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In this article business owners will learn all needed information to create a new company in Bulgaria. Once you have decided to open a new business is important to choose the best accountant who will suit your needs.
1. Getting started
The first thing you need to know is what will be the type of activity of your new company. Once you
have chosen the type of activity of your company, you should research the market.
2. Choosing your legal form of the company
The second step is to form a company. To open a company in Bulgaria in the legal form LTD or LLC is cheapest and is not necessary to have a residence permit.
Formation of LTD and LLC can be done with a foundation capital of only 2 BGN (about 1 EUR). LTD (EOOD) can be formed with one shereholder. LLC. (OOD) can be formed by one or more shareholders. If a company shall be a shareholder there will be additional expenses for translation and its legalization depending of content of Certificate/s that we will need.
Once you have chosen the legal form of your company you should choose a company name that is not taken. There are some specific requirements for the names of the companies. For more information contact us.
All companies must be registered in the Commercial Register in Bulgaria.
The new companies can be register for one day in the Commercial register. All applications for company registration will be processed until the following working day and same day will be the decision on registration of the company. Only there may be a delay if there is an instruction to remove the irregularities in the documents.
3. Choosing a start date
You can choose when to open your company according to your plans for the realization of your services /
goods. The new companies can be register for one day in the Commercial register. All applications for company registration will be processed until the following working day and same day will be the decision on registration of the company. Only there may be a delay if there is an instruction to remove the irregularities in the documents.
We will need at least 2-3 days to prepare the documents, necessary for the initial company registration. Please, bear in mind that some of them will need notary attestation, apart from signature. There are two possible ways to do get a documents notary attested:
- in Bulgaria;
- abroad
When you choose to come in Bulgaria to verify the documents the only thing that must be done is to go to the nearest notary address and to get the attestation. This option is cheaper than verifying the documents in front of a notary abroad. If you choose it this will be the first time when it will be necessary to come in Bulgaria for not longer than a day.
When you decide to get notary attestation abroad apart from the notary signature and stamp the documents will need also you must get them notary attested and then you must go to the Bulgarian Embassy in your country to verify these documents (Declarations, Power of Attorneys, etc.) by Apostle as later they will need to be legalized in Bulgaria. The procedure abroad is more expensive and takes more time.
4. Tax address
You will need to have the official address for tax administration, which will be visited by the National Revenue Agency authorities in connection with the VAT registration.
If you do not have an office in Bulgaria we can offer this service. For more information contact us.
5. Starting a new company
You can start work after your company is registered in the Commercial Register.
6. Opening a bank account
As for the bank account it is obligatory to have bank account in Bulgarian currency. In Bulgaria we could help you to open bank account, if you provide us Power of Attorney. This bank account(s) must be on the name of your Bulgarian company.
Each new company has to open a bank account in Bulgaria so that the company could receive the payments from its clients and make payments to the suppliers and national tax agencies such as National Revenue Agency (NRA) etc.
Then you can choose between two possible ways to open company’s bank account.
- With our assistance for which we will need Power of Attorney
- Personally
We could help you to open bank account without the necessity to come in the country but we could provide you this service only for one particular bank as the have already provided us sample Power of Attorney which when verified by you gives us the rights to provide the service. This bank account(s) must be on the name of your Bulgarian company. Private bank accounts when you want to register company here are not obligatory requirement.
7. Authorization of accounting
Once the company is ready we will need several more Power of Attorneys to be notary attested. The procedure here is the same like with the first documents that need verification (abroad or in Bulgaria). If you choose to complete this procedure in Bulgaria this will be the second and last time that you’ll have to come.
8. VAT registration
In Bulgaria there are two types of VAT registration – mandatory and voluntary. If you plan to trade with European Union countries we recommend you register the company for VAT voluntarily. The VAT registration takes 14 working days.
9. Monthly accounting services
Your Accounting Ltd assists with your monthly accounting and bookkeeping needs. Our accounting service entails everything from balance statements, payroll services, free consultations and tax planning for your business. We have answers for everything your questions.
10. Financial year – closing
The financial year in Bulgaria for the period from 01/01 to 31/12. If you register your company in December your financial year will be only for the period of December.
In Bulgaria it is not possible to have a financial year for the period of 13 months.
