A Foreigner’s Definitive Guide: How to Establish a Company in Bulgaria

Bulgaria, a vibrant European Union member state situated at the crossroads of Europe and Asia, has steadily emerged as an attractive destination for international entrepreneurs and investors. Its strategic geographical location, coupled with a highly competitive tax regime and a skilled workforce, offers a compelling proposition for those looking to expand their business horizons. This comprehensive guide is designed to navigate foreign nationals through the intricacies of establishing a company in Bulgaria, from understanding legal structures to post-registration compliance.

1. Introduction: Why Bulgaria for International Entrepreneurs?

Bulgaria presents a unique blend of opportunities for foreign investors. Its key attractions include a flat corporate income tax rate of just 10%, one of the lowest in the EU, and a 5% dividend tax. As an EU member, companies registered in Bulgaria gain direct access to the entire EU single market, facilitating seamless trade and business operations across the bloc. Beyond favorable taxation, the country boasts significantly lower operating costs compared to Western European counterparts, a stable macroeconomic environment, and a growing pool of multilingual talent, particularly in IT and outsourcing sectors. These factors collectively position Bulgaria as an ideal gateway for international entrepreneurs seeking cost-efficiency, market access, and growth potential.

2. Understanding Bulgarian Legal Entity Structures for Foreigners

Choosing the appropriate legal structure is a foundational step in establishing your business in Bulgaria. The most common forms for foreign investors are the Limited Liability Company (OOD/EOOD) and the Joint Stock Company (AD), with other options available depending on specific business needs.

2.1. Limited Liability Company (OOD / EOOD)

The Limited Liability Company is by far the most popular choice for small and medium-sized enterprises (SMEs) due to its simplicity, flexibility, and minimal capital requirements.

• OOD (Obezpecheno Otgovornost Druzhestvo): This structure is suitable for companies with two or more shareholders. The liability of each shareholder is limited to the amount of their capital contribution.
• EOOD (Ednolichno Obezpecheno Otgovornost Druzhestvo): This is the equivalent of an OOD but designed for a single shareholder. It offers the same limited liability protection.

Both OODs and EOODs require a minimum registered capital of 2 Bulgarian Leva (BGN), though a higher amount is often recommended for credibility and operational ease. They are managed by one or more managers (directors) who can be foreign nationals without Bulgarian residency requirements.

2.2. Joint Stock Company (AD)

The Joint Stock Company (AD – Aktsionerno Druzhestvo) is typically preferred by larger businesses, those seeking to raise capital through public offerings, or ventures with significant investment requirements.

• Higher Capital: An AD requires a minimum registered capital of 50,000 BGN, with at least 25% of it paid up at the time of registration.
• Complex Structure: It involves a more complex management and governance structure, including a Supervisory Board and a Management Board, or a single Board of Directors.
• Suitability: Ideal for substantial investments, financial institutions, or companies planning to list on a stock exchange.

2.3. Other Structures (Branch, Sole Trader)

While less common for direct company formation by non-EU foreigners, other structures exist:

• Branch Office: A branch is not a separate legal entity but rather an extension of an existing foreign company. It allows a foreign company to conduct business in Bulgaria but does not provide limited liability protection separate from the parent company.
• Sole Trader (ET – Ednolichen Targovets): This option is generally available only to individuals who are permanent residents in Bulgaria and are either Bulgarian citizens or citizens of the EU/EEA. It involves unlimited personal liability and is therefore rarely suitable for non-EU foreign entrepreneurs starting a new venture.

3. Essential Pre-Registration Requirements for Non-Residents

Before initiating the official registration process, several critical decisions and preparations must be made to ensure a smooth and successful establishment.

3.1. Choosing a Unique Company Name

The chosen company name must be unique and not already registered in the Bulgarian Commercial Register. It is highly advisable to perform a name availability check through the Commercial Register’s online portal or with the assistance of legal professionals. The name must be in Bulgarian (Cyrillic script), though an English transliteration can also be registered.

3.2. Appointing a Director and Defining Shareholder Structure

You must appoint one or more directors (managers) for your company. These individuals can be foreign nationals, and there is no strict residency requirement for them. However, a local address for service in Bulgaria is often practical. You also need to define the shareholder structure, detailing the percentage of ownership for each shareholder (for OODs) or the number of shares (for ADs).

3.3. Determining Share Capital and Registered Office

As mentioned, the minimum share capital for an OOD/EOOD is 2 BGN, and for an AD, it is 50,000 BGN. While the minimum is low for LLCs, considering a higher initial capital might be beneficial for operational liquidity and perceived credibility. Furthermore, every company must have a registered office address in Bulgaria. This address will serve as the official point of contact for all legal and administrative correspondence.

4. Step-by-Step Company Registration Process in Bulgaria

The registration process typically involves several key stages, each requiring specific documentation and adherence to Bulgarian legal requirements.

4.1. Preparing Constitutive Documents (Articles of Association, Memorandum)

The foundational documents of your company must be drafted. For an OOD/EOOD, this is usually a Memorandum of Association or Articles of Association, outlining the company’s name, registered office, capital, scope of activity, management, and shareholder rights. For an AD, more detailed Articles of Association are required. These documents must be prepared in Bulgarian.

