Starting a Company in Bulgaria: The Complete Guide
Here’s everything you need to know about starting a company in Bulgaria’s with 10% personal and corporate tax rates
Despite being a member of the European Union and having one of the lowest tax rates in the bloc, Bulgaria has kept a relatively low profile. However, this is starting to change. Online business owners, digital nomads, and expats are discovering the benefits of registering their business in Bulgaria and escaping onerous taxes in their home country.
What’s in it for you? A simple flat 10% tax rate for personal income and corporate profits is certainly one of the key attractions, but Bulgaria is also a welcoming place for investors. There are no capital gains taxes on equities or stock market trading in the EU/EEA, and the dividend tax is also just 5%. This favourable fiscal sandwich is made even more appetising by the fact that there is no wealth tax in Bulgaria. The skewer holding it all together: the low cost of living and low rental prices.
Unfortunately, many people are quick to discard Eastern Europe as a place to live or register a business. It has that post-communist reputation that still taints the image of the region. But for those in the know, Bulgaria is a remarkable country, not only for its low taxes but also for its stunningly picturesque landscape and amazing people.
This article is part of EuroNerd’s series on the best corporate and personal tax structures in Europe for location-independent business owners. We focus on countries with low taxes, low cost of living, and high quality of life.
What’s in this guide?
In this guide, we’ll run through everything you need to know about how to start a business in Bulgaria, the Bulgarian tax system for individuals and companies, and what the requirements are for tax residency. It’s a long read, but it’s packed with information that we hope will save you time, money, and stress in the long run.
Important: EU and non-EU citizens are reporting that it is very difficult to open a bank account in Bulgaria right now. To start a company, you need what is called an accumulative account. The process of opening such an account appears to be close to impossible for foreigners. We advise you to consider other jurisdictions as Bulgarian bureaucracy appears to be killing the goose that laid its golden eggs.
- 10% tax is how much you’ll pay on both personal and business income in Bulgaria, one of the lowest rates in Europe.
- 5% is the dividend tax,
- We estimate that the effective tax burden for business owners in Bulgaria can be as low as 14.8%.
- There are 0% capital gains taxes on investments or trading on EU/EEA stock exchanges.
- Other investments and capital gains from securities listed on international exchanges (outside the EU/EEA) are taxed at 10%.
- The Bulgaria Lev is a stable currency as it is fixed to the euro. Bulgaria is switching to the euro in the coming years.
- Some deductions can help reduce the amount of taxes you have to pay. This includes deductions if you have a mortgage or if you have children.
- Land and property are much cheaper in comparison to Western Europe. Just make sure you do your research before buying anything.
- People who love nature will feel at home in Bulgaria. There are mountains, forests, and rivers close to the major cities. Plus, for sunbathers, there is the sea too.
Bulgaria has a long and complicated history. You can easily get lost in the shuffle of empires and kingdoms that have occupied the modern Bulgarian territory over the centuries. The Thracians are supposedly one of the first peoples to have settled the area way back in the Bronze Age, followed by the Persians, Celts, Romans, Slavs, Bulgars, and Ottomans until Bulgaria finally gained independence at the beginning of the 20th century.
The country’s strategic location at the crossroads of Europe and Asia has made it a coveted prize throughout history. This is evident in the diverse architecture and culture found here. You’ll see Roman ruins alongside Orthodox churches and Turkish mosques next to Soviet-style apartment blocks. Interestingly, the Slavic left the strongest mark on the Bulgarian language, although there are also significant Latin, Greek and Ottoman Turkish influences. In neighbouring Romania, history would have it otherwise. There, the language of the Romans took root.
Fast forward to the present day, and Bulgaria has a population of around seven million people and is a member of the European Union (EU). Although not part of Schengen, Bulgaria is fully integrated with the European Single Market and Customs Union. This means that goods, services, and people can move freely and without any restriction to other member states. Bulgaria also has its own currency, the lev (plural: leva), but the de facto currency for international trade is the euro. It’s set to adopt the euro in the coming years, but until then, you need leva for everyday transactions.
Pros of opening a company in Bulgaria
No one would advise you to move yourself and your business to a country you never visited or stayed in for an extended period. If you’re coming from a high-tax country, there is little financial benefit in relocating to Bulgaria unless you work remotely for a foreign company or have your own online-based business. Now that all of that is out of the way, here are some benefits that might just tip the scales in Bulgaria’s favour if you’re pondering the idea.
1. Simple flat 10% tax
There’s no clutter of tiers and allowances. In Bulgaria, it’s a simple 10% rate for both personal and corporate income taxes. You don’t have to look for all kinds of loopholes to lower your tax bill or feel unfairly treated because you’re in a higher tax bracket. It’s the same rate for everyone, and that’s that.
The flat tax rate has been in place since 2008. It can only be changed when the Bulgarian National Assembly (Parliament) votes to do so. In 2014, there was a push to eliminate it, but it was voted down, suggesting that the system will not go anywhere anytime soon. If you’re up for a long read, the Bulgarian Institute of Market Economics has written a report on the subject called Flat Tax in Bulgaria: History, Introduction and Results.
2. 10% corporate tax
Bulgaria has the second-lowest corporate tax rate in Europe. All legal entities operating in Bulgaria are subject to a 10% profit tax, regardless of their ownership. Bulgarian firms can deduct expenses just like they do in any other country. According to OECD, tax on corporate profits has grown significantly in recent years, so you might even develop an argument that company owners are less inclined to deduct professional expenses and pay more to the state because of the low tax rate.
