Why Bulgaria? Main Features for Businesses
Bulgaria has established itself as one of Europe’s most compelling business destinations, offering an exceptional combination of strategic advantages, competitive fiscal policies, and a dynamic ecosystem that makes it particularly attractive for diverse business sectors:
Strategic EU Gateway Location: Bulgaria’s position in Southeastern Europe provides unparalleled access to over 450 million EU consumers while serving as a natural bridge to the Middle East, Asia, and the broader Balkan region. This unique geographical advantage creates opportunities for businesses targeting multiple markets from a single European base. Sofia has transformed into a major innovation hub, ranking 23rd in Europe and 37th globally in the startup ecosystem index.
Lowest Corporate Tax Rate in the EU: Bulgaria boasts the most competitive corporate tax structure in the European Union with a flat corporate income tax rate of just 10%, significantly lower than the EU average of 21.5%. This represents a substantial cost advantage compared to neighboring countries like Romania (16%), Czech Republic (21%), or Austria (23%).
Exceptional Business Environment Rankings: Bulgaria consistently achieves strong performance in international business rankings:
Thriving Innovation Ecosystem: Bulgaria’s startup ecosystem has reached remarkable maturity, with over 800 active startups and €1 billion invested in Bulgarian and Bulgarian-founded deep tech & AI startups. The country ranks 37th globally in the startup ecosystem, making it one of the top destinations in Eastern Europe. The combined enterprise value of Bulgarian startups ranks 2nd per capita in Southeast Europe.
World-Class Infrastructure and Support: Bulgaria offers advanced infrastructure including high-speed internet connectivity, efficient transport networks, and well-developed logistics services. The country benefits from a highly skilled workforce, with approximately two-thirds having completed secondary, technical, or vocational education, creating an ideal environment for knowledge-intensive businesses.
Core Legal Forms of Companies
Bulgaria offers several corporate structures, with the Limited Liability Company (OOD) being overwhelmingly preferred, representing approximately 90% of all company registrations:
Limited Liability Company (OOD – Дружество с Ограничена Отговорност)
Single-Member Limited Liability Company (EOOD)
- Minimum Capital: BGN 2 (approximately €1)
- Structure: Single shareholder variant of OOD
- Management: Simplified governance structure
- Best for: Solo entrepreneurs and individual foreign investors
Joint Stock Company (AD – Акционерно Дружество)
- Minimum Capital: BGN 50,000 (approximately €25,565)
- Structure: More complex governance with board of directors
- Share Transfer: More flexible than OOD
- Best for: Larger businesses planning public trading or significant investment
Key Points to Remember:
- No residency requirements for founders or directors
- Directors do not need Bulgarian nationality
- Company registration can be completed remotely through Power of Attorney
- Notarization required for founding documents
- Registration process takes only 3-4 working days
Taxation System and Optimization Opportunities
Corporate Income Tax (CIT)
Bulgaria’s corporate tax system provides exceptional opportunities for optimization:
Standard Rate: The flat 10% corporate income tax rate is the lowest in the European Union, providing significant competitive advantages.
Global Minimum Tax: From January 1, 2024, Bulgarian entities in scope of the global minimum tax are subject to a minimum effective tax rate of 15% under Pillar Two rules. This affects large multinational groups with annual revenues exceeding €750 million.
Special Tax Optimization Opportunities:
Free Economic Zones (FEZ): Companies operating in Bulgaria’s six FEZs enjoy exceptional benefits:
- 100% corporate income tax exemption for 10 years
- 50% reduction for following 6 years
- No import/export customs duties
- VAT exemptions on exports
- Minimum investment: €1 million (or €100,000 for service companies with 20+ employees)
Investment Incentives Classes A, B, and C: Companies can benefit from various investment promotion measures:
- Class A & B: For investments exceeding BGN 4 million with significant employment creation
- Class C: For municipal investments up to BGN 4 million creating at least 20 jobs
- Benefits include individual administrative support, shortened administrative procedures, and financial aid for training and social security contributions
Loss Carryforward: Tax losses can be carried forward indefinitely, providing significant flexibility for growing businesses.
