Company Formation Bulgaria

Company Formation Bulgaria

• Tax planning via a network of international tax advisers and attorneys
• Why form a company in a foreign country with a tax accountant specialized in international tax law?
• Basic Considerations regarding the Formation of Companies in „Zero-Tax Havens“ i.e. in countries that have not entered into Double Taxation Agreements with other countries
• Offshore Company Formation: Tax haven rankings
• Examples for the legal reduction of corporate taxes
• DTA permanent establishment concept – Our services and fees
• Parent companies and their subsidiaries in the European Union
• Beware of cheap founders!

• Company Formation Bulgaria: In Pursuit of Success and Happiness? Try Bulgaria!
• Company Formation Bulgaria: DTAs

Company formation bulgaria

Next to Cyprus, Bulgaria is the tax haven in the European Union, with taxes on profits of only 10% (flat rate), and dividend distributions to natural or legal persons residing in or outside of Bulgaria are not subject to tax at source. The required minimum share capital for an  “OOD” (= Druschestvo ogranitschena otgovornost) is, following a change in company law as applied to Bulgaria, now just1 euro. Further advantages:

-As Bulgaria is part of the European Union, the EU parent company-subsidiary company directive (tax-free collection of dividends between associated companies within the EU, provided that the requirements of the parent company-subsidiary company directive have been met) is beginning to take effect, as an effect of the EU directive governing mergers and judgements of the European Court of Justice concerning freedom of establishment

-Bulgaria has a double-taxation agreement (DTA) with many countries and, consequently, has the shielding effect of a double-taxation agreement available and a low rate of tax at source on dividend distributions made to Bulgaria. The existence of business premises is defined, as things stand within the DTA, in accordance with §5 of the double-taxation agreement.

Company formation Bulgaria: Public Limited Company in Bulgaria

Setting up a public limited company in Bulgaria is possible without any great problems. The organs are the company general meeting and the managing director/managers. There are no provisions for a supervisory board. In most cases, only the minimum statutory requirements are included in the memorandum and articles of association. Additional details are usually laid down in an internal set of rules of procedure. The minimum share capital required for a PLC is currently BGN 5,000, which is around 2,500 euros. At least 70% of the share capital must be lodged when setting the company up. The valuation of non-cash contributions is carried out by three experts nominated by the court. According to the new company law an OOD can even be set up with a share capital of just one euro.

The memorandum and articles of association do not require the services of a notary, with putting them being enough on its own. However, the specimen signature of the managing director must be notarised. The liability of the partners is limited to the value of their share in the share capital.

There is also the option of setting up a so-called one-man (single-person) PLC, whereby one hundred per cent of the share capital may remain in the ownership of the foreign founder of the company. In this case, an “E” (= Ednolitschno – for “one-man”) is placed in front of the Bulgarian designation for PLC  “OOD” (= Druschestvo ogranitschena otgovornost). The memorandum and articles of association, in the case of an EOOD, are replaced by a deed of incorporation. Even this does not require the services of a notary. The general meeting and the management can be combined in a “managing partner” in the case on an EOOD.

Services of Our “Company formation in Bulgaria” -Law Firm

-tax advice, also in the context of associated companies, pivotal for clients from the EU, Switzerland and the Russian Federation

-setting up of the company through a law firm in Bulgaria

-recording on the register, certified translations of the registration documents, apostille

-registered office, virtual office up to and including an actual office (prevention of the acceptance of a paper company or letter-box company in Bulgaria, that is the “proper registered office”)

-opening of an account for the company (including online banking, credit card and cheques)

-acting as an agent with tax consultants in Bulgaria (accounts, provisional turnover tax returns, annual accounts and balance sheet).

-on request and insofar as required:

-trust director (a person who is normally resident in Bulgaria appears as the managing director of the company, acting as a trustee: 5 DTA:

“place of the senior management of the business” as the location of the business premises for tax purposes in this sense, insofar as it is not a production plant or a site for the exploitation of mineral wealth or construction work lasting for longer than 9-12 months, in which case there must always be business premises in Bulgaria, irrespective of the location of the senior management of the business).

