Company Formation in Bulgaria: How to Do It?

Bulgaria, located in Southeastern Europe, is emerging as an increasingly attractive destination for entrepreneurs looking to establish new businesses in the region. The country boasts a strategic location, a favorable economic climate, and competitive labor costs, making it an appealing option for both local and foreign investors.

Bulgaria is also part of the European Union, which offers additional benefits in terms of free access to the European market and opportunities to take advantage of EU funding programs. However, before proceeding with the company formation in Bulgaria, it is essential to understand the necessary legal considerations and procedures. This article provides a comprehensive overview of the key aspects to be aware of when starting a business in Bulgaria.

Company Formation in Bulgaria: Choosing the Business Structure

Choosing the business structure is a crucial step for any entrepreneur. In Bulgaria, there are several options available, each with specific legal implications and characteristics. Among these options is the sole proprietorship, the simplest form of business structure, mainly suitable for small operations. This option involves unlimited personal liability of the owner for business debts and obligations, making it less common and less recommended for those wishing to limit their risk.

Another possibility is the limited liability company (LLC), a popular choice for many entrepreneurs due to the limited liability protection provided to shareholders, who are only liable for the amount of their contributions. The minimum required capital is 1 EUR, a very low amount compared to other European countries, making this option quick and economical. This legal form also allows for flexible management and relatively easy dividend distribution. For larger companies or those with many shareholders, a joint-stock company (JSC) may be chosen, requiring a minimum capital of 50,000 BGN and subject to stricter regulations. JSCs issue shares to investors and are thus better suited for larger-scale initiatives, such as operations involving capital raising from multiple investors or a potential public listing.

Foreign companies can open a branch in Bulgaria, operating as an extension of the parent company but without independent legal personality. The branch allows the parent company to operate directly in Bulgaria while maintaining centralized management. Alternatively, a commercial representative office can be established, limited to non-profit operations whose main purpose is to promote the parent company’s activities and conduct market research. The representative office cannot generate profit but serves as a good starting point to explore the local market before making a more significant investment.

Read also: Bulgarian Commercial Representative Office: An Opportunity for EU Residency

Company Formation in Bulgaria: Procedure and Documentation

Regardless of the chosen business structure, the next step is to register the company with Bulgarian authorities. The registration procedure involves several stages, including the preparation of necessary documents, depositing the share capital in a bank, and submitting all corporate documentation to the Bulgarian Commercial Register. Completing the registration allows obtaining a Unique Identification Code (UIC), required for tax and administrative purposes. Registration with the Commercial Register must be completed within a specific period to avoid delays and penalties.

The required documentation includes the company’s articles of association, a notarized meeting minutes, and the registration application, all of which must be submitted in compliance with local regulations. It is important to ensure that all documents are correctly drafted and comply with current regulations to avoid issues during the registration process. Although the procedure is relatively straightforward, it is advisable to rely on experienced legal consultants to ensure all formalities are met and to guarantee a smooth and fast company formation process. Legal consultants can also help draft the articles of association and ensure that the chosen business structure aligns with the entrepreneur’s objectives.

Once registration is complete, the company must be registered with the Bulgarian National Revenue Agency to obtain a VAT number. At this stage, additional documents must be submitted, such as the lease agreement for the registered office and details of the company’s bank account. Obtaining the VAT number is a crucial step to start business operations, as it allows the company to fulfill tax obligations and issue invoices to customers.

Read also: Working Remotely from Bulgaria: Opportunities and Advantages for Professionals

Opening a Company in Bulgaria: Permits and Tax Regulations

An important aspect concerns business licenses and permits required for certain economic activities. Entrepreneurs should carefully verify the need for specific authorizations before starting business operations. Some sectors, such as food or pharmaceuticals, require particular licenses and must meet strict standards. It is crucial to comply with all local regulations to avoid legal issues and penalties.

On the tax front, Bulgaria offers an attractive regime with a flat corporate income tax rate of 10%, one of the lowest in Europe. This makes the country particularly appealing for companies looking to reduce their tax burden. Additionally, Bulgaria has signed numerous double taxation treaties to prevent the same income from being taxed more than once.

Another aspect to consider is the value-added tax (VAT). Companies exceeding an annual turnover of 100,000 BGN must register for VAT and apply it to the goods and services provided. The standard VAT rate in Bulgaria is 20%, with some exceptions for specific sectors such as catering and tourism, which may benefit from reduced rates. Proper management of these formalities is crucial to avoid administrative penalties and to ensure compliance with current regulations. Additionally, companies must file periodic VAT returns, usually on a monthly basis, and maintain accurate accounting to ensure all tax obligations are met.

Conclusions

Starting a business in Bulgaria can be advantageous due to the country’s favorable conditions in terms of costs and regulations. However, it is essential to fully understand all the legal and regulatory implications associated with company formation. Relying on a company advisor in Bulgaria, such as Accountacy Bulgaria, can help overcome the complexities of the process and ensure sustainable and secure growth for your business.