3. 10% personal income tax
The same flat 10% applies to most personal income, such as salaries, royalties, and rental income. Nota bene: the dividend tax is only 5%, so it’s worth thinking a little about how to structure your income as a business owner. Freelancers (sole traders) can benefit from a reduced rate, but in most cases, it’s advisable to register as a legal entity.
4. No capital gains tax on EU-listed securities
Bulgaria has a flat tax of 10% on capital gains from listed securities and other financial instruments. However, gains made from selling shares and funds on a regulated stock exchange in an EU/EEA member state are exempt from taxation, according to the Bulgarian Personal Income Taxes Act 13(3). Dividends from listed shares and funds are only taxed at a rate of 5%.
5. No wealth tax
There’s no such thing as a wealth tax in Bulgaria. That means you don’t have to pay taxes on your financial assets, regardless of how much they’re worth. This includes deposits, savings, stocks, and other valuables.
6. Low living costs
Geo-arbitrageurs often compare the cost of living across different cities to see if they can save money by moving while assuming the same amount of income. If we compare the cost of living in Sofia (the most expensive city and not necessarily the one you’ll move to) with some of the other capitals in Europe, it’s clear that Bulgaria is one of the cheapest countries to live in. For people who are launching their first business, those low costs can give you time to grow without the pressure of making ends meet.
According to Expatistan, the living costs in Sofia are 49% lower than in Berlin, 53% lower than in Stockholm, 59% lower than in Amsterdam, and 68% lower than in London. Numbeo suggests that rent prices in Sofia are 62.69% lower than in Berlin, 67.62% lower than in Stockholm, 73.01% lower than in Amsterdam, and 79.25% lower than in London. Similarly, the price per square meter to buy an apartment in the city centre of any of the major Bulgarian is close to 75% cheaper than in Western Europe. If you go to Burgas, Varna, or Plovdiv, you’ll find that prices are almost half of those in Sofia.
7. Easy and cheap to register a company
It’s easy and affordable to register a company in Bulgaria. To register a limited liability company in Bulgaria (OOD or EOOD), you need a minimum share capital of 2 BGN (1 EUR). The whole process usually takes less than two weeks. A lawyer or accountant will typically charge in the range of EUR 300 – 700, which includes all state fees. However, you can do it yourself if you have a strong understanding of the process. Monthly accounting fees are typically around EUR 50 – 100, depending on the size of the business, and a virtual business address is around EUR 110 per year.
8. No discrimination from Western customers
This is anecdotal, but the Bulgarian business owners we know have never reported any issues with customers because of the fact they were based in Bulgaria. When you invoice from a Bulgarian company, it doesn’t attract the same negative attention as when you invoice a business incorporated in Malta, Gibraltar, or other low-tax countries. This is likely because Bulgaria is an EU member state and also because it’s not on any blacklists.
9. Easy to get residency
If you’re an EU/EEA citizen, you can move to Bulgaria tomorrow and stay for three months without any paperwork involved. If you want to stay longer, you can apply for a long-term residence permit. If you’re a non-EU/EEA citizen, the process is also relatively straightforward, and there are plenty of resources available online to help you. There’s not much involved in terms of bureaucracy if you work with a decent lawyer, aside from a few formulas and the ability to subside yourself.
10. Access to online banks and payment processors
Bulgaria being a member of the EU means that you have access to the European SEPA network for online banking and payments. Most Bulgarian banks offer euro and dollar accounts to their business customers. Deposits in Bulgarian accounts are insured just like deposits in other EU countries.
Online banking and payment processing options are also more or less the same as anywhere else in Europe. You can use Wise, Revolut, and other online banks popular among small businesses. Payment tools like Stripe and PayPal are also available. You don’t need to jump through all kinds of hoops to get them to work like you would in other low-tax countries.
11. Excellent base for digital nomads
Digital nomads are known to have itchy feet when it comes to staying in one place for too long. Bulgaria is a country where it is simple and inexpensive to maintain tax residency and satisfy all formal criteria, such as having a permanent address and a centre of vital interests. Will anyone care if you spend a lot of time outside the country? Probably not, as long as you pay your taxes and everything looks good on paper. It’s easy to get out, too. The country is well-connected through rail, road, and air to the rest of Europe, the Middle East, and Asia.
Cons of opening a company in Bulgaria
Eastern Europe has a certain reputation, and perhaps it’s not all undeserved. However, many of the problems mentioned on the web relate to businesses that deal locally within Bulgaria. If you’re looking to set up a company that does business internationally, many of those issues won’t exist. That being said, there are still a few downsides of starting a business in Bulgaria that are worth mentioning.
1. Lack of modern solutions
No matter where you register your business, there will be bureaucracy involved. There’s no way around the formalities. But if you take the UK, France, or Sweden as examples, opening a company and submitting all the necessary documents have been more or less digitalised. It’s incredibly easy to do everything online, from registration to setting up an accounting system. There are third-party solutions for almost everything, and they work.
In Bulgaria, the bureaucracy isn’t as streamlined. You will need the help of an accountant, or you’re going to get your fingers burnt. There’s little do-it-yourself potential here, even for the experienced lot who have handled their own books and records for years. Bulgaria has such a talented IT workforce, so it’s very surprising that the bureaucracy isn’t more modernised.