Other Key Taxes
VAT (DDS – Данък върху Добавената Стойност):
- Standard rate: 20%
- Reduced rate: 9% (books, newspapers, magazines, baby foods, periodicals)
- Registration threshold: BGN 100,000 (approximately €51,000) from April 2025
- Zero rate: Exports and intra-EU supplies
Social Security Contributions:
- Employer rate: 18.92% – 19.62% (including accident insurance)
- Employee rate: 13.78%
- Total combined rate: 32.7% – 33.4%
- Maximum monthly assessment base: BGN 4,130 (as of April 2025)
Withholding Tax:
- Dividends: 5% (one of the lowest in the EU)
- Interest: 10% (0% under certain conditions)
- Royalties: 10%
- Treaty reductions frequently available through extensive double tax treaty network
Ease of Doing Business and Government Policies
Business Environment Rankings
Bulgaria has achieved strong international recognition for its business-friendly environment:
- World Bank Ease of Doing Business: 61st globally (2019)
- Business Ready 2024: 76.33% score in regulatory framework (6th globally)
- Strong performance in “starting a business” and minority investor protection
Government Business Support
The Bulgarian government maintains a highly proactive approach to business development:
Priority Sectors with Strong Government Support:
- Technology and Innovation: Comprehensive support through specialized programs and tax incentives
- Manufacturing: Automotive, electronics, pharmaceuticals, food processing
- Startups and Scale-ups: Over €100 million through Fund of Funds programs
- Green Technology: Renewable energy incentives and sustainability projects
Investment Incentive Programs:
- Class A & B Investments: Administrative support, shortened procedures, financial aid for training
- Priority Investment Projects: Enhanced incentives for strategic investments
- Free Economic Zones: Comprehensive tax exemptions and customs benefits
Business-Friendly Reforms:
- Digital administration and e-services
- Streamlined company registration (3-4 days)
- One-stop-shop for business services
- Enhanced investor protection measures
Company Formation Process and Requirements
Registration Process
Bulgaria offers one of Europe’s most streamlined company formation processes:
- Company Name Reservation: Check availability through Commercial Registry
- Legal Address: Mandatory Bulgarian business address (rental services available)
- Share Capital Deposit: Minimum BGN 2 in bank account
- Document Preparation: Articles of Association, founding agreement
- Notarization: Required for founding documents (remote via Power of Attorney)
- Commercial Registry: Submit to Bulgarian Commercial Registry
- Tax Registration: Automatic registration with National Revenue Agency
Timeline and Costs
- Registration Time: 3-4 working days
- Total Timeline: 1-2 weeks for complete setup
- Basic Costs: €400-€1,200 depending on service package
- Government Fees: Approximately €100-€200
Residency and Director Requirements
- Founder Residency: Not required for company formation
- Director Nationality: No restrictions on director nationality
- Physical Presence: 100% remote incorporation possible through Power of Attorney
- Business Residence Permit: Available for company founders with minimum investment
Shareholding Structure
- Foreign Ownership: 100% foreign ownership permitted without restrictions
- Minimum Shareholders: One founder minimum for EOOD, two for OOD
- Share Transfer: Relatively straightforward process
- Share Capital Usage: Can be used immediately after incorporation
Available Grants and Funding Programs
National Funding Programs
Fund of Funds (FMFIB): Bulgaria’s primary public financing entity manages approximately €650 million in total under various EU programs:
- Entrepreneurship Fund: €100 million public resource structured as three separate funds
- Early Stage Fund: €30 million for startups at proof-of-concept stage (tickets up to €1 million)
- Venture Capital Fund: €30 million for fast-growing businesses (tickets up to €3 million)
- Growth Fund: €40 million for mature enterprises (tickets up to €4 million)
Seed/Acceleration and Start-Up Fund: €70.9 million in public resources supporting 229 companies expected:
- Acceleration stage: €25,000 – €50,000
- Start-up stage: €50,000 – €1 million
- Includes strategic support, training, and mentorship
Best Youth Startup in Bulgaria: Annual contest providing:
- 3-month free training and mentoring program
- Access to tools and contacts for startup success
- Investment opportunities for winners
EU and International Funding
Recovery and Resilience Plan: €690 million Economic Transformation Programme supporting Bulgarian SMEs through:
- Fund 1: Growth and Innovation (guarantee and equity instruments)
- Fund 2: Green Transition and Circular Economy (grants and guarantees)
- Fund 3: Climate Neutrality and Digital Transformation (equity instruments)
EU Programme for Competitiveness: Comprehensive support including:
- Innovation and research funding through Horizon Europe
