Company Registration In Bulgaria - General Overview

Bulgaria is the leader in the field of individual income and corporate income taxation and has the lowest tax rate of 10% in the European Union.

Foreign citizens and companies can set-up and start a business under the same conditions as those applied to Bulgarian natives. The companies established by foreigners according to the Bulgarian legislation are treated as Bulgarian local juridical persons that may have international business.

The most popular juridical form for registering legal entities in Bulgaria by foreign citizens is the Limited Liability Company. A limited liability company, called in Bulgaria 'OOD', is formed by two or more individuals or companies. A Limited Liability Company which has only one shareholder is known in Bulgaria as 'EOOD'.

The main advantage is that the shareholders' liability for the company’s obligations is restricted only to the value of their share in the company’s registered capital. OOD/EOOD exists as a separate legal entity and provides its shareholders for a limited liability.

Bulgarian legislation offers fairly good conditions for company registration. The minimum amount of the registered capital of OOD/EOOD in Bulgaria is just 2 leva (BGN), or about 1 euro.

In Bulgaria a financial system called 'currency board' is applied and the exchange rate of the Bulgarian lev to the Euro is fixed by the Bulgarian National Bank:

1 EUR = 1.95583 BGN (lev). 

Immediately after its registration, the capital of the company can be drawn from the temporary bank account in which it has been deposited. 

In Bulgaria company registration is done at the Trade Register and can be made in any of its branches regardless of the district in which the company headquarters is based. 


The main steps for setting up a new company are:
• Choosing one or more objects or types of business activities for the company.
• Choosing the appropriate juridical form. Perhaps you'd prefer to register a EOOD or OOD. It may have only one partner or be a partnership of several persons/companies.
• Reserving a company name. You may select company's name. Availability can be verified on-line in the Trade Register's website, but it's recommended to be officially reserved as well.
• Company headquarters. Every company must have its main office. "Legaquest" Ltd. offers you the head-office needed for the registration.
• Capital. The necessary capital is to be deposited in a commercial bank. The minimum capital required for a limited liability company is only 2 leva (about 1 euro). Owner's capital has to be deposited into a bank account that has been specially opened for this purpose. Every partner must deposit in person his own share of the capital in the bank.
• Notary public. The manager's signature must be legalised by the notary and therefore the manager must be presented in person.

Trade Register.

In the Trade Register must be presented:
◦ Application for reserving the name of the company
◦ Minutes from the shareholders' founding meeting
◦ The contract of incorporation
◦ A declaration made by the manager
◦ A specimen from the manager's signature
◦ The management contract
◦ Documents proving the required capital is deposited in the bank
◦ Receipts for paid state taxes
◦ Application for the company registration.

Immediately after the completion of the registration the manager of the company may draw out the capital from the bank and use it for the business of the company.

Once the company is registered at the Trade Register, it can apply for a registration under the VAT law. This procedure takes up to 14 days after the necessary documents are submitted to the National Revenue Agency, the fiscal authority in Bulgaria.


Scope of Income Tax For Bulgarian Companies

A legal entity registered in Bulgaria is subject to tax on income derived in Bulgaria and also on other income received worldwide. Corporate income tax in Bulgaria is charged at a flat rate of 10%. Companies in certain sectors, such as insurance and gambling, are subject to special corporate income tax rates.

The tax year is normally the calendar year for the purposes of reporting and payment. Companies must file their reports by March 31 in relation to the previous year and also pay any tax due by that date. Where a company has made a profit in the year just reported, it must pay monthly advance tax payments in the following year. New businesses must pay quarterly in advance; the quarterly amount is agreed with the tax authorities.

Certain income of non-Bulgarian residents is subject to 10% withholding tax, including income from interest, royalties, certain fees, property, and transfer of property (capital gains). Dividends are subject to 5% withholding tax, although exceptions apply where the dividends are by way of extra shares.

Capital gains realised on the sale of property or certain vehicles used for business purposes are subject to corporate income tax. The tax is levied on the difference between the selling price and either the purchase price or the market value of the item.

Tax is charged on immovable property at the rate of 0.15% of the value of the property. Tax is also payable on rental income from properties, although the first 20% is tax free. Where the owner of the rental property is not a Bulgarian resident, then a 15% withholding tax is imposed.

Any Bulgarian company must register for value added tax (VAT) if turnover exceeds BGN50,000. The standard rate of VAT is 20%. There is also a reduced rate of 7% for certain taxable supplies in the tourism sector.
VAT returns must be filed monthly, and at the end of the tax year. Returns must be submitted within 14 days of the end of the tax period, at which time payment is also due. Certain exemptions apply, including goods in customs warehouses or free zones, financial and insurance services, and the lease of buildings.