A Foreigner’s Step-by-Step Guide to Starting a Company in Bulgaria: Essential Insights

Bulgaria, a strategic gateway between East and West, is increasingly becoming a magnet for foreign entrepreneurs. With its favorable tax policies, competitive operating costs, and status as a member of the European Union, the country presents a compelling environment for business development. This comprehensive guide is designed to navigate foreign investors through the intricacies of establishing a company in Bulgaria, providing essential insights and practical steps for a seamless entry into this dynamic market.

Introduction: Why Bulgaria? An Overview for Foreign Entrepreneurs

Bulgaria offers a plethora of advantages for international businesses. Its flat corporate tax rate of 10% is one of the lowest in the EU, significantly boosting profitability. The country boasts a highly educated and multilingual workforce, often available at more competitive labor costs compared to Western Europe. Coupled with its stable economy, EU membership, and access to a vast single market, Bulgaria provides a robust foundation for various ventures, from IT and manufacturing to tourism and services. For foreign entrepreneurs seeking growth opportunities and a business-friendly climate, understanding the nuances of company formation is the first critical step.

1. Choosing the Right Legal Entity for Your Bulgarian Company

Selecting the appropriate legal structure is fundamental to your company’s long-term success and liability. Bulgaria offers several options, each with distinct characteristics regarding ownership, capital, and regulatory obligations.

1.1. Limited Liability Company (OOD/EOOD): The Most Common Choice

OOD (Ograniсheno Otgovorno Druzhestvo): This is the Bulgarian equivalent of a Private Limited Company, suitable for businesses with two or more shareholders. It offers limited liability, meaning shareholders are only responsible for the company’s debts up to the amount of their capital contribution.
EOOD (Ednolichno Ograniсheno Otgovorno Druzhestvo): This variant is specifically designed for a single owner/shareholder. Like the OOD, it provides limited liability, making it an ideal choice for sole entrepreneurs seeking to protect their personal assets. Both OOD and EOOD are popular due to their straightforward setup process, minimal capital requirements, and flexibility, making them perfect for small and medium-sized enterprises (SMEs).

1.2. Joint-Stock Company (AD/EAD): For Larger Enterprises

AD (Aktsionerno Druzhestvo): A Joint-Stock Company is suitable for larger businesses planning to raise capital from multiple investors, potentially through public offerings. It requires a higher minimum share capital and is subject to more stringent regulatory and reporting requirements.
EAD (Ednolichno Aktsionerno Druzhestvo): This is an AD with a single shareholder. Both AD and EAD structures are typically chosen by companies aiming for significant growth, attracting substantial investments, or eventually listing on a stock exchange.

1.3. Other Forms: Branch Office, Sole Proprietorship (Limitations for Foreigners)

Branch Office: A foreign company can establish a branch office in Bulgaria. This is not a separate legal entity; rather, it’s an extension of the parent company, which bears full liability for the branch’s obligations. This option is suitable for businesses wishing to establish a local presence without forming a new Bulgarian company.
Sole Proprietorship (ET – Ednolichen Tŭrgovets): While an option for Bulgarian citizens and some EU residents, this form generally has significant limitations for non-EU foreigners as it typically requires permanent residency or specific work permits. It does not offer limited liability, meaning the owner’s personal assets are not protected.

2. Pre-Registration Essentials: Key Requirements for Foreigners

Before initiating the registration process, foreign entrepreneurs must ensure they meet several fundamental requirements.

2.1. Passport and Personal Identification

All foreign directors and shareholders will need a valid passport. Depending on the country of origin, an apostille or consular legalization of your passport copy may be required, especially if you plan to sign documents remotely or if the issuing country is not party to the Hague Apostille Convention.

2.2. Registered Office Address in Bulgaria

Every Bulgarian company must have a registered office address within the country. This can be a physical office space or a virtual office provided by specialized service providers. The address must be legitimate and capable of receiving official correspondence.

2.3. Minimum Share Capital Requirements (Per Legal Entity)

For an OOD/EOOD, the minimum share capital is symbolically low, at BGN 2 (Bulgarian Leva), which is approximately EUR 1.
For an AD/EAD, the minimum share capital is significantly higher, set at BGN 50,000 (approximately EUR 25,500), of which at least 25% must be paid up prior to registration.

2.4. Appointing a Manager/Director (Residency Implications)

Every Bulgarian company must appoint at least one manager (director). While there is no legal requirement for the manager to be a Bulgarian citizen or resident, having a manager with Bulgarian residency can simplify certain operational aspects, such as opening bank accounts or dealing with local authorities. Non-EU/EEA citizens acting as managers might require a specific type of visa or residence permit if they intend to reside and work in Bulgaria.

3. The Step-by-Step Company Registration Process

The company registration process in Bulgaria is streamlined, primarily managed through the Commercial Register at the Registry Agency. Here’s a breakdown of the typical steps:

3.1. Company Name Check and Reservation

The first step involves checking the Commercial Register to ensure your desired company name is unique and available. While not strictly mandatory to reserve a name, it is advisable to prevent conflicts during the registration process. Professional legal assistance can help with this search.

3.2. Drafting and Notarizing Company Documents (Articles of Association, Specimen Signature)

Key corporate documents must be meticulously drafted. These typically include:

Articles of Association (Statute or Memorandum of Association): This document outlines the company’s internal rules, objectives, capital structure, and management. For EOODs, it’s often referred to as a Memorandum of Association or Deed of Establishment.
Declaration of Consent of the Manager: A formal declaration by the appointed manager to accept the position.
Specimen Signature of the Manager: A notarized document containing the manager’s signature, confirming their authority to represent the company.

All these documents must be notarized by a Bulgarian notary public. If signed abroad, they might require an apostille or consular legalization and a sworn translation into Bulgarian.

3.3. Opening a Bulgarian Bank Account for Initial Capital Contribution

You will need to open a temporary blocking bank account (also known as a capital account) in a Bulgarian bank. The minimum required share capital (e.g., BGN 2 for OOD/EOOD) must be deposited into this account. Once the deposit is made, the bank will issue a certificate confirming the capital contribution, which is a mandatory document for registration.

3.4. Submitting Documents to the Commercial Register (Registry Agency)

All prepared and notarized documents, along with the bank certificate and a completed application form, are submitted to the Commercial Register at the Registry Agency. This can be done in person or through an authorized lawyer. Fees apply for the registration process.

3.5. Obtaining a Unified Identification Code (UIC)

Upon successful registration, the company will be assigned a Unified Identification Code (UIC), also known as a Bulstat number. This unique nine-digit code serves as the company’s primary identification number for all legal, tax, and administrative purposes in Bulgaria. The registration process typically takes a few business days once all documents are correctly submitted.

4. Post-Registration Compliance and Operations

Company registration is just the beginning. Foreign entrepreneurs must adhere to ongoing compliance obligations to ensure lawful operation in Bulgaria.

4.1. Tax Registration (Corporate Tax, VAT) and Obligations

Corporate Income Tax: Bulgaria boasts a highly attractive flat corporate income tax rate of 10%.
VAT Registration: Companies are generally required to register for VAT if their taxable turnover exceeds BGN 50,000 within any consecutive 12-month period. Voluntary VAT registration is also possible, which can be advantageous for businesses dealing with other VAT-registered entities, especially for reclaiming input VAT. Once registered, the company will receive a VAT identification number and must file monthly or quarterly VAT declarations.

4.2. Social Security and Health Insurance Contributions

Employers in Bulgaria are obliged to make social security and health insurance contributions for their employees, including the manager if they are formally employed by the company. The contribution rates are determined by law and depend on the type of work and salary basis.

4.3. Accounting and Annual Reporting Requirements

All registered companies in Bulgaria are legally required to maintain proper accounting records in accordance with Bulgarian accounting standards (which largely align with IFRS). This includes preparing annual financial statements and submitting annual tax declarations to the National Revenue Agency (NRA), as well as publishing annual financial reports in the Commercial Register.

4.4. Obtaining Specific Licenses and Permits (Industry-Specific)

Depending on the nature of your business, you may need to obtain specific licenses, permits, or registrations from relevant regulatory bodies. For example, businesses in finance, healthcare, pharmaceuticals, tourism, or certain manufacturing sectors require additional approvals before commencing operations. It is crucial to identify and secure all necessary licenses to avoid legal penalties.

5. Navigating Visa, Residency, and Work Permits as a Foreigner

For foreign entrepreneurs planning to live and work in Bulgaria, understanding the visa and residency framework is paramount.

5.1. EU/EEA Citizens vs. Non-EU/EEA Citizens: Differentiating Requirements

EU/EEA Citizens: Enjoy freedom of movement and establishment within Bulgaria. They generally do not require a visa or work permit but should register their stay with the local authorities if planning to reside for more than three months.
Non-EU/EEA Citizens: Face stricter requirements and typically need to obtain a visa (if applicable) and a long-term residence permit to live and work in Bulgaria.