There’s no hiding Bulgaria has a corruption problem. According to Transparency International’s Corruption Perceptions Index, it consistently ranks as one of the most corrupt countries in Europe. The good thing is that it’s mostly confined to local business dealings and doesn’t really affect foreigners with online-based revenue models like IT companies, graphic designers, etc. However, it’s still something to be aware of if you’re planning on relocating to Bulgaria.
In Northern Europe, 10 am means 10 am. In Bulgaria, it means closer to 10:30 or 11 am. This can be frustrating for those who are used to things being on time. We’re generalising here, of course, and there are always exceptions to the rule, but in general, Bulgarians aren’t as punctual as you might be used to. But, “when in Rome”, adapt to the culture, and you’ll feel less stressed about it.
4. Programmers are in demand
You cannot expect to move to Bulgaria and hire talented people for a low salary. That time is over. Not only is the country’s outsourcing industry booming, but skilled Bulgarian programmers and developers are in high demand. Many are moving back home to Bulgaria, working remotely from US companies, and making big bucks. This is great for the Bulgarian people, but it means you might have to pay a bit more than you were expecting to hire the right people for your team.
5. “It’s Eastern Europe”
Unfortunately, Bulgaria still has a bit of a cultural image problem. Some Western Europeans view it as the “Wild East” and are quick to write it off without giving it a chance. The good thing is that this is slowly changing as more and more people can get an inside look at the country and see that it has a lot to offer, either by visiting or gathering information from people who live there.
6. Poor social safety net
If something happens and your business fails, or you find yourself in a difficult situation, don’t expect the government to help you out. The social safety net is very weak, and you will likely have to rely on your own resources or the kindness of friends and relatives. There’s no Scandinavia-style welfare system to catch you if you fall. There are unemployment benefits, but they are very low, so make sure you’re confident in your business and have a financial buffer before moving there.
Bulgaria taxes: Overview
Bulgaria’s tax system is one of the simplest in Europe. If you spend more than 183 days in the country and have your vital interests there, you’re considered a resident for tax purposes. As a Bulgarian tax resident, you pay taxes on your worldwide income.
Both the personal and corporate tax rate is a flat 10%, which is the lowest in the European Union. The dividends tax is 5%. This leaves plenty of room for people who open and run a business in Bulgaria to legally structure their income in a way that minimises their effective tax burden.
Bulgaria personal income tax
The personal income tax in Bulgaria is 10%. Other types of personal income are usually also taxed at 10%. The payments you receive from your job, like your salary, are included in calculating your taxable income. Your employer, the company you work for, withholds the 10% income tax from your wage every month and pays that amount to the state.
Foreign income tax in Bulgaria
Bulgaria taxes foreign income at a 10% flat rate. If you are a Bulgarian tax resident, you will be taxed on your worldwide income, regardless of the source. If you receive income from abroad (rental income, for example) and the foreign country has a double taxation agreement with Bulgaria, you might be able to avoid being taxed twice on the same income. Foreign income in the form of capital gains and dividends is subject to different rules.
Social security rates in Bulgaria
The national security contribution rate in Bulgaria is around 25% on salaries (employer and employee combined). National insurance contributions include social security and health insurance contributions. It gives the employee access to the public healthcare system, disability, sickness and unemployment benefits, among other things.
The minimum amount used to calculate monthly insurance contributions is BGN 650. The maximum amount used to calculate monthly insurance contributions is BGN 3,400. This applies to salaried employees and the directors or managers of a Bulgarian company.
How to reduce social security contributions
You can structure your income differently than a regular employee as a company owner and reduce your social security contributions. For example, you could receive a lower salary and the rest of your income as dividends from the company. You can save money on your taxes by paying yourself a salary that meets the minimum requirements for social security contributions. You will then need to pay the rest of your income as dividends. See the example below for more details.
Wealth tax in Bulgaria
Bulgaria does not have a wealth tax. This means that you do not have to pay any taxes on your assets, such as property or savings. You also do not have to pay taxes on unrealised capital gains from investments.
Bulgaria property tax
The annual property tax in Bulgaria is between 0.01% to 0.45%, which is among the lowest in Europe. The property tax is levied as a percentage of your property’s value. The property tax in Bulgaria is paid annually and is determined by the municipality where the property is located. Taxable properties in Bulgaria include land with constructions and non-built construction plots located in Bulgaria.
Tax deductions in Bulgaria
People who live in Bulgaria can use a number of deductions to reduce the amount of money they have to pay in taxes. These deductions are usually a set amount, but some of them are a percentage of the taxable income. Some amounts are quite generous, like the deduction for having dependable children, while others are more modest. The main deductions available for individuals are:
- Mortgage interest expenses
- Social security contributions
- Children and disabled children
- Voluntary health and life insurance contributions
- Charitable donations
Bulgaria capital gains tax
Capital gains and investment income are taxed at either 0% or 10% in Bulgaria, depending on the asset and where it is traded. The tax applies to the positive difference between how much you sell an asset and how much you paid for it. The tax is levied on the total gain, no matter how long you have held the asset. There is no difference between long-term and short-term capital gains.
Capital gains tax in Bulgaria: Overview
- EU/EEA-listed securities: 0%
- US and other non-EU/EEA-listed securities: 10%
- Property in Bulgaria: 10%; certain types of immovable property are exempt from the capital gains tax
- Dividends: 5%
- Cryptocurrencies: 10%
- CFD and other OTC products: 10%
- Social security: Unless the investor is doing this as a professional activity, capital gains and dividends from investments are exempt from national insurance contributions.
