Bulgaria

The lowest corporate tax rate in the entire EU. Corporate income tax in Bulgaria is only 10% of profits.
Minimum required share capital. The minimum share capital of a Bulgarian limited liability company (OOD or EOOD) is only BGN 2, which is a little over EUR 1.

Simplified registration procedure. Following changes to the Commercial Register Act in 2016, a company can be opened within 24 hours. The registration agency has already upgraded its online electronic system, which allows applications to be reviewed and registered within 24 hours.
VAT registration is compulsory for companies entering into financial relations with entities in EU countries, as well as in case of reaching an annual turnover of BGN 50,000. It is not prohibited by law to register more than one company with the same founders, which is an official opportunity to not register a company for VAT when reaching a turnover of BGN 50,000.

Important information

  • Reporting
    • Reporting requirement Yes
    • Open access to reportingNo
    • Mandatory auditNo
    • Annual Return Submission RequirementNo
    • Open access to Annual ReturnNo
    • Reporting requirementNo
    • How many countries have signed an Agreement on the avoidance of double Taxation52
    • OECD MembershipNo
    • Is it considered offshore under Russian lawNo
  • Accounting

    It is mandatory to maintain accounting records and prepare an annual report.

  • Director and Secretary
    • Minimum number of directors1
    • Residency requirement for directorsNo
    • Directors of legal entities are permittedNo
    • Data is disclosed to the local agentNo
    • Data is entered into a public registerYes
    • Requirement for a secretaryNo
    • Residency requirement for a secretaryNo
    • Secretary qualificationsNo
    • The secretary of a legal entity is allowedNo

6 simple steps to purchase a company

  1. choosing a country

  2. choosing a bank

  3. payment (by any method)

  4. sending documents

  5. company registration

  6. bank account opening

Organisational and legal forms

  1. ST - Sole Trader (Individual Entrepreneur);
  2. JSC - Joint Stock Company;
  3. LLC - Limited Liability Company with two or more founders;
  4. EOOD - Limited Liability Company with a single founder.

The most popular forms of ownership are LLC and EOOD.

Necessary requirements

  1. Your company must have a local address;
  2. Your company must have initial capital, which must be deposited in a local bank;
  3. You must choose the name and scope of your business.
  4. The company must be represented by at least 1 director (depending on the form chosen);
  5. A company can exist even with just one shareholder;
  6. It is mandatory to have a legal address in Bulgaria;
  7. An LLC is registered with a minimum share capital of BGN 2 (approximately EUR 1.2). At the time of registration, at least 70% of the share capital must be paid.

Registration

  1. Preparation of a set of constituent documents (power of attorney, articles of association, declarations).
  2. The director of the organisation will have to certify the sample at the nearest Bulgarian embassy or consulate general or at a local notary.
  3. Opening of an escrow bank account for the deposit of share capital. To register a company, you must pay a share capital contribution. Once you are officially registered, you can withdraw the entire share capital.
  4. Completion of registration documents in the Commercial Register.
  5. Your business organisation will be officially registered within 3 working days of your application. The escrow account is closed and you can schedule your visit to the country to open a bank account and also apply for VAT registration.

Taxation

  1. Income tax. It is paid for by all companies that are registered in Bulgaria. The tax rate is 10%;
  2. Owners of any form of enterprise pay tax on worldwide income. The branch accordingly pays tax on its own income, the income of the parent company is not taken into account;
  3. Income received from dividends paid is not included in the tax base. Up to 5% is taxed at source;
  4. Non-residents pay a 10% tax on income from interest on securities and financial leasing; for fees received for technical services in transactions. Tax is also paid on interest from the value of leasing services, on income from factoring and franchising, on the sale by the company of its financial assets, and on income from the granting of the right to exercise intellectual property rights;
  5. Royalties – Payment on royalties payable to foreign persons is set at 10%, unless there are exemptions under the DTT. Payments of royalties to an associated company from the EU are exempt from income tax (ownership of at least 25% for at least two years is required
  6. Tax on repatriation of income - Dividends paid to non-resident individuals or entities are subject to a 5% tax. Dividends paid to EEA residents are an exception.
  7. Interest and royalties paid to non-residents are taxed at 5%, unless it is reduced by a tax treaty or the EU Directive on interest and royalties applies. Fees for technical services payable to a non-resident are also charged at 10%.
  8. Income from foreign sources is usually subject to CIT. The tax credit may be available either through DTT provisions or through unilateral credit.
  9. Inventory values – The valuation of inventories is usually made at the lowest of the cost or market value. The last-in-first-out (LIFO) method is not allowed for tax purposes. Instead, inventory valuation and revaluation methods that are applicable in accordance with accounting standards may be used. Companies are free to choose a valuation method, but must apply the chosen method consistently over the reporting period. An inventory of assets and liabilities is taken at each reporting period. Accounting gains and losses resulting from the revaluation of inventories are not recognised for tax accounting purposes and constitute temporary tax differences.
  10. Rules for the Prevention of Tax Evasion – Transfer pricing rules apply to all types of transactions between related parties that must be conducted on a commercial basis in accordance with the OECD principles. There are usually no documentation requirements.
  11. Benefits. There are tax incentives and deductions for businesses engaged in agricultural activities, employing the long-term unemployed, disabled or elderly, and investing in regions with high unemployment.
  12. Personal Income Tax - Residents of Bulgaria are individuals who reside in the country for 183 days per year, or have a permanent residence here, or have a centre of vital interests here.
  13. The criterion of the centre of life interest prevails over the criterion of permanent address. That is, a person who has permanent residence but whose centre of vital interests is in another country cannot be considered a resident for tax purposes. Residents are taxed on their global income at a flat rate of 10%.
  14. Capital gains tax is set at the standard PIT rate. Exemption from tax on profits derived from entities listed on a regulated Bulgarian or European stock exchange, as well as from properties held for 3 years (1 property) or five years (the other 2 properties).

VAT is payable at two rates:

  1. for taxable transactions of the main category – 20%;
  2. for exports or other types of transactions provided for in international agreements – 0%.

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