To establish a business in Bulgaria, foreign investors benefit from the country’s business-friendly environment, which includes low flat taxes and simplified company formation procedures.
The process primarily involves selecting a suitable legal entity, fulfilling the registration requirements with the Commercial Register, securing the necessary licenses, and ensuring compliance with the country’s taxation and labor laws.
Choosing the Legal Structure
The first critical step in doing business in Bulgaria is to determine the most appropriate legal form for your operations, as this dictates the administrative and fiscal responsibilities. The most common choice for small to medium-sized foreign investors is the Limited Liability Company (OOD) or its single-member variant, the Single-Member Limited Liability Company (EOOD). Both structures offer limited liability, meaning the owner’s personal assets are protected from the company’s debts, and they require a remarkably low minimum share capital of just BGN 2 (approximately €1). This low capital requirement and the simplified formation procedure make the OOD/EOOD highly attractive.
For larger enterprises or those seeking to raise capital through public offerings, the Joint-Stock Company (AD) is the suitable option. An AD requires a significantly higher minimum share capital of BGN 50,000 (approximately €25,565) and a more complex governance structure, typically involving a Board of Directors.
Alternatively, a foreign company may choose to establish a Branch or a Trade Representative Office (TRO). A Branch is a permanent establishment of the foreign parent company and is taxed on profits generated in Bulgaria, while a TRO is limited to non-economic activities like marketing and promotion and is generally not subject to corporate tax. The choice between these entities will define your level of liability, capital commitment, and administrative burden in the country.
Company Formation and Registration Procedure
Once the legal form is chosen, the company formation process must be meticulously followed. For the popular OOD structure, this involves several distinct steps.
First, a unique company name must be selected and reserved with the Bulgarian Commercial Register. Note that the official registration will be in the Cyrillic alphabet.
Second, the minimum share capital (BGN 2 for an OOD/EOOD) must be deposited into a temporary accumulation bank account in a local Bulgarian bank. Proof of this deposit is a mandatory document for registration.
Third, the foundational legal documents must be prepared. These include the Articles of Association or the Deed of Incorporation, which outlines the company’s internal rules, objectives, and management structure. A manager must be appointed, who may be a foreign national, and they must provide a notarized specimen of their signature and a written consent to their appointment.
Finally, all documents, which often require notarized translations if not prepared by a local legal counsel, are submitted to the Commercial Register at the Registry Agency. Provided all documentation is correct, the registration process is typically quick, often taking only a few working days. Upon successful registration, the company officially becomes a Bulgarian legal entity.
Taxation, Accounting, and Compliance
Bulgaria is renowned for having one of the most competitive tax regimes in the European Union, a key incentive for foreign investment. The country operates a flat tax system for both corporate and personal income.
The Corporate Income Tax (CIT) rate is a remarkably low flat 10% on taxable profits, which is the lowest in the EU. Companies are also subject to a 5% withholding tax on dividends and liquidation quotas paid out to shareholders, though this rate can be reduced to 0% for EU-resident entities under certain conditions.
The standard Value-Added Tax (VAT) rate is 20%. VAT registration is generally mandatory for businesses whose taxable turnover exceeds BGN 100,000 over any consecutive 12-month period, though voluntary registration is also possible. Companies must file their annual corporate tax returns by the end of March for the preceding calendar year, and advance tax payments are required throughout the year based on the company’s size and projected profit.
To maintain compliance, it is essential for the newly formed company to immediately secure accounting and payroll services. The company must adhere to Bulgarian labor law for its employees, including social security contributions, and submit annual financial statements to the National Revenue Agency (NRA). The local legal and tax frameworks are complex enough that professional assistance is highly recommended for smooth operation and compliance.
Key Investment Sectors and Strategic Advantages
Bulgaria’s economy offers fertile ground for investment in several high-growth sectors, a vital consideration for market entry strategy. The Information Technology (IT) and Business Process Outsourcing (BPO) sectors are particularly vibrant, fueled by a skilled and multilingual workforce and a history of excellence in computer science. Sofia is rapidly developing as a regional IT hub, attracting numerous global technology firms.
The automotive sector is also a major driver of the Bulgarian economy, with the country becoming a significant producer of automotive components and parts for the European market. Other flourishing areas include mechanical engineering, health and life science, and the electronics industry. Furthermore, the country’s strategic position provides a gateway to both the European Union and Southeast European markets. The low operational costs, competitive wages, and favorable tax regime serve as strong commercial advantages.
For foreign nationals planning to reside and manage the business, acquiring the appropriate long-stay visa, such as a Type D visa, is a necessary step for non-EU citizens, and this is often facilitated by establishing a Trade Representative Office or a company that employs a requisite number of local citizens. This visa and subsequent residency status are preconditions for managing the business locally.