Property, buildings, land, and other immovable assets are subject to a 10% capital gains tax when sold. The taxable base of the property, including limited property rights, is the difference between the sales price and the acquisition price, minus 10% in deductions.
Movable property, such as vehicles, jewellery, artworks, antiques, etc., are taxed at 10% on the total gain when sold. The taxable base is the difference between the sales price and the acquisition price.
Shares and securities tax in Bulgaria
In Bulgaria, securities, shares, ETFs, funds, and other financial instruments are subject to a 0% or 10% capital gains tax. The taxable base for income is calculated as the total amount of money you make minus any money you lose.
Profits from the sale of securities listed on a Bulgarian and EU/EEA stock exchange are taxed at 0% in Bulgaria. Profits from securities listed on international exchanges are taxed at 10%. Profits from other financial assets, like cryptocurrencies and CFDs, are taxed at 10%.
EU/EEA-listed securities are tax-free in Bulgaria
Capital gains on stocks, bonds, funds, and other securities (shares, bonds, etc.) sold on a regulated Bulgarian/EU/EEA market are tax-free in Bulgaria. The trade must occur on an EU/EEA-regulated exchange rather than a US, UK, or other foreign exchange; otherwise, the capital gains will be taxable.
For example, if you buy EUR 10,000 worth of an ETF listed on a German stock exchange, and after 2 years it’s worth EUR 12,000, when you sell it, you will not have to pay any taxes on the EUR 2,000 profit.
If you buy 100 shares of Apple stock for USD 10,000 on the NASDAQ and sell it for USD 12,000 2 years later, you will owe 10% tax on the USD 2,000 profit. However, if you bought the same Apple shares on Borsa Italiana or Deutsche Börse Xetra, you would not have to pay any taxes on the profit.
Dividends from shares
Dividends from shares and funds are taxed at 5% in Bulgaria. If you get dividends from a company not based in Bulgaria, the country where the company is based may tax those dividends. Suppose Bulgaria and the other country have a double taxation agreement. In that case, the tax paid in the other country may be able to be deducted from the Bulgarian taxes that you have to pay.
For example, the US usually withholds a 10% tax on dividends paid to people who don’t live in the US. A Bulgarian who lives in Bulgaria would pay 5% tax on the dividend, but they could deduct the 10% paid in the US on their personal tax return.
CFD tax Bulgaria
Profits from CFDs and other over-the-counter instruments are taxed at 10% in Bulgaria. This also applies if the brokerage is located in Europe. CFDs are not exempt from capital gains taxes because they are not traded on exchanges like stocks but over the counter with CFD brokers or market makers. When selecting a stock brokerage, make sure they provide access to real exchange-listed securities and not CFDs if you want to take advantage of the exemption as mentioned above.
Bulgaria crypto tax
Bulgaria taxes the profits from selling cryptocurrencies at a flat rate of 10%. The taxable income is calculated by adding the profits from each sale and subtracting any losses. The realised profit or loss is calculated by deducting the original purchase price from the sales price. It’s unclear whether trading one cryptocurrency for another constitutes a taxable event.
Bulgaria corporate tax rate
The corporate tax rate in Bulgaria is 10%. This is one of the lowest corporate tax rates in Europe. There are no special brackets for small or large businesses; the simple 10% rate applies to all companies regardless of size. Companies transfer 10% of their profits to the Bulgarian tax office. The profit is calculated by subtracting the total allowed business expenses from the total revenue for the financial year.
Can I deduct expenses?
Bulgarian companies can deduct business expenses like rent, salaries, laptops, and office supplies from their taxable income. Allowed expenses are more or less the same as in other countries. The deductible expenses must be necessary for the business to function and must be supported by invoices or other documentation. The deductible VAT will depend on the goods and services and whether they are bought in Bulgaria, in the EU, or outside the EU.
Tax credits available (but probably not worth it)
Bulgaria offers several interesting tax incentives to companies, such as those that employ people from areas with high unemployment rates or employ elderly or handicapped persons. These credits can reduce the effective corporate tax rate, but they are probably not worth the hassle for most companies. Plus, the credit is nearly only given to manufacturing companies, not those that sell services.
Stock trading with a Bulgarian company
If your company invests and sells securities that are traded on a regulated stock exchange in the EU/EEA, it will not have to pay corporate tax on the profits from the sale. If you have a loss from these trades, you will not be able to deduct it from your corporate taxes. However, you will need to discuss inventory valuation rules with your accountant as the rules are not easy to understand.
Bulgaria corporate tax year and filing
The financial year for Bulgarian companies is the same as the calendar year. For newly incorporated companies, the first tax year is from the date of incorporation until the end of the calendar year. Companies must submit their annual tax return no later than the 30th of June.
Advance tax payments
Advance payments to the tax agency are made on a quarterly or monthly basis, depending on the company’s size. The payments are based on your company’s expected taxable profit this year. Newly incorporated companies do not have to make advance payments for the first year. Small companies with a revenue below BGN 300,000 (2022 number) also do not have to make advanced payments.
Bulgaria dividend tax
Dividends are taxed at a flat rate of 5% in Bulgaria. This is the rate if dividends are paid to an individual who is a tax resident in Bulgaria. If the person is a tax resident in another country, the rate is the same, unless a reduction or exemption is provided for by a tax treaty.
