FOREIGN DIRECT INVESTMENT WITHIN THE BULGARIAN LEGISLATIVE FRAMEWORK


The easiest way to conduct business in Bulgaria is by registration of a company in the country. The most appropriate types of companies for conducting business in Bulgaria are limited liability companies (OOD) and public liability companies (including a single owner private limited liability and public limited companies - EOOD). Registration of the company is made with the Trade Register of the relevant District Court. Any one or more foreign or Bulgarian persons can form such a company and those persons will be liable for the company's obligations to the value of their share in the company's registered capital.

Limited Liability Company (OOD) /including Single Person Limited Liability Company (EOOD)/. The capital is formed by the quotas (sometimes referred to as shares) of its constituent members (promoters). The liability of a member is limited to the amount of the capital the member has subscribed. A limited liability company is founded or owned by one or more persons, including foreign natural or legal persons. The minimum authorized capital is BGN 5000 (leva). At least 70% of the capital should be paid prior to registration. A single person limited liability company (EOOD) is an OOD, owned by one person, including a foreign natural or legal person. The sole owner of an EOOD exercises the powers of both the general meeting and the manager, unless another manager has been appointed to run the company.

The limited liability company (OOD) should work out the balance sheet and the annual financial statements.


What are the steps necessary to establish business in Bulgaria?

Registration of the company's name with the Information Service Center;
Working out of the Company Charter or Articles of Partnership /Articles of Association/, which should include the following items - company name, central office, main activity, partners and shares - general data of partners (if the partner is a legal entity it has to present a copy of its recent registration, plus a certified resolution signed by the managing body, approving the partnership of the new company), partner rights and obligations and company management;
Declaration on behalf of the manager/s as per the Law on Commerce;
Deposition with a bank of due authorized capital or at least 70% of it (not less than 10 leva);
Application for entry in the Trade Register of the Court and publication in the State Gazette.


Do I need any assistance for registration of a company in Bulgaria?

Yes, it is recommended. Our lawyers are at your disposal with a full package service. It will take 3 working days for producing the whole set of documents for the Court. Registration with the Court will take two weeks at the most - fees are competitive.
Please note! Once registered, companies and representation offices have to register their activities within 14 days as of register with:

Local Tax Administration Offices for taxation purposes;
Local Social Security Offices, if foreign investors have employees on their pay-roll;
The National Institute on Statistics under the registration system BULSTAT for statistical purposes;
Customs authorities when foreign trade operations are performed.


What are the state fees for registration of a company?

LTD (OOD/EOOD) - up to 450 Euro
Registration of the company's name with the Information Service Center - up to 26 Euro
Registration with the National Institute on Statistics - up to 26 Euro
Registration with the Local Tax Administration Office - no fee
Preparation of the necessary documents about changes in an already registered company in the Commercial register in the respective court - 100 euro;
Preparing and submitting claims, requests, warrants, powers of attorney, and the like, demanded in the administrative or court procedures - 50 euro per hour;
Written opinions, consultations, proposals, participation in negotiations, signing agreements, preliminary contracts, and the like, and in case the legal advisor in his capacity of an attorney, participates personally in the meetings - 75 euro per hour.

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TAXATION

The taxation categories that are used in Bulgaria are:

Corporate income tax
Personal income tax
Local taxes
Value added tax /VAT/

The Local Tax Administration Offices where the initial tax registration of the company has been made collect the taxes. This depends on the registration addresses of the company.


What is the corporate income tax in Bulgaria?

Under the Corporate Income Tax Act (CITA) all companies and partnerships (including non-incorporated partnerships) carrying out business in the country, are liable to corporate income tax. The annual flat corporate income tax rate is 5% down to 10% since 2007.


What is the level of property tax?

Owners of immovable property are liable to property tax at a rate of 0.15%. For companies the tax base is the net book value of non-residential immovable property plus the accumulated depreciation costs thereon. The tax base of residential property is determined in accordance with an appendix to the Local Taxes and Fees Act.


What is the rate of Value Added Tax /VAT/ in Bulgaria?

Transactions with land and lease of property for residential purposes are exempt from value added tax. All other real estate transactions are subject to VAT at the uniform rate of 20%. The buyer/lessee is entitled to a VAT refund, provided it is registered for VAT purposes.


A zero rate applies to:

Export of goods
Certain supplies of services in connection to services explicitly listed in the VAT act
Supplies of goods and services in connection to international transportation of goods or passengers

Exporters can refund VAT within 30 days as of the date of submitting the VAT return for the respective month. Please note! All payments on VAT are made to a special "VAT bank account" only.


Who should make VAT Registration?

Any person (legal or natural, resident or non-resident) who has a taxable turnover (excluding exports) of at least BGN 50 000 during the proceeding 12 months should register for VAT purposes by filing a standard registration form within 14 days after the end of the calendar month in which the above threshold is reached.

With the latest amendments of article 124 of VAT Act foreign legal persons are allowed to register on the grounds of Basic capital over BGN 500 000, regardless of the realized turnover. This will enable foreign investors to register for VAT purposes from the very beginning of their activity, thus obtaining the right to deduction or refund for the goods and services they purchase during the initial investment purposes in Bulgaria.

Any taxable person is obliged to open a "VAT-account" not later than 14 days from the registration under the law and to hold it while registered under the law. The VAT account can be used only for VAT payments and aims to facilitate the VAT refund procedure.


Are there any restrictions on reparation of profits?

There are no restrictions on reparations of profits, provided that resident enterprises (owned by foreign persons) have covered all tax obligations pertaining to their transactions.

Foreign investors can freely purchase foreign currency and transfer it abroad upon presentation of receipt for paid taxes. This right may also be exercised by foreign nationals working in the country, with respect to the remuneration received by them, and by foreign nationals who have obtained a permit for permanent residence and are registered as sole traders or participate as an unlimited partner in a partnership, after a certificate for paid taxes is submitted.


What about transfers of profits?

Profit transferred from abroad shall not be taxed in Bulgaria provided an agreement avoiding double taxation has been ratified with the country concerned. Profits earned in Bulgaria can be freely exported after payment of due taxes.

This information together with details of the management, etc., is recorded in the commercial register and promulgated in the State Gazette.


Full details of forming a company and taxation can be obtained from our Accountancy Partner.


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