Opening a business in Bulgaria – operating in the EU under profitable conditions
Why open a business in Bulgaria, of all places? After all, it is the poorest state in the EU. That is exactly the point: a company legally registered in Bulgaria can operate freely in the EU, on the one hand, while paying minimal fees and taxes on the other.
Our law offices specialize in visas, relocation, and business law. In this article, attorney Michael Decker will explain the most popular forms of incorporation in Bulgaria, and how to choose the best possible option for your needs.
What are the advantages of registering your company in Bulgaria?
- Bulgaria is a member state of the European Union.
- Bulgaria is centrally located for transferring and shipping goods throughout Europe.
- Bulgaria has two sea ports.
- Bulgaria has land borders with Greece, Turkey, Romania, Serbia, and Macedonia.
- Operating costs in Bulgaria are significantly lower than in Israel.
- Company taxes on profits earned in Bulgaria are 10%.
- If you wanted European citizenship but have no affiliation, opening a company in Bulgaria may significantly help you obtain residency and, in certain cases, citizenship via a gradual process.
Common types of incorporation in Bulgaria:
Regarding small and medium-sized businesses, the dilemma is the choice between “ET” (a “registered business” in Israeli terms) or OOD/EOOD (a limited corporation). What are the advantages and disadvantages of the three types of incorporation?
Advantages and disadvantages of ET (“Едноличен Търговец”)
ET in Bulgaria represents ownership by an individual (an individual merchant). This is a business owned and managed by a private individual (living in Bulgaria) where the legal entity (which can sue and be sued, as well as bearing responsibility) belongs to the business owner.
Advantages of ET
- No need for initial capital.
- Registration fee is lower than for OOD/EOOD.
- Closing procedure is relatively rapid.
Disadvantages
- Personal liability for all the company’s financial obligations.
- Higher taxes than the company taxes for the other forms of incorporation.
- If the company intends to apply for a loan from a Bulgarian bank, the Bulgarian banks do not “like” this type of incorporation.
Limited liability corporation:
The following two types of incorporation are the most common and both of them have limited liability (that is, the stock owner risks capital up to the value of his or her investment).
Advantages of incorporating as a limited liability corporation:
- The initial capital required for a limited liability corporation is very low, 1 Euro (2 Levs).
- There is no limit to the number of partners and/or the capital.
- The company is an independent legal entity, meaning that it can sue and be sued.
- The tax on profits is only 10%.
Disadvantages of a limited liability corporation
- A higher registration fee
- Dismantling the company is more complex, expensive, and time-consuming.
What is the difference between the two types of incorporation?
OOD (“Дружество с ограничена отговорност”) is a limited liability corporation which is not limited in terms of number of stockholders, but there must be at least two.
EOOD (“Еднолично Дружество с ограничена отговорност”) is a limited liability corporation belonging to an individual (one stockholder).
Is it possible to open a company without residing in Bulgaria?
The answer is yes, but you must take into account that opening a bank account requires the physical presence of the account/firm owner at the bank. There is no option to open a company without a bank account. So how can this be done long-distance? One can open an OOD with a partner/stockholder who is a Bulgarian citizen and opens the bank account; after the initial process, he or she transfers the stocks and in fact will not be part of the company after its founding. Stock transfer is a transaction which requires notarization (like almost every legal transaction in Bulgaria).
Contact experts in immigration and business law in Bulgaria
Do you want to open a company or corporation in Bulgaria? Do you want to obtain a Bulgarian passport or work in an EU member state? Contact us to arrange a meeting with an attorney from our offices in Jerusalem or Tel Aviv.
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