Located right in the heart of Southeast Europe, Bulgaria offers a strategic geographic location, business-friendly policies, and cost-effective operations. If you want to start a company there, this guide will walk you through the steps and the important factors you need to know.
1. Why Bulgaria?
Strategically located at the crossing of Europe and Asia, Bulgaria combines the possibilities for business growth across two continents. Due to the vicinity to large markets in Turkey, Romania, Greece, and Serbia, easy access both to European Union countries and non-EU ones alike is a sure thing. Also, logistics and transport in Bulgaria benefit greatly from developed infrastructure like sea ports along the Black Sea shores, highways, and a few international airports.
Membership in the EU: Since 2007, Bulgaria has been a member of the European Union and the Schengen area, thus providing access to the EU single market with a stable legal framework. Its membership offers a number of funding opportunities from various programs of the EU.
Low Taxes: Bulgaria is among those European countries boasting one of the lowest corporate tax rates at 10%, a flat corporate income tax of 10%, and has a preferential zero rate on dividends distributed to EU-resident shareholders.
Cost Efficiency: The country offers competitive labor costs and relatively affordable operational expenses compared to Western European countries. For example, the average monthly salary in Bulgaria is around €850, significantly lower than in Germany at €4,100 or France at €3,100. Office rentals in Sofia range from €5 to €15 per square meter, a fraction of what you will pay in cities such as London or Paris. Utility costs, including electricity and internet, are also among the lowest in Europe.
Skilled Labor Force: With great emphasis on education, the workforce in Bulgaria is well-trained, flexible, and multilingual in economic hotspots like Sofia, Plovdiv and the Black Sea metropolis Varna and Burgas. There, plenty of professionals speak English, German, French, Turkish and Greek fluently, and the number of IT and engineering talents is constantly growing, positioning the country as an interesting destination for tech startups and outsourcing.
2. Forms of Business Organizations in Bulgaria
Prior to the process of incorporation, a relevant legal form of a future business has to be identified. The most common options include:
Sole Proprietorship (ET): This is the form that is suitable for small-scale operations. It is simple to set up but does not offer liability protection.
Limited Liability Company: The most suitable for small to medium-sized businesses, it requires a minimum share capital of BGN 2 (~€1), which is highly accessible for entrepreneurs. EOOD stands for single-member LLC, while OOD can have more shareholders.
Joint-Stock Company (AD/EAD): For large businesses or those that would like to attract capital by shareholders, the minimum share capital is BGN 50,000 (~€25,000).
Branch or Representative Office: For foreign companies opening a presence and not forming a separate entity. Although branches can conduct commercial activities, representative offices cannot; they are usually allowed to perform only non-commercial activities, such as marketing and research.
3. Important Steps to Establish Your Business
a. Name Your Business
Ensure that it is a unique name and complies with the legislation in Bulgaria. You can check if a name is free using the Bulgarian Commercial Register. Choose a name that your target audience will connect with and which says what your brand is about, if possible.
b. Prepare the Documents
The papers needed are different for different kinds of businesses, but usually, they include:
• Articles of Association or Memorandum of Incorporation, usually comprising the company’s structure and purpose.
• Copies of founders’ or shareholders’ identification documents—this can sometimes include notarized copies of passports or IDs.
• Registered address of your business, proof of may be accepted.
c. Registration in the Bulgarian Commercial Register
Every company must be registered with the Commercial Register kept by the Registry Agency. This usually takes a few days and requires all documents along with a registration fee.
d. Opening a Corporate Bank Account
You will need a local bank account to deposit your first share capital and to carry out your business transactions. Just choose the bank with the best conditions for businesses and be ready to show documents like your company’s registration certificate.
e. Sign up for Tax and Social Security
Register your company with the National Revenue Agency to obtain a tax identification number. This procedure also involves registering with the social security system for your employees, which is carried out in accordance with Bulgarian labor laws.
f. Hire Workers (if needed)
Labor laws in Bulgaria are good for workers. Be prepared to give written employment contracts that include jobs, duties, and pay in writing. The minimum wage is BGN 780 (about €400), and the employer should also add social security and health insurance costs.
4. Law and Rule Knowledge
Accounting Standards: Bulgarian companies are obliged to keep their books in good order and to present them in accordance with the International Financial Reporting Standards. Small businesses can use simpler accounting standards if they wish so.
Tax Compliance: File VAT, corporate tax, and payroll taxes on time. VAT registration is compulsory if your annual turnover exceeds BGN 100,000 (~€51,000). The standard VAT rate is 20%, but there is a reduced rate of 9% for specific services, such as hotel accommodation.
Licenses and Permits: Other permits or licenses may be needed, depending on your business activity. For instance, food-related businesses would need health and safety certificates, and construction firms are subject to special building regulations.
5. Cultural and Business Etiquette
Bulgarian is the official language, but many people speak English in business, especially in big towns and cities. Knowing some Bulgarian words can help things go easier.
Bulgarians trust personal relationships and connections. Hence, most business meetings open with ‘small talk’, and people attend to work in formal clothes. Attending industry events or other means of setting up an in-person meeting can help your business dramatically. Familiarity with the local way of life and how business is conducted will open doors to foreigners easily, but there’s no need for foreign company directors or CEO’s to be present in Bulgaria when you hire local representatives and directors instead.
Familiarity with the local way of life and how business is conducted. For example, most business meetings open with ‘small talk’ and people attend to work in formal clothes.
6. Challenges to Consider
Some procedures are slow-moving and paper-intensive, even though generally improving. It would be helpful to hire local counsel or accounting advice for those procedures that are quite troublesome. Big cities like Sofia, Plovdiv, and Varna have good infrastructure, but the countryside may have less.
7. Final Tips for Success
Involve experts locally for legal, financial, and administrative assistance. This will save time and diminish errors. Do careful research to know your target audience and competition. Find ways to make your products different. Give foreign investors benefits such as accessing EU-funded programs, tax cuts, and grants supporting projects in innovation and sustainability. Join business groups or local chambers of commerce to connect with others and stay updated on the latest trends in your industry.
Conclusion
Starting a company in Bulgaria has many advantages, including low taxes and good access to markets in Europe and Asia. Learn about the laws, finances, and culture that will help your business succeed in this rising center of Europe. Take the first step today and learn about the opportunities that Bulgaria can offer. Dr. Werner & Partners is pleased to offer you specialized consultation in regard to Bulgarian business matters, with well established connections to Bulgaria as well as German and English speaking assistants living in Bulgaria, ready to meet you there.
Disclaimer: The above-mentioned article is simply based on independent research carried out by Dr. Werner & Partners and cannot constitute any form of legal advice. If you would like to meet up with any of our representatives to seek further information, please contact us for an appointment.