BUSINESS IN BULGARIA

GENERAL INFORMATION

Bulgaria has a very strategic geographical location – it borders with the European Union, and is on the intersection of Europe and Asia.  

Bulgaria is a parliamentary republic. Its leading industries are: tourism, information technology and telecommunications, agriculture, pharmaceuticals, and textiles.  

Attractive investment segments in the service sector are: transport and logistics, information technologies, outsourcing of business processes, health and tourism related to healthy lifestyles.  

Leading sectors in industry are: transport equipment and machine building, electronics and electrical engineering, chemical industry, food and agriculture.  

Bulgaria’s resources sector is led by mining and alternative energy.

General Factsheet

 source: NSI, NRA, Eurostat

BENEFITS OF BULGARIA

Political and economic stability

Bulgaria has been a member of the European Union since January 2007. Government policy is focused on building a favourable business climate for foreign investorsLow investment riskLow currency risk as the local currency has been pegged to EUR since 1998Low budget deficitAll the biggest European banks are represented in BulgariaIt only takes a couple days to register a new company in Bulgaria. The minimal start-up capital has been reduced to only 2 BGN (1 EUR) for limited liability companies. International VAT registration takes 10 daysBulgaria has signed Double Taxation Treaties with more than 60 countries all over the world

Strategic geographic location

5 Pan-European transport corridorsBridge between Europe and AsiaAccess to profitable markets: Turkey and the Middle East

Highly-qualified and multilingual workforce

• 30 000 students abroad (data report of Bulgarian National Audit Office 2016)
• 19.6% of the population has a university degree (data National Statistical Institute)
• 46% of the population speaks at least one foreign language

“…If you want first-class mathematicians, try looking in Bulgaria.”
William Fitzsimmons, Dean of Admissions & Financial Aid, Harvard College

Low production costs and taxes

Flat 10% personal income tax and 10% corporate income tax0% tax in municipalities with unemployment higher than 25% of the country averageBusiness Process Outsourcing (BPO) in Bulgaria with two-digit growth last 10 years with over 40 thousand employeesSofia in top 10 cities in the world for start-ups according to Forbes

Balanced work-to-lifestyle logistics

Sofia is one of the cheapest European cities in terms of office rentSofia is the most affordable city in Europe (Europe Backpacker Index for 2017)Sofia is the best bargaining place to visit in Europe, according to Europe Backpacker Index for 2017. The index is based on daily expenses for cheap but comfortable and reputable accommodation, public transport, three meals and drinks, plus visiting one cultural attraction

ESTABLISHING A BUSINESS

The establishment of businesses in Bulgaria is governed by The Commercial Act. Foreign persons who want to establish a business in Bulgaria have the same rights as Bulgarians. There is no limitation on the share participation of foreign legal entities and individuals.  

The following forms of commercial organization can be set up:

• Sole-shareholder limited liability company
• Limited liability company with more than one shareholder
• Sole trader, individual company with unlimited liability
• Joint stock company
• 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 agreement
• Partnership limited by shares
• Branch
• Representative office
• Consortium and holding

Contact us if you wish to get a thorough comparison of establishing a branch office, subsidiary company, or a representative office.  

The registration must be carried out by a professional firm in Bulgaria. It is not possible for foreigners to do business in Bulgaria without incorporation through a permanent establishment.  

Regardless of founders’ nationality, all types of entities established in Bulgaria are considered as Bulgarian and treated under Bulgarian legislation system.

ACCOUNTING

The Bulgarian accounting legislation is generally aligned with the EU legislation. Companies have to observe and keep their accountancy in compliance with the requirements under the Accountancy Act.

Fiscal year corresponds to the calendar year. All companies registered in the Commercial Register must announce their annual financial statement no later than 30 June the following year.  

Penalties for not submitting the report on time are as following:

• For companies – 0.5% of net revenue from sales
• For directors – individual financial penalties  

Audit is mandatory for companies which either during current or previous year fill two of the below criteria:

• Balance value of assets towards 31 December is 2 million BGN
• Net sales income for the year is 4 million BGN
• Average number of employees for the year is 50 people

The audit is also mandatory for some of the AD-s and KDA-s, emittents on public markets, insurance companies, credit institutions, additional social contribution funds, and other companies when required by legal acts.  

Penalties 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-sized companies (the SMEs) can apply National Accounting Standards. Newly established entities are considered SMEs in the year of their establishment must apply to the rules for the first and second year.  

Companies which for one of the two previous years exceed the following indicators should apply for International Financial Reporting Standards (IFRS):

• Balance value of assets towards 31 December is 8 million BGN
• Net sales income for the year is 15 million BGN
• Average number of employees for the year is 250 people.  

However, credit institutions, insurance and investment companies, pension and health insurance funds and funds managed by these companies apply no matter what.

Leinonen is happy to help you with all your accounting needs in Bulgaria.

EMPLOYMENT

Employment contract is signed between the employee and the employer in a written form, specifying certain statutory requirements such as place and nature of work, position occupied and the characteristics of work, basic and additional employment remuneration, working hours etc.

All employment contracts must be registered with the respective territorial division of National Revenue Agency:

• In three days term after concluding or amendment of the employment contract, but before the first working day
• In seven days term after its termination

Employment contracts can be concluded for fixed and indefinite period of time.  

Fixed-term contracts can only be signed in exceptional cases specified in the Labor Code. For both types of contracts, employers have the opportunity to assess employees capability for certain work through probation period which cannot exceed six month.

Employers report monthly information about employees’ social contributions and personal income tax. Declaration for social contributions should be submitted until the 25^th of the following month.  

Employers’ legal responsibility is to pay over employee’s tax and social security deductions to the Bulgarian tax authorities.

Outsource your payroll management to Leinonen to make sure, that everything is done correctly and on time.

IMPLIED TERMS OF THE CONTRACT

Employment contract must include:

• Involved parties
• Physical location where employment will be performed
• Employment position and work description
• Date of signing and of expected commencement of work
• Duration of the contract
• Duration of the working day or week
• Basic and, if applicable, any additional employment remuneration
• Terms and conditions of employment remuneration payment
• Annual paid leaves (basic, extended, additional)
• A common notice period for employment termination

TAXATION

Bulgaria has two levels of taxes: state taxes belong to the capacity of the National Revenue Agency (NRA), local taxes to that of the municipal councils.

When establishing your company, first you need to:

• Register your company for taxation
• Start keeping financial records
• Start preparing a tax return

An annual activity report is not needed if your company shows no activity throughout the year or if there are no reported revenues and expenditures, compliant with Bulgaria’s accounting law.

BEING AN EXPAT

The citizens of the EU, EEA and Switzerland can be employed, self-employed or sent to a business trip to Bulgaria without restrictions and without a work permit since the country is a member of the EU. Special rules are also provided for family members of the EU, EEA and Swiss citizens.

Expats wishing to work in Bulgaria must apply for a temporary residence permit beforehand (consequently a work permit for non -EU, EEA citizens) or a permanent residence (no work permit needed). They may either arrange this along with their Bulgarian employers while they reside outside of Bulgaria. Alternatively, non -EU, EEA expats may enter the country, look for work, and then leave the country to process the visa. Company’s Directors or Members of Board of Directors do not need a work permit.

Foreigners looking to reside in Bulgaria have plenty of opportunities to rent apartments although expats are advised to seek out real estate agencies when looking for an accommodation.