrepreneurs do not need a visa to stay in Bulgaria: they can enter the country using their ID card or passport and stay for a period of maximum there months, which in most cases is sufficient for foreign company owners to manage their business. Third-country nationals are subject to the general visa requirements that also apply in other countries in the EU, however, investors in Bulgaria from these countries can benefit from a permanent resident status when they invest a substantial amount in shares, ownership of assets in a Bulgarian company, bonds, treasury bills, and other instruments. One of our attorneys in Bulgaria can give you more information if you are interested in obtaining permanent residency in the country through investment.
The main steps to open a company in Bulgaria
The following steps must be completed when opening a company in Bulgaria:
- preparing and notarizing the Articles of Association: the constitutive documents of the company are drawn up in accordance with the law and in the presence of a notary public (although our lawyers can help you if you cannot be present in the country); other constitutive documents include the minutes of the shareholder’s meeting and the identification details along with the specimen signatures for the company directors.
- depositing the share capital: the minimum share capital of the company is deposited in a corporate bank account opened in the name of the legal entity.
- submitting the application form with Bulgarian Trade Registry: the form for registration, any applicable registration fees and the documents prepared at the previous step are submitted to the Commercial Register belonging to the Registry Agency.
- registering for VAT purposes: VAT registration is mandatory in Bulgaria for companies that exceed 50,000 BGN in a 12-month period. Other thresholds can apply for intra-community acquisitions and our team of lawyers can give you more details.
- registering employees for social insurance purposes: social security contributions are mandatory in Bulgaria and companies must register for this purpose once they hire employees.
Upon registration with the Commercial Register, entrepreneurs will need to pay a set of gees for the application itself and for the reservation of the company name (in this case the fee is lower if the application is submitted electronically).
Companies in Bulgaria need to obtain the relevant special permits and licenses for functioning once they are registered. These can apply to those businesses that are engaged in construction and building activities but also for other types of businesses. Our team of lawyers in Bulgaria can give you complete information about the relevant permits and can assist foreign investors in making the necessary applications with the Bulgarian authorities.
Trading name reservation in Bulgaria
After choosing the type of company to open in Bulgaria, the trading name reservation is the first step in the registration procedure. There are several requirements to meet when selecting the company name.
The future company owner must select at least three names in order to avoid to not find the desired one available. The first name of the list should be the wanted followed by two alternatives.
The trading name reservation is easy to complete and will enable you to open a company in Bulgaria quite quicky. If you cannot be in the country for some of the procedures, our lawyers can handle the procedure on your behalf based on a power of attorney.
Bank account opening – a mandatory step when setting up a Bulgarian business
Even if not all types of companies are subject to mandatory share capital requirements, a Bulgarian corporate bank account is required in order to deposit the amount of money used for the operations of the business. Moreover, later on, the same account will be used for the financial transactions of the Bulgarian company.
The opening of the account is not complicated and can be completed with a local or branch of a foreign bank operating in Bulgaria. Our Bulgarian lawyers can advise on how to choose a bank based on the financial operations your company will complete.
If you want to open a company in Bulgaria, our law firm can offer detailed information on the steps you need to complete from the beginning as well as a timeline of the incorporation procedure for you to know how to best organize your time.
Legal address requirements in Bulgaria
Apart from the provisions of the Company Law, companies can be divided into resident and non-resident businesses. However, the most important benefit – that of the low corporate tax – is available for resident companies for which a Bulgarian registered office is required.
Establishing the legal address is the next when you decide to open a company in Bulgaria. There are several options available:
- a rental agreement for an office space in a Bulgarian city;
- a property you own in Bulgaria (if applicable);
- a virtual office which is a service available at very low costs.
The proof of registered address must be filed with the Companies Register under the form of a contract in the case of a rental of virtual office service or of the property title.
Perhaps, finding a legal address is the most time-consuming task when opening a company in Bulgaria, which is why we can propose various virtual office services in order to help. You can get in touch with our Bulgarian law firm any time for more information on this option.
Share capital requirements for business registration in Bulgaria
When you decide to open a company in Bulgaria, the capital is very important as it will sustain your operations. In certain cases, a minimum amount of money is mandatory as prescribed by the Company Law, while for other, the established sum will be at your discretion.
Currently, the only legal form that has an imposed minimum share capital is the public limited liability company which must have at least 50,000 BGN (or the equivalent in euro – approximately 26,000 euros) as a capital.
There are also specific share capital requirements based on the industry a company will operate in. In this case, the minimum amount required is imposed by the governmental agency representing the respective industry. Either way, it is recommended to draft a business plan to know how to establish the minimum amount necessary to meet your business goals.
Foreign investors from non-EU countries who want to open companies in Bulgaria can also apply for the residency by investment program which enables to relocate to the country. You can rely on us if you are interested in immigration by investment here.
Starting a business in Bulgaria
Once they decide to open a company in Bulgaria, investors need to comply both with the incorporation process described above and with the ongoing regulations for doing business. One of the most important issues includes the taxation of companies. Corporate tax is imposed in Bulgaria on resident legal entities and non-resident companies, for the latter only on their Bulgarian-sourced income. Bulgaria has one of the lowest corporate income tax rates in Europe, of only 10% and companies can also benefit from general incentives and regional tax incentives. Investors who will provide intra-community services are required to perform an EORI registration.
