Setting up a company in Bulgaria requires taking into account a variety of legal and financial matters. Knowing the points that need to be taken into consideration beforehand can help one to make the business setting up easier and more efficient. This article analyses the steps that interested entrepreneurs need to undertake for setting up a business in Bulgaria.
Before a business is set up and registered in Bulgaria, a number of important decisions need to be made. It helps to determine the type and the status of the company. The two main types that foreign and local entrepreneurs may choose from are sole trader and private company. Each type has its own regulations and benefits and it is crucial to understand which one is the most suitable for the venture in question. In addition, it is necessary to select the City Court that will supervise over the business registration procedure.
Appointing a lawyer is the next major step. This is especially beneficial when it comes to the paperwork and administrative tasks that demands the assistance of a Bulgarian legal professional. During the procedure, the new business owners need to open a bank account in a Bulgarian bank and declare the share capital according to their motives and preference. Moreover, a local address is required for setting up a business in Bulgaria. After all these steps are followed, an application for business registration needs to be submitted to the Complex on Document Flow and Archiving.
When the application is approved by the Commercial Register, the owners may start operating their business legally. Even though establishing a company alone is already an elaborate procedure, the business owners may require other licences and permits in case their activities include the production of specific goods or services. Obtaining the documents from the respective bodies needs to be done before the activity commences. Also, a registration for the VAT is necessary in certain cases as well.
To conclude, setting up a business in Bulgaria is a complex yet manageable task with the right assistance. Following the guidelines discussed in this article can help entrepreneurs to smoothly get through the business registration formalities, so they can start operating as soon as possible.
Fees and Taxes
Opening a business in Bulgaria can entail certain costs, depending on the region and the legal form that the business takes on. Generally speaking, setting up a company in Bulgaria may cost anywhere between 500 to 700 euros. This sum includes the registration fee, the cost of the notary’s certificate, the court fee and the register fee. Additionally, the business owners need to consider a yearly tax for keeping the business active. That is why it is best for the entrepreneurs to seek professional guidance for determining the rate of taxation for the legal form that they have chosen.
Likewise, when the business activity involves trading, the owners need to be aware of the varying rates across different services and products. Even though the company may be exempt from VAT when it falls within the threshold of 50,000 BGN annually, it is still subject to corporation tax which stands at 10%. Other than that, if the business is engaged in transport, manufacturing or distribution of food, there is an added environmental tax that needs to be taken into account.
In addition, foreign investors should be informed about the work permit regulations and should account for the cost and documents that are required for obtaining the permit. Lastly, when setting up a business in Bulgaria, it is wise to consider opening a local office or a branch depending on the activities and interests of the company. Although this may involve extra cost, this may provide access to clients, specialised services and business opportunities.
The Role of the Investment Promotion Act
The Investment Promotion Act (IPA) of the Republic of Bulgaria sets out the relevant regulations and strategies that should be taken into account when foreign investors are setting up businesses in Bulgaria. The benefits of the IPA include the fact that certain industries, such as software development, IT and renewable energy, are exempt from customs duty and other taxes when they are imported as part of the business activities.
Moreover, companies that have opted for a unified legal form tend to benefit from the Corporate Income Tax (CIT), where their fiscal rate stands at a flat rate of 10%. This is part of the simplified schemes that the IPA has introduced to make the business setting up much easier for foreign investors. Moreover, the IPA helps foreign companies to open branches and offices in Bulgaria, since it provides business owners with the applicable regulation for the procedure.
The Investment Promotion Act (IPA) also encourages business owners to find suitable land for their companies. They are able to acquire land at a lower rate and under different terms with the help of the IPA, which is beneficial for financially constricted entrepreneurs. Furthermore, the IPA makes provisions that certain industries and companies benefit from reduced tax rates, namely those that are engaged with research and / or development activities such as medical and technically advanced companies.
The IPA also assists foreign investors by providing them with incentives to move operations to Bulgaria. Companies that are able to provide economic or social benefits to the society are also given preferential treatment as part of the IPA. It also entitles the company to a reduced enrollment fee and a tax cut that lasts anywhere between 5 and 10 years.
Regulations and Agreements
When setting up a business in Bulgaria, it is important for the entrepreneurs to be aware of the rules and agreements set in different countries and treaties. Bulgaria is a part of the European Union, which means that businesses are subject to the regulations of the EU. Therefore, any regulations that fall under the EU laws, such as the ones related to Data Protection, Copyright and Intellectual Property Rights should be taken into consideration when starting a business in BG.
Moreover, Bulgaria is a part of the International Agreement for the Avoidance of Double Taxation. This agreement applies to anyone who is engaged in international business operations, regardless of their citizenship or the country of origin of the transactions. This helps businesses to avoid taxation on income that has been earned in the other country.
Companies are also required to take into account the international conventions and agreements that Bulgaria has signed up to. For instance, Bulgaria is a part of the World Trade Organisation and many of its regulations, such as the ones related to anti-dumping, subsidies and import restrictions need to be adhered to.
It is beneficial for businesses to keep up with the applicable international conventions and agreements. This is because it allows the business owners to operate within the confines of the law, and to make well-informed decisions about the activity and the direction of their company.
Practicalities
Apart from the legal aspects of setting up a business in Bulgaria, there are a few practical matters that need to be taken into account. This includes finding the right kind of workspace for the activity and getting the supplies needed for conducting the operations.
Finding commercial space for the business may depend on the purpose of the company and its availability. For instance, companies that are intending to operate via retail outlet or kiosks will require a bigger commercial space. Additionally, if it is a service based business, then usually an office or a workspace will suffice.
Taking the time to source appropriate and necessary supplies and materials can save the company a considerable amount of time and money. This involves comparing prices between retailers and assessing the quality of the goods. Additionally, entrepreneurs need to know whether they require internal or external deliveries and how to transport the items efficiently.
Also, companies need to make sure that they advertise the business appropriately to gain more customers and to help spread their brand name. This includes setting up a website, registering with online trading platforms, creating online profile and offering attractive discounts and promotions.
In conclusion, the practicalities related to the business activity should be assessed carefully, since the right choice of workspace and connections to right suppliers can make a significant difference in the business’s success. Likewise, building a strong customer base should be one of the main focuses of the business owners, to ensure that they will have a steady customer base.