The corporate tax return declarations must be filed no later than 31 March of the year following the tax year and should be delivered to the NRA office where the taxable entity is registered.
The annual corporate income tax must be paid no later than 31 March of the year following the tax year.
From the beginning of September 2016 National Revenue Agency will refund VAT in a shorter period. This applies to companies that have no obligations to the NRA and low-risk companies. NRA will determine which companies satisfy these requirements. These companies will not be checked by the NRA.
If you want to know more contact with us.
Company registration
The registration of a new company takes 1 to 4 days – this includes preparing the necessary documents for submission to the Commercial Register.
VAT registration
VAT registration is a free service like yours documents can be submitted online.
The deadline for registration of VAT company takes 14 working days from the date of the application for registration.
Deadline for submission of monthly VAT return – submission of monthly VAT return is 14 th including the month following the tax period to which it relates.
Publication of Annual Financial Statements
The financial statements should be filed to the Bulgarian Trade Registry also and this is obligatory to all companies.
The deadline for this is:
1. for sole traders – 31 May;
2. for limited liability companies – 30 June;
3. and all other traders within the meaning of the Commerce Act – within 31st July.
Representative expenses
It is important that these expenses should be connected to the popularization of the activity of the company.
The tax rate of these expenses is 10% of their value. The sum should be paid and declared once after the end of the financial year.
The payment of taxes ( how is it paid and how )
The corporate tax is paid once at the end of the financial year which is March 31st. The rate of the corporate tax is 10% charged on the amount of your annual profit. About how the payment of the taxes happens – almost all of our customers provide us passive access to their online banking. This means that we receive special user name and password for accounting needs so that we could upload the payment orders in the online banking and the customers just to approve them.
Insurance ( for the people involved in the company )
There is no limit according to the Bulgarian legislation about the number of the employees that a company must have. For example you could work only by yourself as manager of the company or you could either have 10 or more employees – it depends on you. As for the insurances rate – in Bulgaria each job position that you want to assign staff to, have a minimum wage. This amount is individual for each job position and it is linked to the activity of your company and your vision for the amount of the employees’ salaries. On the amount of the employees’ salaries you owe insurances. Their rate is 17.8 % on the behalf of the employer. The minimum wage in Bulgaria for 2016 is 420 BGN. The insurances are paid the same way as taxes.
The first stage of this process is the dissolution of the company which could be initiated by passing a resolution by the shareholders for closing the company down. For the purpose of dissolving the company, it is also necessary for the manager of the company to notify the Tax Office of the dissolution process. The Tax office then issues a certificate under art.77 of the Tax Code certifying that the company does not have tax obligations towards the State. The above Certificate should be sent directly by the Tax Office to the Trade Register. It is also necessary for the General Assembly of the shareholders to appoint a liquidator and to determine the deadline for liquidation which could not be less then 6 months. All documents related to the above actions should be presented before the Trade Register. If they are correctly prepared, the Trade Register should change the status of the company from “active company” to a ‘company in process of liquidation”. In the case where there are missing documents or incorrectly prepared documents there is a possibility that the Trade Register will refuse publishing the above circumstance.
As at the time of starting the dissolution process, the company would still be in business relations with third parties and such relations could not be terminated immediately, for the duration of this process the company would still exists as a legal entity. Its commercial activity however could be stopped. Whether the company will be active during the process of its liquidation depends on the decision made by the shareholders (The General Assembly) on the General Meeting. If the shareholders decide so, during the process of its liquidation, the company would not be allowed to participate in any commercial transactions or to sign any commercial contracts. However, they could decide instead that the company shall participate in the commercial transactions. In any event this decision of the General Assembly should be published in the Trade Register.
The dissolution process should be finished within a specified deadline –a minimum of 6 months. In every individual case this deadline is specified by the shareholders in the General Assembly but it is always at least 6 months. The main goal of this time period is for the existing business relations between the company and third parties to be concluded and for the assets and shares to be divided between the shareholders.
After this deadline expires, the second stage of the liquidation process commences, The General Assembly is summoned again and the relevant legal documents for the final liquidation and deleting the company from the Trade Register are prepared. Along with the respective Protocol from the General Assembly’s meeting, the company should present before the Trade register a Certificate from the National Insurance Institute, notifying that the company has no obligations towards the National Insurance Institute ( it actually means that the national insurance of the employees has been paid by the company). The company is also obliged to present before the Trade Registry the specified in the Commercial Code accountancy documents.