Dividends paid by a Bulgarian company to a company in another EU/EEA member state are not taxed by Bulgaria. This means that a Bulgarian company can potentially be combined with another company from the EU/EEA in a country that does not tax dividend distributions.
Dividends vs salary for company owners
If your Bulgarian company has been profitable, you may want to distribute the profits to the shareholders as dividends. Dividends can be paid out in the year after the year in which the profits were generated, and corporate tax is paid. Depending on how much profit your company generates, paying yourself dividends is often more effective than paying yourself a high salary.
Tax optimisation strategy
As a small business owner or consultant, you’ll be looking for ways to reduce the amount of taxes you have to pay. You want to make sure that the profits you earned stay in your pocket. Here are some ways to reduce your tax bill when you move money from your company to yourself. These are just ideas, so it is important to talk to a certified accountant or tax planner to see what would work best for you.
Example – Minimum salary, maximum dividends
In this example, we have a company owner/director who takes out a monthly salary from their company of BGN 650. We set the monthly salary to BGN 650 because this number is the smallest base used to calculate national insurance contributions. As a company controller, you would be liable for at least this amount, even if you do not take out a salary. The amount you pay yourself each month as a salary will be subject to social security and income taxes.
Even if you are a director of a company, there is no minimum wage requirement (unless you have a contract of employment with the company). Typically, business owners will pay themselves a “living wage” based on how much money they need to live each month. However, we assume the owner has sufficient funds to sustain themselves and their family throughout the year without having to touch the company’s liquidity. This is by no means the case for all business owners, but we will assume it is here for simplicity’s sake.
As a normal employee, you’re used to thinking of your salary as the only way to get paid. However, as a limited company owner, the most tax-effective method of paying yourself is often through a combination of a modest wage and dividends. A dividend is a distribution of profits paid out to shareholders. Dividends are taken out of the company’s after-tax profits. In our example, the imaginative company pays out 12 x BGN 650 in salary and BGN 1,000,000 in dividends.
During the year, the director receives a net monthly salary of BGN 650, equal to BGN 504.39 after taxes.
- Gross monthly salary: BGN 650
- National insurance base: BGN 650
- National insurance of 13.78% (paid by employee): BGN 89.57
- Personal tax base: BGN 560.43
- Personal income tax of 10%: BGN 56.04
- Net monthly salary: BGN 504.39
- Total monthly taxes: BGN 145.61
- Net yearly (x12) salary: BGN: BGN 6,053
- Total yearly taxes: BGN 1,747.32
Employer (company) part
The company pays its part of the national insurance contributions and the director’s salary. Both expenses are deductible.
- Monthly national insurance of 18.52% (paid by employer): BGN 120.38
- Yearly national insurance: BGN 1,444.56
- Monthly salary and insurance expenses for the employer: BGN 770.38
- Yearly (x12) salary expenses for the employer: BGN 9,244.56
Taxable base and dividends distribution
When the tax year ends, we imagine the company has a profit of BGN 1,000,000 after all expenses have been paid, including the director’s salary and insurance contributions. The company must pay 10% in corporate income tax. After corporate taxes, the company has BGN 900,000 to distribute as dividends.
- Corporate tax base: BGN 1,000,000
- Corporate income tax of 10%: BGN 100,000
- Net profit available for distribution: BGN 900,000
- Dividend withholding tax of 5%: BGN 45,000
- Dividends paid to the owner/director: BGN 855,000
Effective tax rate
From the example below, you can see that a company owner who pays out all of their profits as dividends will pay taxes at a rate of 14.5% (BGN 855,000 / 1,000,000). If we consider the taxes that the director paid on a personal level, it’s slightly higher. Our director and the company paid a total of BGN 1,747.32 (personal) + 1,444.56 (corporate) = BGN 3,191.88. This results in a total effective tax rate of 14.8%.
If the owner can claim any deductions, the tax rate on personal income will be lower. For example, the owner may have children living at home or a mortgage on their property. This would reduce their taxable income base (not for dividends, however), and the amount of personal income tax they pay would come close to zero.
Bulgaria tax residency
If you’re considering becoming a tax resident in Bulgaria, the best place to get information is from the The Bulgarian Ministry of the Interior. They issue the official guidelines and rules.
How to become a Bulgarian tax resident
The general rule is that you are considered Bulgarian tax residents if: you spend more than 183 days in the country in a calendar year, have a fixed residential address in the country, and have vital interest ties to Bulgaria. Of course, each case is unique, but these are the general rules.
- 183-days rule: You’re only considered a tax resident if you spend more than 183 days in Bulgaria during any 12 months. This can be continuous or broken up as long as the total days spent in Bulgaria add up to more than 183.
- Vital interests rule: This is a bit more subjective, but in general, you’re considered to have vital interests in Bulgaria if your personal and economic ties are in the country (e.g. factors like spouse and dependent children, fixed address, property, own business, location of employment etc.)
For foreigners, it’s not too hard to move your tax residency to Bulgaria. In general, you need to cut ties with your previous country of residence and fulfil the 183-days and vital interests-rule.
Bulgaria tax residency rules
Bulgarian tax residents are taxed on their worldwide income, regardless of whether the income is remitted to Bulgaria or not. This means that for individuals who are considered tax residents in Bulgaria, their income from all sources (Bulgarian and foreign) is subject to Bulgarian taxation rules.
