It is said that Bulgaria has the most favourable taxes is Europe. Why?

Bulgaria has one of the lowest corporate income taxes in the EU – 10% corporate income tax. Moreover, there is a possibility of 0% taxation rate for manufacturing companies in areas with high unemployment. Along with this, 10% personal income tax, flat rate, was introduced in 2008. Investors also benefit from certain provisions in the Corporate Income Tax Law, the Value Added Tax Law and from the Law on Encouragement of Employment, provided they meet certain criteria. In addition, investors may also use EU Structural Funds for further support in their investment projects in Bulgaria.

Where do I start?

Start with a Business Plan and a budget, as maintaining an offshore company requires paying an annual registration fee. Do you want to set up a small trading company, or an international empire? Do you want to sell your product on the internet? Decide on your target market and the types of currencies you want to accept. You may first wish to set up a Virtual Office to test the market with your product. The flexibility in moving offshore will automatically open up new possibilities for you and your business.

Why should I turn to a professional service provider in the formation of an offshore company, when all the information is available over the internet?

While this is definitely true, loads of time can be wasted searching for the information. Using the services of a professional is justified because the knowledge which we have acquired over the years can save you a significant amount of time and money. In addition, every single offshore jurisdiction has its own specifics related to its legislation and corporate regulations, which can be very confusing for a person who has no experience with this matters.

Is setting up offshore illegal?

No, setting up offshore is not illegal. However, withholding information about your offshore investments is illegal in some countries. An offshore jurisdiction should be perceived as just another foreign country, but with certain advantages. These can take the form of banking secrecy laws, advantages in forming companies for international trade through tax treaties, no interest tax, no inheritance taxes, no capital gains tax, no individual tax, and many others.

Depending on your personal needs or preferences, there will normally be one or more offshore jurisdictions offering the services you are looking for.

Is offshore only for the rich?

This might have been so a long time ago. However, in this modern age with the high quality of services offered by De Hoon & Partners, offshore is now a relatively simple and affordable procedure for almost anyone. Once having moved all or part of your business offshore, the savings made by the low-tax or tax-free status opens up a whole new world of investment and business opportunities. If required, we will be happy to introduce you to an independent offshore investment advisor.

I am considering to do business in Bulgaria and I was wondering which legal form to choose. Could you please tell me which are the most popular legal forms of the Bulgarian companies?

The most frequently used legal forms in Bulgaria are Limited Liability companies (LLC), Joint-stock companies and local branches of foreign companies. We always advise our clients before registering a company in Bulgaria to contact us so that we can recommend the legal form which will best suits their business interests and objectives. There are particular business activities which match only certain legal forms and if this is not considered prior to the company registration, you can end up losing precious time and money in the wrong direction.

How do I find the right jurisdiction?

This depends on what the corporation is going to be used for and your own personal or business circumstances. If you don’t have a personal preference or a recommendation from a friend, please ask our experienced advisors for suitable suggestions. They will be able to help you make the right decision to match your budget and personal requirements. Alternatively, please feel free to use our Jurisdictions section for further information.

Some important factors to consider when choosing a suitable jurisdiction: Incorporation & annual maintenance costs, the tax regime, legal system, confidentiality, exchange controls, banking facilities and the political and economic stability.

Can I move my existing business offshore?

Some companies move parts of their business offshore almost immediately as separate subsidiaries and profit centres. However, you will need to look at your business with a view to re-structure your activities and maybe look for new business opportunities on a cross-border basis into other countries. The possibilities are quite extensive, and we are able to assist you when it comes to applying offshore advantages to your existing company operations.

Are there any other advantages besides tax?

Yes, there are many advantages including: Anonymity, asset protection, foreign property holding through a company in a third country, limiting of liability in business transactions, unrestricted flow of capital, transfer of assets etc. etc.

Are offshore companies really tax efficient?