All rights and obligations are transferred to the trustor through a trust agreement. In this situation, as a tax and law firm, we do not just provide a founding managing director but a person who is the managing director recorded in the trade register and who can be contacted throughout the term of the contract (trust agreement). In addition, the trust director can, on request or insofar as this is legally required, provide appropriate signatures.   

-trust partners (a legal person appears as a partner in the company, acting as a trustee): sometimes it may be necessary for the partner to want to be or need to be anonymous to the outside world. In such an event we offer solutions, e.g. by making use of a partner acting as a trustee.

-setting up of an intermediate holding company for sending dividends through, tax-free, to the actual owner of the shares

-when setting up operational facilities: help with the search for suitable offices, warehouses and/or production sites, taking care of visa matters for managers and employees, and development funds, nationally and within the EU.

Special Services for Clients from the Russian Federation

We offer consultations, a setting-up procedure and complete execution, on request, in the Russian language. But please note that our secretary’s office is only English or German-speaking. If, however, you send us an e-mail in Russian, we can deal with it appropriately.

For clients from the Russian Federation it is very worthwhile setting up a company in Bulgaria as:

• it is geographically close to Bulgaria
• Russia has a double-taxation agreement with Bulgaria (there is the shielding effect of a double-taxation agreement available, a low rate of tax at source when distributing dividends to Bulgaria.  The existence of business premises is defined solely by §5  of the DTA).
• tax of only 10% on profits, with dividends paid to Russia not being subject to any tax at source in Bulgaria

Fees Company formation Bulgaria

The fees depend on the services. We will be pleased to send you an overview of our charges.

Watch out for agencies that just set up companies and people offering cheap deals

When setting up a company abroad/an international tax structure it is of crucial importance that the client is advised by well-versed and experienced specialists (tax consultants in international tax law or with comparable qualifications). However, in the case of approx. 98% of the providers on the Internet, what is involved are agencies that merely set up companies and that do not have sufficient qualifications within the context of international tax law.

In this situation, setting up a company abroad can quickly become a trap, if the domestic tax laws, international tax law and/or internal law in the country in which the company is to be set up are not observed, e.g.:

• -internal regulations aimed at preventing abuse of a dispositive right. Almost all countries are familiar with corresponding laws/regulations, in particular Germany, Austria, Spain, the Russian Federation, the USA and even Switzerland. The aim, at all times, is to define the domestic taxation law. Naturally, countries have no interest in the right to taxation being shifted wholly or in part to another country.
• -law on double-taxation agreements, pivotally the clauses on abuse in DTAs (activity qualifications, subject-to-tax clauses, remittance-base clauses, anti-treaty shopping clauses etc.).

 -domestic regulations concerning the taking out of permanent business premises under DTA – and, above all, under non-DTA circumstances

-G20 Agreement  (agreements on sharing information between states)

Within a low-tax network the client can be assured that he is being advised on both sides (country of residence of the client and the state in which the foreign company has its registered office) by well-versed and experienced specialists in international tax law. This means, at all times, tax consultants in international tax law or with comparable qualifications (lawyers with additional qualifications, LL.M;a degree in business economics or a degree in law with in-house or external qualifications in international tax law).

Alternatives to Setting Up a Company in Bulgaria

The following alternatives are on offer within the EU :

-Cyprus (10% tax on profits, dividend payments to a non-Cypriot are not subject to tax at source)

-the EU special zones of Madeira and the Canaries (tax rates of 0-5% . However, conditions have to be met such as the creation of jobs and/or making investments)

-DTA circumstances: Here it depends on where the client is domiciled and whether his homeland has a double-taxation agreement with the country where it is intended to set up the company.

-Non-DTA circumstances (as a rule, so-called zero-tax havens such as the BVI, Belize, the Cayman Islands, Panama, the Seychelles etc.):  caution is advised here with regard to the assumption of the abuse of a dispositive right. You can find out more on this topic on our internet pages concerning the setting up of offshore companies/non-DTA circumstances.

Overview of Double-Taxation Agreements in Relation to “Setting Up A Company in Bulgaria”

Bulgaria has a double-taxation agreement (DTA)with the following countries: