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Advantages of Setting up a Business in Bulgaria
An excellent option for those Trading within the European Union
Bulgaria as a member of EU since 2007 has a strong currency (LEV), economic freedom, positive trends and perfect location (SE Europe).
- EU member since 2007;
- Strong currency (LEV);
- Economic freedom;
- Positive economic trends;
- Perfect location (SE Europe);
- Low costs and taxes for employees;
- Perfect English and Russian speaking staff.
Bulgaria has become a very interesting choice for opening a business due to the geographical positioning, bordering the Black Sea to the east, Romania to the north, Serbia and Macedonia to the West and Greece and Turkey to the south. The country positions itself in south-eastern Europe, with a territory of 110,994 sq. km., being the 14th largest European country.
Opening a company in Bulgaria is at first sight a straightforward and not complicated process. There are relatively clear requirements of Bulgarian Company Laws and the whole procedure is fast and easy compared to other corporate issues. That is why it is a common practice for paralegals and non-lawyers to offer Bulgarian company incorporation services by filling in a standard pack of documents and filing them with the competent Registry Agency without even asking for anything but personal/company details.
Bulgarian commercial company setup however leads to a lot of legal and financial consequences for its owners (shareholders, partners) which unfortunately are frequently neglected. There are a number of questions to be considered in advance and a variety of options – and only qualified corporate lawyers with deep knowledge of Commercial Law matters can advise on which option is best for each particular new company formation in Bulgaria.
Our corporate attorneys start the process of forming companies in Bulgaria with an in-depth analysis of the specific requirements of the respective client and clarification of some essential issues:
- What is the new company’s purpose – running an active business, land acquisition etc.;
- What type of legal form will fit most to the profile and needs of the business entity;
- What are the specifics of the business that will be run by the company;
- Who will be the owner/s and who will be the manager/s and what are the legal implications for them;
- What powers will be granted to the manager/s by the shareholder/s and owner/s;
- What further expenses and costs should be expected after the process of Bulgarian company
- creation is complete;
- What are the legal ways of reducing these further costs and at the same time working with
- conformity with Bulgarian legislation;
- What can be done for tax optimization and tax planning;
There are certain mandatory procedures following the company establishment that must be undertaken by qualified accountants. Otherwise fines could be imposed on the company and in a worst-case scenario it could be liquidated by public authorities and some or all of its assets (bank deposits, real estate, etc.) used to cover all related administrative expenses. In this relation one should know that attorneys operating under Bulgarian Bar Act have certain obligations which should follow quite strictly and could be held responsible for their actions and in this relation are required to maintain professional indemnity insurance cover – while non-lawyers and paralegals do not have such obligations.
Financial Advantages of Setting up a New Bulgarian Company
There are really many advantages that can drive an investor to start a Bulgarian company. It is definitely not the only but maybe it is the most important one – and this is the lowest corporate tax rate in the whole of the European Union. It amount to only 10 % – yes, that’s only ten percent! This absolute maximum that any company registered and based in Bulgaria can be obliged to pay to the Bulgarian state. It is very important to mention that all expenses that a company has made are subject to deduction from the total corporate turnover at the end of each financial year. Actually it is not all of them, but all relevant and business-related expenses made throughout the year. If you have a good enough accountant or business consultant – it’s almost guaranteed that you will have all those financial expenses deducted from the turnover.
The second most valued by investors comes the initial capital of a Bulgarian limited liability company (OOD). It is no more, nor less than exactly 2 Bulgarian levs which equals to a little more than 1 (yes, one) Euro! What does this practically mean? It definitely means that you can start a small business at the most very minimal costs in EU. There are also investors who expand their big businesses but first opening small companies and then transforming them into medium or big ones by means of raising the capital from one to one thousand or even a million Euros. The opposite option is also possible. The tiny foundation capital means one other thing – the business risks are absolutely minimal. Why is that so? Simply because any owner of any company is responsible and cannot be chased even for a cent more than the foundation capital. Even if the company has a million debt – if its foundation capital is 1 Euros, then all financial responsibilities – no matter their source – are strictly limited to this very 1 Euro.