Starting a company in Bulgaria
More and more expats migrate to Bulgaria to start a new company or relocate their current business. While the process isn’t yet as streamlined as it is in Estonia, the UK or US, it’s still fairly straightforward. One of the most important things is to find a reliable accounting firm to help with the incorporation process and ongoing compliance.
How to start a company in Bulgaria as a foreigner
There are many companies in Bulgaria that can help you register your business, do your accounting, handle payroll, and other administrative tasks. While atypical in many other countries, it’s normal for accountancy and business consultancy companies to also offer legal services like contract reviews, trademark registration, and visa support.
The best way to go about it is to search in Bulgarian (through Google Translate or similarly) rather than English. The most modern and innovative accounting firms are still primarily catering to the local market. You can also get recommendations from fellow expats and narrow down a list of potential service providers. Make sure to interview several firms to find the one you are most comfortable with to help you with the incorporation process and the ongoing compliance.
How much does it cost to set up a company in Bulgaria?
The cost of setting up a company in Bulgaria varies depending on the type of business, the chosen legal structure, and what kind of professional incorporation service you use. Because you need an English (or another foreign language) translation of the documents, the cost is higher for foreigners than for locals.
The price for incorporating a company in Bulgaria we received from the leading online legal platform is EUR 350. Their price for a non-translated Bulgarian company incorporation is around EUR 122. You can find other offers online in the range of EUR 500 – 800.
The quote we received included translations of all necessary documents, personal support, mailing them to us abroad so we could sign them, and then forwarding the package to the commercial registry. The price also included state fees and other fees, except banking fees. They also put us in touch with an online accounting firm with an English platform and very supportive staff.
A note about notaries in Bulgaria
Notaries are the lifeblood of Bulgarian bureaucracy. Without their incessant need for signatures, stamps, and other official paraphernalia, the country would grind to a halt. Some say they make up half of the Bulgarian workforce. In fact, Bulgarians despise notaries just as much as foreigners do – they’re considered the epitome of red tape and bureaucrats gone mad. You’ll need to visit a notary for almost everything, which can be frustrating if you are used to signing things digitally.
Step 0: Preliminaries
Before starting the registration process, you need to prepare the following documents and information.
- A business address in Bulgaria. This can be a virtual address at your accountant’s office or any other place if you want to protect the privacy of your home address.
- A unique business name. You need to prepare three variants of the desired company name. It should not coincide with any existing business names in Bulgaria. It should be compliant with the Bulgarian Trade Act. You can check for availability in the public trade registry. To reserve the name, complete the relevant formula D1.
- ID document. Your Bulgarian accountant and service provider will ask you for a copy of your passport or national identification document.
- Business description. Write a brief description of the business you want to register. This will be used in the company’s articles of association and business activity code.
Step 1: Find an accountant
The first step is to find a reliable accountant (or lawyer) who will help you with the registration process. While you can legally register the company yourself, you will likely get lost and make potentially costly mistakes. A competent accountant will be familiar with the entire procedure from beginning to end. Your accountant will also help you with the ongoing accounting, annual report, VAT, and personal tax returns.
Here are a few tips to narrow down the search:
- Ask in expat communities: You’re not the first foreign to want to start a business in Bulgaria. Ask around in forums like Reddit for recommendations of good service providers.
- Search in Bulgarian: The Bulgarian market for foreign founders isn’t as developed as, e.g. the Estonian one, where many service providers cater to foreign entrepreneurs. Try searching in Bulgarian to get the best recommendations.
Step 2: Pick your company structure
Your accountant will ask what kind of company you want to register. The most common types are the limited liability company (OOD/EOOD) and the sole proprietorship. The main distinction is that an OOD/EOOD offers limited liability protection to its shareholders, while a sole proprietorship exposes the owner to unlimited liability.
Your advisor will most likely recommend an OOD/EOOD for liability reasons and because the company is more flexible when it comes to ownership and management. The difference between an OOD and an EOOD is that an OOD has multiple shareholders, while an EOOD has a single shareholder. The minimum share capital is BGN 2 (around EUR 1).
Non-EU/EEA citizens should ask their accountant about the Trade Representative Office-model, as this is a common way to get a long-term residence permit in Bulgaria.
Step 3: Your accountant prepares the legal documents
After you’ve decided on the company structure, your accountant will prepare and send you some necessary legal documents. These are mostly standard forms that look similar for all small companies, with a few specific details filled in. The documents will be in Bulgarian, so you should get an English copy of everything.
Here’s a list of the necessary documents:
- The application to the Bulgarian Trade Registry for incorporating the EOOD: Form A4
- Bank statement showing that the minimum capital has been deposited
- The articles of association
- The memorandum of association, showing the decision of the board, the agenda of the meeting, the minutes, etc.
- A specimen signature from the director authenticated by a public notary.
- A statement of consent from the single shareholder saying they are willingly acting as the director
- Four different declarations
Step 4: Open an “accumulation account”
Before registering your company, you need to show that your company has deposited the minimum share capital of BGN 2 (EUR 1) in a bank account. It may sound ridiculous that such a small amount of money is needed, but that’s just how it is.
The way to do this is to open an “accumulation account” (набирателни сметки) with any bank in Bulgaria. This is a special type of account that is only used for incorporating a company. The money will be locked in the account until the registration process is completed.