Upon receipt of all documents and a satisfactory check, the Trade register would erase the company’s entry from its records.
According to Art. 38, para. 4 of PITA (Law On the Taxation Income of Physical Persons) withholding tax on the income from liquidation shares is determined on the positive difference between the liquidation value of the share and the documented cost of the share in the company – 10 %.
To summarise:
1. When you receive Incomes from company, situated in a Non EU Country – you must charge 0 % VAT in the invoices that you issue.
3. When you receive Incomes from company not registered for VAT, situated in an EU Country – you must charge 20% VAT in the invoices that you issue.
4. When you receive Incomes from an individual, situated in a Non EU Country – you must charge 20 % VAT that you issue.
5. When you receive incomes from an individual (THAT HAS VAT REGISTRATION) situated in an EU Country – you must charge 0 % VAT that you issue.
6. Incomes from an individual (THAT DOES NOT HAVE REGISTRATION) situated in an EU Country – you must charge 20 % VAT in the invoices that you issue.
• Maximum insurable income changes from 2400 BGN to 2600 BGN .;
• Minimum insurance income for self-employed persons who did not carry out activities in 2013 and those which started operations in 2014 and 2015 is set at 420 BGN .;
• Minimum insurance income for self-employed persons who have exercised an activity in 2013 is determined according to their taxable income for 2013 as follows:
- Up to 5400 BGN – 420 BGN .;
- 5 400.01 BGN to 6500 BGN – 450 BGN .;
- 6 500.01 BGN to 7500 BGN – 500 BGN .;
- Over 7500 BGN – 550 BGN
• Minimum insurance income for farmers and tobacco – 300 BGN
• The minimum wage varies from 340 to 360 BGN of 01.01.2015 and of 01.07.2015, they are to be increased to 380 BGN
• Changes in VAT mainly concern the provision of telecommunications services, broadcasting of radio and television and electronic services to end users. These services should be subject to VAT in the country in which he is established taxable person – the customer. To avoid the need to register for VAT in each Member State on such deliveries, providers will be able to enjoy special arrangements for reporting the information system MOSS, after applying for it.
• Annual tax returns can now be submitted electronically only runway code issued by the NRA.
• The maternity allowance does not change remains 340 BGN changes affect the way the calculation of income which is received mother before going on leave – 18 months increased to 24 months.
• A new electronic system for the submission of medical certificates from doctors at the Institute. This does not relieve employees of their obligation to submit a doctor’s note – a copy of the employer. It is believed that the introduction of the electronic system will speed up the processing of medical certificates.
• Within 01.31.2015 year self employed can change the type of self-insurance you. Declaration of self-employment may be submitted in person at the NRA or by proxy, and also by registered mail.
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According to VAT car is a car in which the number of seats the driver does not exceed 5.
The fuel expenses for a car classified as maintenance costs repair and operation. These costs are treated differently depending on what kind of activity is the fuel used:
1. When the fuel is used for the performance of the main activity of the company, it is recognized for tax purposes and not subject to to income tax on costs. Activities that fall into this category – security, transport or taxi services.
2. When the fuel is used for the management activities of the company, the costs are not subject to VAT pursuant to Art. 70, paragraph 1, item. 3 VAT and taxed 10% according to Art. 204 tons. 3 CITA.
3. When the fuel is used for main and management activities of the company tax base costs are based on mileage for the activity for the calendar year.
4. When the cost of exploitation, repair and maintenance of passenger cars used for representation expenses such as business meetings, or other entertainment events are subject to 10% tax under CITA.
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Value Added Tax
1.1.The tax rate is 20 percent for:
- taxable supplies, unless expressly specified as being subject to a zero-tax rate
- import of goods on the Bulgarian territory
- taxable intra-Community acquisitions
1.2.The tax rate applicable to accommodation provided at hotels and similar establishments, including providing vacation accommodation and letting out places for camping sites and caravan sites, is 9 percent (9%).
1.3.The tax rate is 0 percent (0%) in the cases provided for by the VAT Act – Chapter III of the VAT Act.