5.2. Visa D for Business Owners/Investors

Non-EU/EEA citizens intending to establish a business and reside in Bulgaria for an extended period typically need to apply for a Visa D. This long-stay visa is a prerequisite for applying for a long-term residence permit in Bulgaria. Requirements usually include a robust business plan, proof of sufficient financial resources, and evidence of a viable economic activity in Bulgaria.

5.3. Long-Term Residency Options for Foreign Entrepreneurs

Several legal grounds exist for non-EU/EEA foreigners to obtain a long-term residence permit in Bulgaria as entrepreneurs:

Establishing a Company and Creating Jobs: One common path is by establishing a commercial company that employs at least 10 Bulgarian citizens for a period of at least six months. This is stipulated under Art. 24, para 1, item 6 of the Foreigners in the Republic of Bulgaria Act.
Significant Investment: The Foreigners in the Republic of Bulgaria Act also provides for long-term residency based on significant investments in the country (e.g., through real estate, government bonds, or certified investments), often leading to a fast-track to permanent residency.
Representation of a Foreign Company: Establishing a trade representative office of a foreign company can also serve as a basis for a long-term residence permit for its representatives, provided certain conditions are met.

6. Operational Considerations and Best Practices

Efficient operation requires careful attention to local practices and infrastructure.

6.1. Hiring Employees: Understanding Bulgarian Labor Law

Bulgarian labor law is comprehensive and regulates employment contracts, working hours, minimum wage, paid leave, social security contributions, and termination procedures. Employers must adhere strictly to these regulations, and it is advisable to consult with local labor law experts to ensure full compliance and avoid disputes.

6.2. Virtual Office vs. Physical Office Space Solutions

Virtual Office: Offers a cost-effective solution for startups and businesses that do not require a physical presence. It provides a registered address, mail handling, and often phone answering services.
Physical Office Space: Necessary for operations requiring a dedicated workspace, storage, or client meetings. Bulgaria offers a range of office spaces, from co-working facilities to traditional rented offices, often at competitive prices compared to other EU capitals.

6.3. Banking Services and Payment Systems Integration

Bulgaria has a well-developed banking sector with both local and international banks. Opening a corporate bank account is straightforward once your company is registered. For businesses involved in e-commerce, integrating with local and international payment systems is crucial. Most Bulgarian banks offer robust online banking platforms and support various payment gateways.

6.4. Intellectual Property Protection in Bulgaria

Protecting your intellectual property (IP) is vital. Bulgaria, as an EU member, is part of the European IP framework. You can register trademarks, patents, and designs with the Bulgarian Patent Office or directly with the European Union Intellectual Property Office (EUIPO) for EU-wide protection. Copyright is automatically protected upon creation, though registration can provide stronger legal standing.

7. Common Challenges and How to Overcome Them

While Bulgaria offers numerous advantages, foreign entrepreneurs may encounter certain challenges. Proactive planning can help mitigate these.

7.1. Language Barrier and the Importance of Professional Assistance

Bulgarian is the official language, and while many young professionals speak English, official communication with government agencies often requires documents in Bulgarian. Engaging local legal, accounting, and administrative professionals who are fluent in both Bulgarian and English is highly recommended to bridge the language gap and ensure accurate communication.

7.2. Navigating Bureaucracy and Managing Timelines

While significant improvements have been made, navigating Bulgarian bureaucracy can sometimes be time-consuming. Patience, clear organization, and relying on experienced local experts can streamline processes and manage expectations regarding timelines for permits, registrations, and official responses.

7.3. Staying Updated with Legal and Regulatory Changes

As an EU member, Bulgaria’s legal and regulatory landscape is dynamic, with frequent updates to align with EU directives. It is crucial to have ongoing access to professional advice (legal and accounting) to stay informed about changes in tax law, labor regulations, and industry-specific requirements, ensuring continuous compliance.

Conclusion: Your Path to a Successful Bulgarian Enterprise

Starting a company in Bulgaria as a foreigner is a highly rewarding endeavor, offering access to a thriving market, a strategic location, and a supportive business environment characterized by low taxes and operational costs. While the process involves several legal and administrative steps, a clear understanding of the requirements, coupled with strategic planning and reliance on professional local expertise, can significantly smooth the journey. By diligently following this step-by-step guide and embracing the unique opportunities Bulgaria presents, foreign entrepreneurs can confidently establish and grow successful enterprises, paving their path towards a prosperous future in the heart of the Balkans.