Bulgaria has become a very interesting choice for opening a business because of the business advantages it offers but also because of the clear tax and human resources advantages it has over other European countries.
Some of the top reasons why investors should choose to start a business in Bulgaria include:
- Location advantages: Bulgaria can be a strategic hub for doing business in Europe due to the geographical positioning, bordering the Black Sea to the east, Romania to the north, Serbia and Macedonia as well as Greece and Turkey. The country positions itself in southeastern Europe, with a territory of 110,994 square kilometers, being the 14th largest European country.
- Business opportunities: with a population of over 7 million people, Bulgaria is mainly urbanized and has its commercial and cultural activities centered on the capital, Sofia, which is also the largest city of the country. In terms of business sectors, the most important economic fields are: agriculture, power engineering, and heavy industry and they all depend on natural resources. Moreover, Bulgaria is a member of the European Union, NATO and Council of Europe which grants unified EU laws and offers a convenient degree of political and business stability.
- Low business costs: the country has a very attractive tax regime, with one f the lowest corporate income taxes in Europe and also a low personal income tax; the costs related to labor are also competitive when compared to those in Germany, Belgium, France or other countries in the EU.
- Good workforce: the country not only has low labor costs but also a skilled and multilingual workforce.
A simplified registration process
When it comes to opening a business in Bulgaria, one may benefit from many advantages, such as a symbolical minimum required capital, worth 2 BGN for the private limited liability company and a simplified registration process. The entire process for a company to register in Bulgaria will generally last a few days and only in some cases, it can last up to two weeks.
The most widely-used types of companies in Bulgaria are the limited liability company (for small or medium-sized businesses), the joint-stock company (for larger businesses), as well as the branch of a foreign company (an extension of the foreign legal entity). Companies need to be registered with the Commercial Register and certain fees will apply for this process.
One of our lawyers in Bulgaria can give you complete information about the different types of legal entities as well as the complete process of opening a company in Bulgaria.
A notable advantage in opening a business in Bulgaria lies in the possibility of using a power of attorney to open the company and it is not mandatory for the beneficial owner to be present in Bulgaria when registering the company. Our team can provide additional information about how we can help you.
Another important factor is that there are no running costs for the company; therefore, if the company was registered but it does not have any activity, it is not subject to financial obligations. Nevertheless, the legal entity is required to submit an annual tax return, a very simple process that can be made using accounting services or directly by the company’s manager.
Investors should keep in mind that, apart from the easy company registration, they will also need to pay attention to other requirements, such as EORI registration, in some cases.
Low corporate taxes and employment costs
In regards to company taxes, in Bulgaria, a company is taxed based on its profit, but it is different from turnover, more specifically, the tax is applied on the profit generated after all expenses have been removed from the total amount. The rate of the profit tax is 10%.
In addition, Bulgaria has signed agreements for avoidance of double taxation with countries such as the United Kingdom, Turkey or Russia, meaning that a company that has operating both in Bulgaria and in another signatory state will pay taxes only in the country where that income is derived from.
Other costs for opening a company in Bulgaria are in regards to salaries and social insurances for the employees. However, the country has a lower minimum wage, compared to other EU countries, as well as low social insurance costs even if the personnel is well trained (19.62% for the employer and 13.78% for the employee).
Promotion for investments in certain sectors
Bulgaria is one of the east European countries that has managed to record notable advancements in many industries. Examples include the IT industry and the tourism industry. Both of these sectors and others attract foreign direct investments and entrepreneurs find that not only the country has favorable regimes for foreign company ownership but also lower business and employment costs compared to other European countries.
The state offers promotions if initial investments are made in industry sectors such as:
- production of electricity from renewable sources
- computer technologies
- research and development
- education or human health care.
Other attractive sectors in the Bulgarian business market are electrical engineering, mechanical engineering, electronics, automotive part manufacturing, and chemical industry. Companies that operate in selected business fields will need to obtain certain permits. Examples of such sectors include the chemical industry, food and agriculture, tourism, machine building, and several others.
Competitive advantages on the Bulgarian market
Bulgaria has many advantages that recommend it as a location for setting up a business, among which we can mention:
- it has the lowest operational cost in EU;
- a highly skilled labor force;
- very low total average monthly compensation.
Companies in Bulgaria use current accounting as costs are not high, but generally, companies choose to use the services of an accountant once per year, action permitted by the Bulgarian law.
Why open a company in Bulgaria
Bulgaria is currently one of the most prolific Eastern European countries as in the past few years it has undergone important reforms. At the moment, information technology is one of the most important economic sectors in the country. However, manufacturing and agriculture are also developed industries in which foreign investors will find good business opportunities.
According to a report drafted by the European Commission:
- if in 2020, the country was affected by the pandemic, in 2021 its economy is expected to make a mild recovery of 3.5%;
- the unemployment rate is also predicted to go down to 4.8% from the 5.1% registered in 2020;
- for 2022, Bulgaria’s Gross Domestic Product (GDP) is expected to increase to 4.7%;
- the unemployment rate is predicted to decrease to 3.9% in the following year.
If you need assistance in setting up a company in the country, please contact our lawyers in Bulgaria. If you are interested in setting up companies in other countries, such as Dubai, Malta, Russia or Latvia, you may contact our local lawyers or our local company formation agents.