4.2. Opening a Company Bank Account and Depositing Initial Capital

A provisional “blocking” bank account must be opened in a Bulgarian bank in the name of the company being established. The required initial share capital must be deposited into this account. The bank will then issue a certificate confirming the deposit, which is a mandatory document for registration.

4.3. Notarization of Required Documents and Signatures

Several documents and signatures must be notarized by a Bulgarian notary public. These typically include the manager’s specimen signature (образец от подпис) and a declaration of consent to act as a manager. If any foreign documents are used (e.g., passports, corporate documents from the parent company), they may need to be translated into Bulgarian by a sworn translator and apostilled (if from a country signatory to the Hague Convention) or legalized.

4.4. Submission of Documents to the Commercial Register

All prepared and notarized documents, along with the application form (Form A4 for OOD/EOOD), the bank certificate, and proof of paid state fees, are submitted to the Registry Agency (Commercial Register). This can be done in person or electronically through a lawyer with a qualified electronic signature.

4.5. Obtaining the Unique Identification Code (UIC)

Upon successful review and approval of the submitted documents, the Commercial Register will officially register your company and issue a Unique Identification Code (UIC – ЕИК). This UIC is your company’s official registration number and serves as its primary identifier for all legal, tax, and administrative purposes in Bulgaria. The registration typically takes 1-3 business days once all documents are correctly submitted.

5. Post-Registration Compliance and Operational Obligations

Company registration is just the beginning. Post-registration, several crucial compliance and operational obligations must be met to ensure your business operates legally and smoothly.

5.1. Tax Registration and VAT Considerations (if applicable)

Once registered with the Commercial Register, your company is automatically registered for corporate income tax purposes. However, specific registration for Value Added Tax (VAT) is required if your company’s taxable turnover exceeds 100,000 BGN within any consecutive 12-month period. Voluntary VAT registration is also possible and often advisable for companies dealing with other VAT-registered businesses or exporting goods/services within the EU.

5.2. Social Security Registration for Directors and Employees

Any directors receiving remuneration and all employees must be registered with the National Revenue Agency (NRA) for social security and health insurance contributions. This process involves proper employment contract drafting and submission of declarations to the NRA before the commencement of work.

5.3. Establishing Accounting Practices and Annual Reporting

All Bulgarian companies are legally required to maintain proper accounting records in accordance with Bulgarian accounting standards. This includes regular bookkeeping, preparing monthly or quarterly tax declarations, and submitting annual financial statements to the Commercial Register and the National Statistical Institute. Engaging a qualified local accountant is essential for ensuring compliance.

5.4. Acquiring Specific Licenses and Permits (Sector-Dependent)

Depending on your company’s specific business activities, you may need to acquire additional licenses, permits, or registrations from relevant regulatory bodies. For instance, businesses in finance, healthcare, tourism, transportation, or specific retail sectors often require special authorizations. It is critical to identify and secure these before commencing operations.

6. Visa and Residency Implications for Non-EU Foreign Nationals

For non-EU foreign nationals intending to reside in Bulgaria or manage their company in person, understanding visa and residency requirements is paramount. Establishing a company does not automatically grant residency. Common pathways for obtaining a long-term (Type D) visa and subsequent residence permit include:

• Investment Visa: For significant investments in the Bulgarian economy.
• Company Representative: Registering a trade representative office of a foreign company (not a newly established Bulgarian company).
• Employment Basis: Obtaining a work permit if employed by the newly established Bulgarian company, although this can be complex for owners/managers.

It is highly recommended to seek specialized immigration advice in parallel with company registration to ensure compliance with Bulgarian immigration laws.

7. Key Strategic Considerations and Professional Guidance

Navigating the Bulgarian business landscape successfully requires not only adherence to legal procedures but also strategic planning and professional support.

7.1. Engaging Legal and Accounting Expertise

The importance of engaging local legal and accounting professionals cannot be overstated. A local lawyer can assist with drafting constitutive documents, navigating the Commercial Register, and providing advice on corporate governance. A local accountant will be invaluable for tax planning, bookkeeping, payroll, and ensuring compliance with Bulgarian financial regulations. Their expertise can help overcome language barriers and complex administrative procedures.

7.2. Understanding Local Business Culture and Language

While English is widely spoken in business circles, particularly in larger cities and the IT sector, understanding Bulgarian business culture and having access to Bulgarian language support can significantly ease operations. Building relationships, networking, and demonstrating an understanding of local customs can contribute to long-term success.

7.3. Exploring Available Investment Incentives

Bulgaria actively encourages foreign investment and offers various incentives, particularly for investments in specific regions, high-tech industries, or job creation. These can include state aid schemes, EU structural funds, tax credits, or reduced administrative burdens. Researching and leveraging these incentives can provide a significant competitive advantage.

8. Conclusion: Navigating Your Entrepreneurial Journey in Bulgaria Successfully

Establishing a company in Bulgaria offers a gateway to the European market with favorable tax conditions and a dynamic economic environment. While the process involves specific legal and administrative steps, a well-planned approach, coupled with expert local guidance, can streamline your journey. By carefully selecting your legal structure, meticulously preparing documentation, fulfilling post-registration obligations, and staying abreast of local regulations, international entrepreneurs can successfully establish and grow their ventures in Bulgaria, unlocking its vast potential.