Types of business in Bulgaria

The types of business organizations, most often used in Bulgaria are Limited Liability Company (LTD/LLC), Joint Stock Company (JSC), branch and trade representation.

  1. Limited Liability Company (LLC/LTD)

It is the business type most popular among investors and entrepreneurs because of the minimum capital requirements, simplified structure and management. LLC can be established by one or more persons – individuals and/or legal entities. Shareholders in LLC may be Bulgarian and/or foreign individuals and/or legal entities.

The minimum share capital of Bulgarian LTD is 2 BGN (two Bulgarian Leva), which is equal to approximately 1 EUR (1 Euro).

The company shares may be transferred by a notarized contract for transfer of shares. Transfer of shares is possible between shareholders or to a third party.

The company is governed by a Manager. This position may be occupied by one or more persons. Only a natural person may be appointed as a manager of LTD. The manager can be a shareholder or a third person and there are no restrictions for his/her nationality.

  1. Joint Stock Company (JSC)

JSC is another widely used type of business organization and startup. The most intriguing for investors are the lack of legal restrictions on the transfer of shares and the lack of personal commitment of shareholders in the company activity. This type of company could be founded by one or more Bulgarian and/or foreign individuals and/or legal entities.

The minimum registered capital for registration and operation of JSC is 50 000 BGN (fifty thousand Bulgarian Leva), which is equal to approximately 26 000 EUR (twenty six thousand Euro). For certain types of activities, such as banking or insurance activities, a higher minimum capital is required. At the moment of company formation at least 25 % of the value of each share must be paid. This means that the minimum for starting the company registration is 12 500 BGN, as the remainder of total capital (37 500 BGN) shall be paid within two years.

The company is governed by Board of Directors (in one-tier system) or by Supervisory Board and Management Board (in two-tier system). It is required at least 3 persons to participate in the governing body.

Shares of a joint stock company are tradable instruments. The shares may be:

  • registered shares or bearer shares;
  • common shares or preferred shares;
  • stock shares or dematerialized shares;

The transfer of registered shares must be recorded in the book of registered shareholders of JSC. In most cases, the acquisitions of shares by new shareholders doesn’t meet with special difficulties.

  1. Branch

Opening a branch is one of the ways for the realization of business operations of a foreign company in Bulgaria. Foreign companies registered as traders in the country where they are established are able to organize their business in Bulgaria by registration of branch of a foreign trader.

Branch of a foreign trader is being created with registration in the Commercial Register. After its formation, according to Bulgarian legislation, the branch of a foreign company is not an independent legal entity but it has a certain degree of independence from the parent company. There is a requirement for the branch to have independent accounting and to draw up separate balance sheet. Assets and liabilities of the branch are considered as assets and liabilities of the parent company.

The branch is governed by a Manager. Regarding the taxes, as place of business (a permanent establishment) of the branch of foreign company shall be considered Bulgaria. For tax purposes the foreign parent company will be liable to corporate tax on profits from the activity of the branch in Bulgaria.

  1. Trade representative office (TRO)

A foreign person or legal entity may register a trade representative in Bulgaria, provided that it is entitled to conduct business under the national law of its home country. Trade representative office (commercial representation) is being registered in the Bulgarian Chamber of Commerce and Industry.

TRO is not a separate legal entity and cannot carry out business activity. Thus, commercial representation aims to carry out activities such as promotions, exhibitions, demonstrations, training or advertising of products and services. Therefore, in general TRO does not generate any income and it is not a subject to corporate tax in Bulgaria.

If TRO is involved in business activities in the country it can be classified as “a permanent establishment” for the purposes of taxation and the foreign parent company will be liable to corporate tax on profits in Bulgaria made as a result of business activity of the TRO.

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Jurisdictions with preferential tax regime (Offshore zones)

List of countries / territories, which are preferential tax jurisdictions:

  1. AI – Anguilla
  2. AG – Antigua and Barbuda
  3. AW – Aruba
  4. BB – Barbados
  5. BZ – Belize
  6. BM – Bermuda
  7. BN – Brunei Darussalam
  8. VG – Virgin Islands, British
  9. VI – Virgin Islands (U.S.)
  10. GD – Grenada
  11. GU – Guam
  12. GG – Guernsey
  13. JE – Jersey
  14. DO – Dominican Republic
  15. KY – Cayman Islands
  16. AD – Andorra
  17. MC – Monaco
  18. GY – Guyana
  19. CW – Curaçao
  20. LBU – Labuan
  21. MO – Macao
  22. MS – Montserrat
  23. WS – Samoa
  24. NU – Niue
  25. NC – New Caledonia
  26. AE – United Arab Emirates
  27. BS – Bahamas
  28. OM – Oman
  29. IM – Isle of Man
  30. CX – Christmas Island
  31. CK – Cook Islands
  32. PN – Pitcairn
  33. VU – Vanuatu
  34. LR – Liberia
  35. MU – Mauritius
  36. MV – Maldives
  37. MH – Marshall Islands
  38. NR – Nauru
  39. PW – Palau
  40. PA – Panama
  41. SC – Seychelles
  42. FJ – Fiji
  43. – Sark
  44. VC – Saint Vincent and the Grenadines
  45. LC – Saint Lucia
  46. Flag_of_Sint_Maarten.svg SX – Sint Maarten
  47. TC – Turks and Caicos Islands
  48. UY – Uruguay
  49. KN – Saint Kitts and Nevis
  50. HK – Hong Kong

 

Preferential tax jurisdictions are states/territories, which are not EU Member States and do not exchange information with the Republic of Bulgaria on administrative cooperation in the field of taxation and meet 2 of the following conditions:

a) there are no effective agreements for avoidance of double taxation between the Republic of Bulgaria and relevant state/territory;

b) there is an enforces agreement for avoidance of double taxation between the Republic of Bulgaria and the relevant state/territory but the relevant state/territory refuses or cannot exchange information upon request;

c) the due income or corporate tax or any corresponding taxes on the income that have been or are to be realized by the foreign person in the relevant state/territory are more than 60 percent lower than the income or corporate tax on the said income in the Republic of Bulgaria;

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