If an “onshore” company subject to high rates of tax comes up against an offshore company, then the advantageous tax regime undoubtedly provides benefits which will mean greater profits for the company, which can either be used for dividend payments or for further development. During a recession, an enterprise with greater liquid assets, either from its own sources or from bank loans, will certainly be more efficient and successful. If, therefore, as a result of favorable tax conditions, a company has been able for years or even decades to re-invest more in production or development, then it can enjoy significant advantages over competitors who may not have been employing efficient tax solutions.

What is a tax haven?

A “tax haven” (or “tax shelter”) is neither a legal, nor a political, official or scientific term. In the traditional sense, a tax paradise is a country where one can register a business which will remain completely tax-free in that country (except for certain government fees), as long as it does not operate inside its own country. Some tax haven jurisdictions have gone even further, by abolishing business and income taxation for all businesses, both domestic and offshore.
A proper tax haven jurisdiction would normally have a whole complete network of regulations, laws and precedents aimed at the attraction of international business to register there. Such attractions may not only include zero taxation on business, but may also feature extremely fast and efficient business incorporation procedures, minimum mandatory reporting, strict secrecy provisions in the financial and corporate sector, a developed financial system and no information-sharing agreements with foreign governments.

Which is the best country for offshore company registration?

There is no definite answer to this question. A varying range of fiscal and financial benefits to international business are offered by tens of jurisdictions around the world. The actual choice may depend on such variables as the geographical location of the client, the type of business for which the offshore company is intended, price of incorporation and management, speed of service, language and, of course, the range of services offered.

What is the purpose of the offshore company?

There are two main reasons for you to decide to register an offshore company. The first is tax avoidance, minimization or deferral. The second is asset protection and confidentiality. Both reasons are quite independent. Some offshore companies actually do not pursue any tax-reduction purposes at all, but mostly serve as a protective shell for some part of the assets of their owner. More often, though, both reasons overlap and complement each other.

Are offshore companies required to keep financial records and books?

Many offshore jurisdictions do not require any financial records to be officially filed. Quite simply, offshore companies are free to keep their books as they wish. However, since recently, some of the more advanced offshore financial centres have gradually realized that a mandatory requirement to maintain some formal financial records in an offshore company would actually be in the best interests of the beneficial owners of the companies, as this would provide the company owners with extra peace of mind. This aspect becomes specifically important when an offshore corporation is owned by several individuals, thus requiring a more elaborate system of management and controls.

What are the differences between an offshore company, offshore corporation and IBC?

There is no big difference between them. They are all offshore legal entities, called differently depending on the jurisdiction. Other terms used include non-resident company or corporation.

Are your offshore services confidential?

We will not disclose any information concerning our clients without their prior written consent. However, this obligation of confidentiality is not applicable when a court order from the jurisdiction is made to disclose such information or if it is not in compliance with the laws of the countries..

Do I need to hire an accounting specialist to do my taxes for my start-up in Bulgaria?

As a start-up, it is important that you avail the services of a CPA, in order that you will be enlightened with all the vital financial issues that you will encounter in each phase of your business cycle. However, finding the appropriate CPA is one of the most delicate issues faced by entrepreneurs. In hiring a CPA for your business, it is advisable that you look for a CPA that is well adept at informing you on the issues at hand, assists you in formulating business strategies and finds ways to take advantage of your firm’s available resources, flexible with fees and blends in with your business objectives, as well as appetite for risks.

Should general partnership pay taxes on the territory of Bulgaria?

In compliance with the Bulgarian CIT act taxable on the territory of Bulgaria shall be:
– the local legal entities including the general partnerships;
– the foreign legal entities which carry out business activities within the Republic of Bulgaria through a location of business activity;
– the foreign legal entities which carry out administration of property in such a location of business activity;
– the foreign legal entities which receive income from a source within the Republic of Bulgaria..

Are there any requirements to perform business activity on the territory of Bulgaria?