1.4.. Exempt supplies:
- Supply linked to health care;
- Supply linked to welfare and social security work;
- Supply linked to education, sports or physical education;
- Supply linked to culture;
- Supply linked to religious denominations;
- Supply of a non-profit-making nature;
- Supply linked to land and buildings;
- Supply of financial services;
- Supply linked to insurance services;
- Gambling;
- Supply of postage stamps and postal services;
- Supply of goods or services for which credit for input tax has not been used
Minimum social security income
- minimum monthly social security income of self-employed according to their 2012 taxable income as self-employed:
- up to BGN 5,400.00 – BGN 420.00;
- from BGN 5,400.01 to BGN 6,500.00 – BGN 450.00;
- from 6,500.01 to BGN 7,500.00 – BGN 500.00;
- over BGN 7,500.00 – BGN 550.00;
- minimum monthly social security income of registered agricultural producers and tobacco producers – BGN 240.00;
- the minimum social security income of individuals employed under employment contracts is fixed as per groups of professions and according to the Classification of Economic Activities (CEA) (2008).
The income for which social security contributions must be paid includes all remunerations and other earnings from employment; the social security income also includes the gross monthly remunerations accrued but not paid.
The minimum salary for the country for 2014 is BGN 340.00.
Maximum monthly social security income
- maximum monthly social security income – BGN 2400.00;
Corporate Income Tax Act
The corporate tax rate is 10 percent (10%).
The corporate tax period is the calendar year.
For newly incorporated companies, which are taxable persons, the tax period commences on the date of incorporation and ends at the end of the year.
Tax rates for income earned from dividends and liquidation dividends and non-resident income tax withheld
- A tax of 5 percent (5%) withheld at source is charged on dividends and liquidation dividends allocated by resident legal entities;
- Income of a non-resident entity from a source in Bulgaria /as provided for by Article 12 (2.3), (2.5) and (2.8) of the Corporate Income Tax Act/ not earned through a place of business in Bulgaria is subject to a tax of 10 percent (10%) withheld at source, which shall be final.
On the annual base the following costs are subject to a 10% tax:
- Representation costs;
- Social costs, in-kind;
- Social costs for contributions /premiums/ for additional social security and life insurance;
- Social costs for food coupons in the cases provided for by the law;
- Costs related to maintenance, repairs and use of vehicles when used for administration purposes;
Individual Income Tax Act
Tax rates
- Uniform individual income tax rate of 10 percent (10%);
- Uniform sole proprietorship income tax rate: 15 percent (15%);
Tax rates of final tax:
- 5 percent (5%);
- 10 percent (10%);
- 7 percent (7%);
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Compulsory VAT registration – art. 96, para 1 of the VAT Act.
An obligation for registration arises when a taxable person reaches a taxable turnover of BGN 50 000 or more for a period 12 consecutive months preceding the current month.
Compulsory registration for supply of goods with assembly and installation – art. 97, para 1 of the VAT Act. A person who is established in another Member State and who effects taxable supplies of goods which are assembled or installed within the territory of the country by or for the account of the said person. The application for registration shall be submitted not later than 7 days prior to the date of occurrence of the chargeable event for the supply.
Compulsory registration in case of distance selling of goods – art. 98 of the VAT Act.
Any taxable person who effects a supply of goods whereof the place of transaction is within the territory of the country under the terms of distance selling shall be registered on this grounds. The obligation for registration arises not later than 7 days prior to the date of occurrence of the chargeable event and turnover of BGN 70 000.
Compulsory registration in case of Intra-Community Acquisition (ICA) – art. 99 of the VAT Act.
The application for registration shall be submitted not later than 7 days prior to the date of occurrence of the chargeable event for the acquisition by which the total value of taxable Intra-Community acquisitions exceeds BGN 20,000. The obligation for registration arises not later than 7 days prior to the date of occurrence of the chargeable event.
Compulsory registration as result of transformation – art. 10, para 1 of the VAT Act.
Registration under the VAT Act shall be compulsory for any person who in case of no supply of goods or services (Art. 10, para. 1 of the VAT Act) acquires goods. This registration shall be effected by submission of an application for registration with in 14 days.
Registration of a non-resident who is not established within country – art. 101 of the VAT Act.
This type of registration does not apply to non-resident persons supplying services under Chapter Eighteen of the VAT Act, insofar as there is a specific procedure for registration. The obligation for registration arises not later than 14 days prior to the date of occurrence of the chargeable event.
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