Incorporate in Bulgaria: A Step-by-Step Guide to Business Setup

Bulgaria has steadily become one of the most attractive destinations for entrepreneurs and business owners looking to establish a presence in Europe. With its favorable tax policies, access to the European Union (EU) market, and business-friendly legal environment, incorporating Bulgaria is a strategic move for many international entrepreneurs.

This guide will walk you through the process of incorporating a company in Bulgaria, detailing the legal requirements, benefits, steps involved, and potential challenges you may face.

Whether you are an established business owner or a startup founder, this article will provide you with everything you need to know about incorporating in Bulgaria.

Why Incorporate in Bulgaria?

Bulgaria offers a compelling set of benefits that make it an attractive location for business incorporation. Whether you are seeking a low corporate tax rate, easy access to the EU market, or a skilled workforce, Bulgaria has a diverse range of resources and advantages for businesses. Here is why incorporating in Bulgaria is a smart choice for entrepreneurs:

• Low Corporate Tax Rate: Bulgaria boasts one of the lowest corporate tax rates in the European Union, at just 10%. This tax advantage makes it highly appealing to both small businesses and large corporations.
• Strategic Location: Bulgaria is located at the crossroads between Europe, the Middle East, and Asia, providing excellent opportunities for businesses engaged in trade, logistics, and distribution.
• EU Membership: As an EU member, companies incorporated in Bulgaria benefit from the free movement of goods, services, and capital within the EU. Businesses could benefit by access to the single market as the EU.
• Low Operational Costs: Bulgaria offers low wages compared to other EU countries, making it a cost-effective option for businesses. This extends to real estate, utilities, and other operational expenses.
• Skilled Workforce: Bulgaria has a well-educated and multilingual workforce, particularly strong in sectors like information technology, engineering, and manufacturing.
• Ease of Doing Business: Bulgaria is known for its straightforward and relatively quick incorporation process, which is highly advantageous for entrepreneurs looking to hit the ground running.

Benefits of Incorporating in Bulgaria

Incorporating in Bulgaria offers a wide range of benefits for businesses. Whether you are an international company looking to enter the EU market or a small startup in need of a tax-efficient structure, the advantages are numerous:

• Access to EU Funds and Programs: By incorporating in Bulgaria, your company can apply for EU grants and funding programs, which are available to support innovation, research, and development.
• Double Taxation Treaties: Bulgaria has signed over 60 double taxation treaties with other countries, reducing tax liabilities for foreign investors and allowing businesses to operate more cost-effectively.
• Flexible Business Environment: Bulgaria’s flexible labor laws and business-friendly regulatory framework make it easier for companies to adapt and grow. Whether you need to hire staff quickly or expand operations, Bulgaria’s legal system supports business growth.
• Stable Macroeconomic Environment: With a stable currency pegged to the euro and a consistent growth trajectory in GDP, Bulgaria offers a safe and stable environment for investment.

Legal Requirements for Incorporation in Bulgaria

To incorporate a business in Bulgaria, there are specific legal steps and documentation that you must complete. The requirements are straight to the point; however, it is a priority to be aware of them for a smooth process.

Types of Business Entities Available in Bulgaria

Bulgaria offers several types of business structures to suit the needs of different entrepreneurs and companies. The types of business entities which are commonly known for incorporation include:

1. Sole Proprietorship (ET): Ideal for individual entrepreneurs, a Sole Proprietorship in Bulgaria allows for simple operation but does not offer limited liability.
2. Limited Liability Company (LLC or OOD): The most common business structure for foreign investors, an LLC in Bulgaria provides limited liability and is suitable for small to medium-sized enterprises.
3. Joint Stock Company (AD): A Joint Stock Company is ideal for larger businesses, particularly those that plan to raise capital by issuing shares. This structure enables a higher level of flexibility for shareholders and directors.
4. Branch Office: If your company is already established in another country, you can open a branch office in Bulgaria to manage operations locally without incorporating a separate legal entity.
5. Partnerships: Bulgaria also offers options for general and limited partnerships, suitable for businesses involving two or more individuals or entities that share management responsibilities and profits.