Any activity which is not forbidden by the law could be carried out in Bulgaria. For some activities such as banks, tourism, retail and wholesale of electricity, staff leasing and etc. additional licensing will be needed, after the company is incorporated.

Should the minimum share capital be paid up in the Bulgarian bank?

At least 75% of the share capital when establishing a LLC shall be physically paid in the bank account at the time of company’s incorporation.

Should the shareholder of such company be a resident of Bulgaria?

No, this is not necessary. In Bulgaria the local and foreign individuals have equal rights and obligations towards the corporate, the commercial and tax legislation.

Is there any obligatory requirement that management should be situated on the territory of Bulgaria when one of directors should be resident in order to admit the company as being resident?

No, this is not necessary. There are many examples of incorporated Bulgarian companies with shareholder’s foreign individuals which have never visited Bulgaria before. In case that the management is situated abroad then the Bulgarian accountant shall complete all local obligations involved by power of attorney.

After registering company in Bulgaria can I hire foreign citizen workers and if yes how many workers I can invite per year?

Yes, a Bulgarian company is allowed to hire foreign citizens. There is no limitation in their number.

Do we need to open temporary bank account and what amount should be deposited in that account?

A temporary bank account shall be opened at the time of company establishment. This account shall be closed when the company is ready. The temporary bank account shall have the amount of the agreed company share capital.

Will non EU citizen get resident permit after registering a company in Bulgaria?

Not automatically, unfortunately. Company establishment is not prerequisite for getting resident permit in Bulgaria. In order to obtain it, the non EU citizen has to incorporate a specific additional entity which allows the non EU citizen to receive a residence permit / visa type D for long term staying in Bulgaria. If you set up only a company in Bulgaria then you could get visa type C – Type C which is issued to an alien for a single or multiple entry into Bulgaria and a cumulative duration of the stay not exceeding 90 days within any six-month period, reckoned from the date of first entry. A multiple entry short-stay visa may be with a period of validity not exceeding 12 months, save in so far as otherwise provided in an international treaty in force for the Republic of Bulgaria or in an act of the Council of Ministers.

Will non EU citizen get resident permit if owning a real estate in Bulgaria?

No.The non EU proprietor of real estate could get only a short-stay visa. In order to get residence permit / visa type D for long-term staying in Bulgaria there is a long list of implications that need to be met. Part of them are: to invest over 500,000 euros on the Bulgarian market or to initiate a business activity under the Law for stimulation of foreign investments or if you have some special contributions for the Bulgarian in the area of national security, science, technology, culture or sports.

Are there any limitations for foreign citizens who intend to set up a company in Bulgaria?

The laws in Bulgaria predict absolutely the same rights and obligation to both local and foreign citizens regarding registration of a new company.

What about my personal taxes?

De Hoon & Partners does not provide tax advice and do not assist you to evade taxes. This would be illegal for BOTH of us, however, it is our business to show you the opportunities available on how to reduce or even avoid incurring a tax liability.

We always advise our clients to seek advice from a tax lawyer and/or accountant in their respective country before proceeding with the purchase of a company.

I am living in Bulgaria but am employed in the United Kingdom so my salary is paid from a UK accountant into my UK bank account on a monthly basis. I am not sure if I should be paying tax within Bulgaria now as I am not employed by a Bulgarian company. Could you please give me some advice?

The object of taxation under the Bulgarian Personal Income Tax Act shall be the income of local and foreign natural persons. Regardless of the citizenship thereof, a local natural person shall be a person: –

– whose permanent place of residence is in Bulgaria, or

– who spends inside the territory of Bulgaria more than 183 days in each period of 12 consecutive months, or

– who has his center of vital interests in Bulgaria. Vital interests in Bulgaria means: “the interests of the person are closely connected with the country. In the course of determining those interests, the following may be taken into consideration: the family, the property, the place in which the person carries out his/her employment, professional or business activity, and the place from which he/she manages his/her property”.