You will need to provide a statement from the bank that shows the account’s existence and how much money is in it. This can be done by providing a printed bank statement or declaration from the bank. Afterwards, you’re free to open a business account for your Bulgarian company with a foreign online bank or local institution.
Step 4: The documents are submitted
After you have prepared and signed all the documents, they will be submitted to the Bulgarian Trade Registry. The process usually takes about two weeks. Your agent should send you the certificate of incorporation and other relevant documents.
Step 5: Post-incorporation
A few final touches are worth considering to ensure your company runs as smoothly as possible.
- VAT registration: This is voluntary for small businesses with a turnover below BGN 50,000 per year (EUR 25,000) but mandatory if you plan on invoicing other EU-registered companies or if your turnover is likely to exceed the threshold.
- Opening a business bank account: This is necessary, and you need it before your company can be registered. Afterwards, your choice is between a local Bulgarian bank, a foreign bank, or an online business bank.
- Accounting: You need accounting software and a good accountant to help you with invoicing, tracking expenses, and preparing your annual report. You should be able to tweak Freshbooks, Zoho, or similarly to work for a Bulgarian company. Luckily, more and more digital accounting firms in Bulgaria, like Anagami, cater to English speakers. These firms can help you with your finances remotely.
- Remember the deadlines: Annual report, VAT filings, payroll, social security, etc. There are plenty of important dates to remember, and you don’t want to get fined for missing one.
Summing it up
Registering a company in Bulgaria is the same process for locals and foreigners. Bulgarian law does not discriminate against foreign shareholders. However, the bureaucratic wheels are still not used to the idea that people outside Bulgaria might have a business there.
Even if you do not live in Bulgaria, you can still register your company there. However, it will be more expensive to do so because you will need to hire a lawyer. Additionally, it will be much harder to open a local bank account.
Is Bulgaria a tax haven?
No, Bulgaria has never been formally considered a tax haven by the OECD, the EU, or any other major international organisation. The Tax Justice Network, an NGO critical of tax havens, has also never included Bulgaria on its list of tax havens. Bulgaria is not on any list of countries known for being tax havens. In other words, it is not well-known for being a place where people can avoid paying taxes. You could say that it prefers to stay out of the public eye.
Business banking in Bulgaria
If you’re starting a business in Bulgaria, you’ll need to open a corporate bank account. This is done before the company has been registered with the Trade Registry. You cannot complete the incorporation without evidence of the company’s capital. The most common way to show this is with a bank statement. The process for foreigners is a bit tricky because of all the new anti-money laundering regulations mandated by the EU. But it’s possible with the right preparation.
The accumulation account – a major hurdle
Part of incorporating a company is to deposit the initial share capital. The term share capital is the amount of capital, usually in the form of money or tangible assets that the shareholders have invested in the company. A limited company cannot be registered with the authorities before there is proof that the share capital exists.
In many European countries, proving this is by presenting a bank statement that shows that the money is there. Some banks will allow the aspiring business owner to open an account before the company is registered so the capital can be paid in. However, in most cases, you transfer the share capital to a client account held by your lawyer. The lawyer is then able to show that the funds are available and the company can be registered.
In Bulgaria, the process is slightly different. You need to open a so-called “accumulation” or “accumulative” account with a bank to deposit and prove the share capital. This is a special type of account that is only used to pay share capital. It is not a legal requirement that the accumulation account is at a Bulgarian bank. However, it is often difficult to find a bank outside of Bulgaria willing to open such an account.
How to open an accumulation account
It used to be relatively easy to open a business bank account in Bulgaria as a foreigner. You or your lawyer would go to a bank in Bulgaria with a notarised copy of your passport, fill out some paperwork, and the account would be opened. But since the introduction of new anti-money laundering regulations, things have turned more difficult.
Now, the banks require a lot more documentation. They want to see proof that you are who you say you are and that your business is legitimate. This means providing them with personal utility bills, bank statements, and tax returns going back several years. You will also be required to provide a business plan and other documents related to your company.
The good news is that if you have all the necessary documents, it is still possible to open a bank account as a foreigner. It will just take some time and patience. As the director and single shareholder, you must go to the bank in person or ask a lawyer to go there as your authorised representative. It’s far easier to get through the eye of the needle if you live and have your residential address in Bulgaria.
What you need to open the account
You should email or call multiple banks to learn their requirements. Most banks will ask you to visit their branch in-person to open an account. Some banks may require that you have a physical presence in Bulgaria. In contrast, others may be willing to open an account for foreigners living abroad.
- A notarised power of attorney, if the account is opened by a proxy (very difficult for foreigners these days)
- Your passport and a notarised copy of your passport
- Copies of identity documents of the representatives, proxies (if any) and the actual owners of the capital
- The signatures of the people who have the right to spend the money in this account on behalf of the company and the company’s seal.
- Articles of Association
- Memorandum of Association
- Declaration of beneficial owners of capital
What happens to an accumulation account afterwards?
After registering your Bulgarian company, you will need to close the accumulation account. The capital can be transferred to a regular business account. Some banks, wishing to keep you as a customer, will let you convert the accumulation account to a regular business account. Suppose you don’t want to use a Bulgarian business account. In that case, there is no law prohibiting you from opening an account with a foreign institution.