- Structural and cohesion fund access
- LIFE Programme for environmental projects (up to €6 million)
European Investment Fund (EIF): €10.8 million equity investments mobilizing €68.5 million in resources, supporting 3,300 Bulgarian SMEs
Innovation and R&D Support
National Innovation Fund: Grants up to BGN 1 million (€500,000) covering:
- R&D expenses with 25-75% funding rates
- Equipment and tools
- Business development costs
SME Fund 2025: Up to €1,000 (increased from €700) for trademark and industrial design protection, supporting IP registration costs
Governance and Compliance Requirements
Financial Reporting Standards
Bulgaria offers flexibility in financial reporting with comprehensive requirements:
Annual Financial Statements Must Include:
- Balance Sheet
- Profit and Loss Statement
- Notes to Financial Statements
- Cash Flow Statement (if audited)
- Statement of Changes in Equity (if audited)
Filing Requirements: Annual financial statements must be filed by the end of the fifth month after balance sheet date
Audit Requirements
Mandatory Audit applies to companies meeting at least two of three criteria:
- Total assets: BGN 4 million
- Net revenue: BGN 8 million
- Average employees: 50 persons
Always Required for:
- Joint stock companies (AD)
- Public interest entities
- Companies with state/municipal shareholders
New Compliance Requirements (2025-2026)
SAF-T Reporting: Bulgaria will implement Standard Audit File for Tax reporting from January 2026:
- Phase 1 (2026): Large enterprises (BGN 300+ million revenue or BGN 3.5+ million taxes)
- Monthly reporting: Due by 14th of following month
- Annual reporting: Fixed assets due by June 30
- Grace period: 6 months for first submission without penalties
Sustainability Reporting: Enhanced ESG disclosure requirements for:
- Large enterprises from 2025
- Listed SMEs from 2026
- Includes quantitative and qualitative sustainability information
Tax Administration Timeline
Corporate Income Tax Return: Must be filed between March 1 and June 30 of following year
VAT Compliance: Monthly returns required by 14th of following month
Conclusion
Bulgaria presents an exceptionally attractive corporate income tax environment that positions it as one of Europe’s premier business destinations. The combination of the EU’s lowest corporate tax rate (10%), strategic location, comprehensive government support, and a thriving innovation ecosystem creates compelling opportunities for businesses across multiple sectors.
Key Advantages:
- Unmatched 10% corporate tax rate (lowest in EU) with extensive double tax treaty network
- Exceptional Free Economic Zone benefits (100% tax exemption for 10 years)
- 100% foreign ownership permitted with streamlined 3-4 day registration process
- Thriving startup ecosystem (37th globally, €1 billion invested) with substantial EU funding access
- Comprehensive investment incentives through Classes A, B, and C certification programs
- Strategic access to 450+ million EU consumers plus Balkan and Middle Eastern markets
Strategic Considerations:
- Higher social security contributions (32.7-33.4% combined rate)
- New SAF-T reporting requirements from 2026 requiring system upgrades
- Global minimum tax (15%) applies to large multinational groups
- Need for ongoing professional support for compliance and optimization
Optimal Business Types for Bulgaria:
- Technology and Innovation Companies: Exceptional startup ecosystem and R&D incentives
- Manufacturing and Export-Oriented Businesses: Free Economic Zone advantages and strategic location
- Service Companies: Low tax rates and skilled workforce
- SMEs and Growth Companies: Comprehensive EU funding and national support programs
For entrepreneurs considering European expansion, Bulgaria offers a unique combination of fiscal efficiency, innovation support, and market access that positions it as the continent’s most competitive destination for growth-oriented businesses. The government’s proactive approach to business support—demonstrated through comprehensive funding programs (€650+ million through Fund of Funds), investment incentives, and specialized zones—creates an environment where businesses can not only establish operations efficiently but also access the resources necessary for sustained growth.
The country’s evolution from a traditional Eastern European economy to a modern innovation hub, combined with its strategic geographic position and business-friendly regulatory environment, provides an ideal foundation for businesses seeking both immediate operational advantages and long-term expansion potential in the global marketplace. Bulgaria’s commitment to digital transformation, sustainability, and international competitiveness—evidenced by its top-tier startup rankings and substantial investment in technology—makes it particularly attractive for innovative enterprises seeking to establish a strategic foothold in the European Union while benefiting from the continent’s most competitive fiscal environment.
