Doing business in Bulgaria
How quickly can I set up a business?
As setting up a business usually begins with the registration of a legal structure, the time required to start the business varies depending on the time needed for the registration of the chosen legal structure.
The pre-registration period may take between one week and several months depending on the investor. This includes the time needed for the following steps:
1) providing the necessary information and data required for the drawing up of the documents;
2) drawing up of the documents for the registration of the legal structure (about 2-3 working days);
3) time for notarization of several documents and apostilling them (in case the documents were not notarized in Bulgaria),
4) time for the founders (in case the founder is a legal entity) to issue a certificate of good standing with apostil;
5) time for translation and legalization of the documents in Bulgaria.
The official registration of a legal structure in the commercial register of Bulgarian Registry Agency takes 24 hours.
Together with the official registration of the legal structure in the commercial register of Bulgarian Registry Agency the legal structure can be also registered under VAT.
What is the minimum investment needed?
The minimum investment depends on the legal structure chosen by the investor. The initial investment is two types: costs for the pre-paid capital of the chosen legal structure and costs for state, bank and other fees like notarizations, translations, legalizations of the documents, etc.
The costs for pre-paid capital are as follows:
1. Sole trader – no costs;
2. General partnership – no costs;
3. Limited liability company – 2 BGN;
4. Joint-stock company – 50 000 BGN;
5. Branch of a foreign company – no costs.
The costs for state, bank and other fees are between 100 BGN – 300 BGN depending on the legal structure.
How can I raise finance?
The sources of funding are many and varied, but most often we can divide them into two types: internal and external sources of funding.
1. The internal sources of funding may be investment by the owner of the company, proceeds from retained earnings, proceeds from the sale of assets, equity from operating activities, etc. The owner of the company can fund the company by an official increase of the capital of the company, with a loan or by an additional monetary contribution (in case of a limited liability company).
2. Among the external sources of funding are loan from a credit institution, loan by a third person, bond loan (in case of a joint-stock company), leasing, factoring.
What are the legal requirements for setting up my business?
The most common legal structures in Bulgaria are:
1. Sole trader;
2. General partnership;
3. Limited liability company;
4. Joint-stock company;
5. Branch of a foreign entity.
Partnerships and capital firms may be differentiated by risk-taking.
Anyone who wants to assume risks on their own and take on liability for debts using their own assets can register with the commercial register by the Bulgarian Registry Agency as a sole trader or can establish a general partnership together with a colleague.
Anyone who wants to take less financial risk and limit themselves to a certain amount of pre-paid capital may set up a capital firm, i.e. a limited liability company or a joint-stock company.
The limited liability company has the following legal structure: general meeting, formed by the owners of the capital of the company, and a manager/s that organizes and represents the company before third parties. The main decisions regarding the company are taken by the General meeting. The general meeting appoints and releases from duty and responsibilities the manager/s of the company.
The joint-stock company on the other hand has a general meeting, formed by the shareholders, and a board of directors. The main decisions about the company and its activities are taken by the Board of directors. The general meeting of the shareholders have very limited rights. The general meeting appoints and releases from duty and responsibilities the members of the board of directors of the company.
A foreign company may decide not to register a new company in Bulgaria, but to set up a branch of a foreign company. The branch is not a separate legal entity but an extension of the overseas parent company. The parent company appoints one or more managers who will manage and represent the branch.
What structure should I consider?
The structure that we can recommend for starting a new business is the limited liability company.
The limited liability company is a capital company which means that the owner of the capital takes less financial risk by limiting themselves to the amount of the pre-paid capital of the company.
The legally required minimum amount of the pre-paid capital is 2 BGN which gives the opportunity to set up a company without big costs.
The owner of the capital through the General meeting makes the most important decisions regarding the activity of the company, for example:
1. Appoints and releases the manager/s;
2. Resolve on the decrease or increase of the capital;
3. Resolve on setting up or closing down branches and participation in other companies;
4. Resolve on the acquisition or alienation of real property and real rights therein, etc.
The owner of the capital may appoint themselves as manager of the company.
A third person (physical or legal) may not be accepted as a partner in the company without the express consent of all other partners.
What advice can you give me in regards to payroll and taxation requirements?
As the capital of Bulgaria Sofia is the largest city in the country and a major location for much of the business in Bulgaria, as well as for many foreign investors. That is why Sofia is a preferred location by most new investors. Some other preferred locations are Plovdiv, Varna and Burgas.
The general provisions regarding the Bulgarian payroll system are settled in accordance with the Bulgarian Labor Code and Bulgarian Social Security Code.
The two main types of taxes related to the employment relations are:
– Social security insurance contributions and
– Income tax.
60% of the employees’ social security insurance contributions are at the expense of their employer. The remaining 40% of the social security insurance contributions together with the income tax are paid by the employee. The employer has an obligation to deduct the relative amounts from the salaries of its employees on a monthly basis.
Foreign workers in Bulgaria are subject to the same tax regulations as Bulgarian workers.
Income tax is payable regardless of whether the employee is a local or a foreigner. As residents are considered as any individual who has been present in Bulgaria for 183 days or more in any 12-month period, or if their centre of vital interest is in Bulgaria.
The amount of the personal income tax is 10 % of all income earned in Bulgaria during the relative tax year.
The social insurance system in Bulgaria covers pensions, sickness, disability, maternity, unemployment, and a childcare benefit. Employers and employees are also required to contribute to public health insurance.
Bulgaria has a government-mandated minimum wage which is BGN 650 per month for 2021.
Salaries are paid on monthly basis and the payday is agreed between the employer and employee.
The standard working time in Bulgaria is 8 hours per day over a 40-hour (five-day) week.
The mandatory annual paid leave which the employee can use during one calendar year is minimum 20 days.
Our firms in Bulgaria
How can Kreston grow your business?
Select your business type:
Sergey Atamas, managing partner of Kreston Ukraine, explains how Ukrainian accountants and auditors are dealing with the ramifications of the war.
Accountants, business and financial advisers Kreston Reeves has strengthened its market-leading Restructuring team with the appointment of Carrie James.
Kreston Macedonia was founded earlier this year and was originally known as TPM Audit prior to joining the Kreston Global network. Led by founding partner Nenad Tortevski.