Best banks in Bulgaria
The Bulgarian banking scene is a mix of big foreign banks and several smaller local banks and credit institutions. The largest banks are European institutions with a subsidiary presence in Bulgaria, such as UniCredit Bulbank (Italy), DSK Bank (Hungary), United Bulgarian Bank (Belgium), and Postbank (Greece, the Netherlands). But there are also many local banks, such as First Investment Bank.
DSK Bank is arguably among the most modern and customer-centric banks in Bulgaria. The bank is part of the Hungarian OTP Group, one of the largest financial institutions in Central and Eastern Europe. The bank’s website and mobile app are available in English and Bulgarian, and customer support is provided in both languages. They offer a large range of services to small and medium-sized businesses, including multi-currency accounts, initial share capital accounts, loans, and lines of credit.
Fibank (First Investment Bank)
Fibank is one of the largest banks in Bulgaria and a market leader in SME business banking. Their fees are BGN 10 for account opening, BGN 20 in monthly fees, and BGN 5 per Euro transfer. It has a more professional approach than some of the other Bulgarian banks. Its website and documentation are available in both English and Bulgarian. They offer a wide range of business banking products and services, including foreign currency accounts in EUR, USD, and other denominations.
CCB (Central Cooperative Bank)
Like DSK, CCB is a modern, English-friendly bank with a wide range of products and services for businesses. However, the app is in Bulgarian only. They, too, offer share capital accounts, multi-currency accounts, and loans. They have several offices around the country and 24/7 telephone and online support in English and Bulgarian.
Raiffeisenbank is one of the leading banks in Bulgaria, with a wide network of branches and ATMs across the country. The bank is part of the Austrian Raiffeisen Group, one of the largest banking groups in Central and Eastern Europe.
Can non-residents open a bank account in Bulgaria?
Many reputable lawyers in Bulgaria have good relationships with bank representatives. They can help you open an account faster than if you did it yourself. But of course, there are no guarantees. To open a business bank account in Bulgaria as a non-resident, you need to show that the company has substance in the country and a solid business plan. Usually, the directors and shareholders must be physically present in Bulgaria when the account is opened.
Are Bulgarian banks safe?
Bulgarian banks are as safe as any other banks in Europe. The largest banks in Bulgaria are well-capitalised institutions with branches in multiple countries. All accounts are protected by law by up to €100,000 per depositor per bank under the European Union Deposit Guarantee Scheme. Joint accounts of married couples are insured for up to double the amount. This safeguard system was recently shown to work when Corpbank failed in 2014. Customers got their money back from the government using the Deposit Insurance Fund.
The Bulgarian people are some of the most hospitable in the world, despite the hardships they’ve faced over the years. Bulgarians often like to complain about their country, but the fact is thousands of Bulgarians are returning from abroad these years because they miss their country. Foreigners, too, are increasingly interested in Bulgaria as a business destination. Almost 20,000 people moved to Bulgaria in 2021. The fast-growing economy, the low taxes, and the skilled workforce are just some reasons.
This guide has hopefully given you a good overview of the business and taxation opportunities available in Bulgaria. The country offers a lot of potential for entrepreneurs and businesses of all sizes. And with its location in the heart of Europe and its good transport links, it’s easy to get to from almost anywhere in the world. So what are you waiting for?
Are taxes low in Bulgaria?
Bulgaria has low taxes for companies, business owners, employees, and investors. In other words, taxes in Bulgaria are low for almost everyone. The corporate tax rate is 10%, the personal income tax rate is 10%, and the capital gains tax rate is 0% to 10%. There is no wealth tax in Bulgaria, and property taxes are among the lowest in Europe.
Does Bulgaria tax foreign income?
Yes, Bulgarian tax residents are taxed on their worldwide income, whether local or foreign-sourced. Bulgaria’s tax system is not territorial, so all income earned by Bulgarian tax residents is subject to taxation in Bulgaria. However, there are a number of double tax treaties in place which means that you may be able to avoid being taxed twice on the same income by being given credit for taxes paid in another country.
How do taxes work in Bulgaria?
When it comes to taxes, Bulgaria is relatively simple. The personal income tax rate is 10%, and the corporate tax rate is 10%. There are several allowances and deductions available that can reduce your tax bill. Capital gains are taxed at a rate of 0% to 10%, depending on the type of asset. Property taxes are relatively low, and Bulgaria has no wealth tax.
How do I file a tax return in Bulgaria?
If you’re a Bulgarian tax resident, you’re required to file a tax return every year. You should use a professional tax advisor or accountant to help you with this, as the tax system can be complicated. The English version of the Bulgarian National Revenue Agency website is very difficult to navigate, and some important parts are only available in Bulgarian. You can file your tax return:
- At the local National Revenue Agency office
- By post
- On-site at one of the 352 post offices
- Online with an electronic signature
How do I become a tax resident in Bulgaria?
To become a Bulgarian tax resident, you must spend more than 183 days in Bulgaria during any 12 month period and have your so-called “centre of vital interests” in Bulgaria (e.g. residential address, bank account, employment, spouse, etc.). The situation for US citizens is more complicated. The United States taxes non-resident citizens no matter where they live, but they can get credits for the foreign taxes that they have paid.
EAI International, 2021. Taxes in Europe: Bulgaria.
Deloitte, 2021. Individual’s Tax Guide – Bulgaria.
PWC Bulgaria, 2022. Tax Summary: Bulgaria.
TaxMoney.bg. Taxes for Bulgarian Companies.