Eligibility and Documentation Needed

To incorporate a business in Bulgaria, you must meet the following eligibility criteria and prepare specific documentation:

1. Founders’ Identification: Valid passports or national IDs for all company founders (or their legal representatives).
2. Reservation of Company Name: You must reserve your company name through the Bulgarian Trade Register to ensure it is unique.
3. Articles of Association (for LLCs and Joint Stock Companies): This document outlines the company's structure, management, and operations.
4. Shareholders’ Agreement: If there are multiple shareholders, this agreement specifies their rights, obligations, and ownership stakes.
5. NACE Code: Businesses must select a NACE code, which identifies the type of business activities the company will engage in.
6. Bank Deposit Certificate: For certain business structures like the LLC, you must provide a certificate from a Bulgarian bank confirming that the required share capital (minimum €1 / USD 0.55) has been deposited.

Step-by-Step Process to Incorporate in Bulgaria

1. Choose Your Business Structure

The first step for your business is to select the relevant legal structure. Whether you opt for a Sole Proprietorship, LLC, or Joint Stock Company, your choice will depend on your business needs, liability preferences, and future growth plans.

2. Reserve Your Company Name

The company name registration with the Bulgarian Trade is a requirement for your business. This ensures that your chosen name is available and complies with Bulgarian naming conventions. Typically, the process is completed in a couple of days.

3. Prepare and File Incorporation Documents

Once your company name is registered, drafting and filing your incorporation documents are the next steps. This includes the Articles of Association, which outline the company’s purpose, structure, and operational guidelines.

4. Open a Corporate Bank Account

Next, you must open a corporate bank account in Bulgaria. You would need the account for the deposit of share capital and manage business transactions for your firm.

5. Obtain Necessary Licenses and Permits

Depending on the industry sector, the specific permits, or licenses at the different levels like local, regional, or national need to be acquired. Common licenses include those for businesses in sectors like construction, manufacturing, or hospitality.

Costs and Fees Associated with Incorporating in Bulgaria

Incorporating in Bulgaria is relatively cost-effective, particularly compared to other EU countries. However, it is required to be aware of the various costs and fees involved:

• Company Name Registration: This typically costs around USD 53–USD 106.
• Notary Fees: The firm needs a notary to certify the incorporation documents. The fees would range between USD 106 to USD 531, depending on the documentation and its complexity.
• Company Registration Fees: Registering your company with the Bulgarian Trade Register costs around USD 212–USD 531.
• Legal and Accounting Assistance: Hiring a lawyer or accountant to assist with the incorporation process can cost between USD 531 and USD 2,124, depending on the services required.
• Bank Fees: Opening a corporate bank account may involve a small fee, typically ranging from USD 53 to USD 212.

Common Challenges and How to Overcome Them

Incorporating a business in Bulgaria is a relatively smooth process, but there are some common challenges you may encounter:

• Language Barrier: While Bulgaria is business-friendly, most official documents and communications are in Bulgarian. Hiring a local consultant or lawyer can help navigate the language barrier and ensure that all documentation is properly completed.
• Tax Compliance: While Bulgaria offers advantageous tax policies, navigating its tax laws can be intricate. To ensure compliance and maximize potential tax incentives the accountant or local tax advisor engagement is a must.  
• Navigating Local Regulations: Industries subject to stringent regulations, such as pharmaceuticals or finance, may encounter additional legal requirements. To understand the required licenses and permits for functioning within these sectors, conduct thorough consultations with local experts or research.

FAQs About Incorporating in Bulgaria

What are the legal requirements to incorporate in Bulgaria?

• The legal requirements include selecting a business structure, reserving a company name, drafting the Articles of Association, opening a corporate bank account, and filing incorporation documents with the Trade Register.

How long does it take to incorporate a business in Bulgaria?

• The process generally takes a couple or three weeks for incorporation, depending on the complexity of the application as well as the availability of documentation.

What types of companies can be incorporated in Bulgaria?

• You can incorporate various types of companies, including Sole Proprietorships, Limited Liability Companies (LLC), Joint Stock Companies (AD), and more.

Conclusion

Incorporating in Bulgaria is an excellent opportunity for entrepreneurs seeking a cost-effective, strategically located base in Europe. With its low taxes, access to the EU market, and favorable business environment, Bulgaria is an ideal destination for international companies.

Follow the steps outlined in this guide, consult local professionals when needed, and you will be well on your way to establishing a successful business in Bulgaria. Start Your Business Journey: Incorporate in Bulgaria Today!