Legal, Tax and other Business Information

Legal System

A good understanding of the legal system is key to optimizing new and existing opportunities, for doing business in Bulgaria. The current Bulgarian legal system is dynamic and constantly improving, by adopting the modern patterns which reflect economic progress, globalization and political development. The process of harmonization of our legal system with the acquis communitaire, has finished successfully. In Bulgaria, investors will find out that many legal provisions are similar to those regulating other markets, in which they are used to conducting business. In many areas, investors will be pleasantly surprised by the reduced number of bureaucratic requirements and their tendency to operate in an efficient manner and often ahead of schedule. They may also benefit from the establishment of special measures to foster projects where more significant amounts are being invested. The equal treatment of local and foreign investors is a legally determined principle and the areas where this is not currently the case, such as the ownership of land, are in process of reform. The development of the banking sector, the securities’ legal regime and the privatization policies all improve investor confidence by removing areas of uncertainty and risk.


Starting a Business

Bulgarian law recognizes the following types of commercial companies exhaustively listed in the Commerce Act: (i) general partnership; (ii) limited partnership; (iii) limited liability company (“LLC”) or one-person-owned limited liability company; (iv) joint stock company (“JSC”) or one-person-owned joint stock company; and (v) company limited by shares. All of the above organisations are recognized as separate legal entities. Regardless of the nationality of its founder(s), each company registered in Bulgaria is considered as a Bulgarian legal entity and should be governed in compliance with the effective Bulgarian laws and regulations. In addition to the five types of commercial companies mentioned above, business may also be conducted in one of the following organisational forms: (i) sole trader; (ii) holding; (iii) branch; (iv) trade representative office (“TRO”); and (v) co-operative. Under Bulgarian law, sole traders, partners in general partnerships and unlimited partners in limited partnerships and in companies limited by shares have unlimited personal liability to the company’s creditors. On the other hand, the shareholders’ exposure in limited liability companies and joint stock companies, as well as the liability of limited partners in limited partnerships and in companies limited by shares is capped at the amount of their shareholding in the company’s capital.

The procedure for incorporation of a company in Bulgaria does not differ when local or foreign persons participate in its establishment. Under Bulgarian law there are no restrictions as to the size of the foreign participation in the capital of a Bulgarian company and, therefore, up to 100% of the registered capital of a local company can be held by foreign persons.

The types of business organisations most commonly used for establishment of foreign presence in Bulgaria are the LLC, the JSC, the branch and the TRO.


Corporate Tax

Corporate income tax in Bulgaria applies in a single rate of 10%. Bulgaria has also signed a double taxation avoidance agreement with the United States. Bulgarian resident companies are subject to Bulgarian tax on their world-wide profits. Companies that are non-residents in Bulgaria are liable to taxes in respect of the profits gained through a permanent establishment in the Republic of Bulgaria and of the income specified in the CITA accruing from a source inside the Republic of Bulgaria. A company is resident in Bulgaria if it is incorporated (registered) pursuant to Bulgarian legislation. Resident companies are also the companies incorporated under Council Regulation (EC) No 2157/2001, as well as any cooperative society incorporated under Council Regulation No 1435/2003, where the registered office thereof is situated in the country, and they are entered into a Bulgarian register. Most of the taxation rules, including the major rules relating to tax incentives, apply equally to resident and non-resident corporations conducting activities through a Bulgarian permanent establishment. For more information visit the InvestBulgaria Agency