ACCOUNTING SERVICES BULGARIA
FREQUENTLY ASKED QUESTIONS
Starting a new company in Bulgaria
The basic forms of company administration in Bulgaria are the so called:
- Single Person Limited Liability Company (the owner is single). The Bulgarian abbreviation for it is EOOD. This is the most used form in the country. A little more than 1 Euro is required as a company’s capital. You should have a Bulgarian bank account where this capital should be transferred. This bank account should be opened from the owner of the company or by his representative who must have power of attorney to do that. The VAT registration is mandatory when company’s turnover exceeds 50000 BGN almost everyone prefers to make this registration before starting the company’s activity because it is easier. (see also VAT registration)
After receiving the confirmation that the company’s capital is imported you should make a registration of the company in the Trade register. Once this registration is completed you should register at NOI (National Social Security Institute)
- Private Limited Liability Company (the owner is multiple) The Bulgarian abbreviation for it is OOD. The procedure and requirements are almost the same. The major difference is that you should elect a supervisory board of directors. After that a management should be appointed. The procedure for registration is a little bit longer compared to the Single Person Limited Liability Company.
- Joint Stock Liability Company is the third form of the company. It is also called Public Limited Company. The Bulgarian abbreviation for it is AD. What is specific is that the capital is shared between the members which are liable to the amount of the capital invested. The capital required is from 50 000 BGN to 100 000 BGN depending on the company’s activity. The procedure for registration is identical.
* Founders in Bulgaria can be local individuals, as well as foreigners and legal entities.
* Each company should have registered office in Bulgaria.
* Тhe fee for issuing Power of attorney, including state fees costs up to 130-150 euro. The maximum period for filing documents in the Bulgarian Trade Registry is 7 working days.
ACCOUNTING SERVICES BULGARIA can assist you with the documentation for the registration. Also we are able to provide you this company registered office (see also company registered office)
Liquidation of the company (closing the company)
Firstly, an application for issuing a certificate for liquidation should be held in National Revenue Agency. After receiving this certificate together with a description of the management body for the liquidation itself, the procedure for liquidation and the name of the liquidator should be brought the National Trade register. The person able for the liquidation
(the liquidator) should be registered in the Trade register and after this he takes all the responsibility and obligations for the liquidation. The liquidator could be a person form the management body, could be also separately elected from the management body to fulfill the liquidation procedure. After the decision of The Trade register about the company’s liquidation a representative should invite the creditors of the company to pay them. After period of six months the liquidation can be preceded by the deletion of the company from the Trade register. This deletion is made after receiving documents from the NRA which verify that the pay slips (accounting documents for employees) are transferred to National Social Security Institute or if the company hasn’t had any employees the documents from NRA confirm that there were not employees.
During the liquidation period the company should prepare the accounting documentation needed for the procedure, as well as Annual Finance Report that should be held to the Trade register. The Trade register has a web site where you can find information for all companies that are registered or are in procedure of liquidation.
VAT registration in Bulgaria
The VAT registration could be made voluntary without any activity of the company.
The VAT registration is obligatory when the turnover exceed 50 000 BGN/25 000 EUR within the 12 consecutive months.
However, our advice is to make this registration before starting any activity because it is much faster and easier.
The procedure for VAT registration is no longer than 14 working days.
The standard procedure for registration starts with application that should be held to the National Revenue Agency (NRA) by a person with representative powers or a person whose name should be written in a notarized power of attorney. The NRA will verify the application within 14 days maximum issuing a document that allows/refuses the registration.
The VAT in Bulgaria is 20%;
The VAT for tourism is 9%;
The VAT on deals between companies registered in Bulgaria and the others companies in EU is 0%
ACCOUNTING SERVICES BULGARIA can assist you with the documentation for the registration.
Cash accounting regime
As of 01 January 2014 the VAT Act envisages a new special regime of cash accounting of the VAT. It aims to help small businesses who have difficulties to pay VAT before receiving payments by their customers for the delivered supplies of goods and services. An important requirement is the availability of preconditions for the company being granted a tax credit when making the payments to its suppliers.
The tax becomes chargeable at the date of full or partial payment in proportion to the payment for the goods and services.
The cash accounting regime is applicable only if:
- There is a deal that is charged with tax rate of 20%
- The entities carrying out the deal are VAT registered
- The entities who carry out the deal are not associated
- Payments for the deal are made only via bank transfer
The cash accounting regime is not obligatory.
Registered office address (TAX address)
The VAT law requires that all companies must have registered office address which must be situated at a physical location that should be in the country of registration. It can be business address, the address of the accountant of the company, the lawyer of the company or any other that you choose in Bulgaria. The most important thing is that this should be an address at which you/or your representative will be able every working day so that all the authorities, for example National Revenue Agency (NRA), can be able to contact from 09:00 a.m. - 05:30 p.m. and where all company’s correspondence will arrive. If a representative is not fount to the address that is supposed to be your registered office address the consequences could be sanction by NRA. For example if your company has already started a VAT procedure it could be stopped and the registration – denied.
If your company doesn’t have any option for registered office address we could offer you tax address.
ACCOUNTING SERVICES BULGARIA we are able to provide you this company registered office.
Issuing an invoice
According to the VAT law the invoice should contain the following information:
- The name “Invoice”
- Number of the invoice – it should be consequent and written by Arabic digits. The first number should start at 0000000001 and should be at least 10 digit serial numbers. After issuing 10 billion numbers all invoices can be started again from 0000000001 but only after National Revenue Agency (NRA) is informed.
- Date of the issuance of the invoice
- Name of the provider on the one side and on the other the name of the recipient
- Address of the supplier and the recipient
- Specific identification code of the supplier and the recipient.
- VAT number of the provider and the recipient (if they are VAT reiterated)
- Subject and value of the deal (what is sold, what quantity, what is the single price per one unit, total amount)
- Date of delivery or date when the is payment released
- Tax base
- Tax rate
- If the tax rate is different from 20% justification for implementing another rate should be written
- VAT rate
- Total amount of the payment
Seal and signature of the recipient of the invoice are not obligatorily.
ACCOUNTING SERVICES BULGARIA may issue all yours invoices for clients.
Why you should open a bank account, what is the procedure and how much does it costs?
Each new company should open a bank account in Bulgaria so that the company could receive the payments from its clients and make payments to the suppliers and national tax agencies such as National Revenue Agency (NRA) etc.
To open a bank account for and entity the representative of the company or a person who has power of attorney (POA) of the name of the representative should provide to the bank institution the following documents:
- New requirement is that the bank account should be opened (registered) privately from the owner of the company or by representative who has POA;
- Document for Identity of the representative/the person who has a POA;
- Document that gives the person the right to administer the bank account Founding act etc.;
- Seal of the company (the procedure for making company’s seal is no longer than 24 hours and costs about 15 – 30 BGN);
Nine of ten of the bigger banks in Bulgaria has a fee not exceeding the amount of 10 BGN for opening company’s bank account both in Bulgarian lava and foreign currency. However, there is a minimum deposit that should be transferred to the company’s bank account when it is opened for the first time. This sum varies in different banks and depends on the currency.
For closing company’s bank account there is a major difference between the banks. The fees are between 10- 30 BGN.
The fees for the account’s monthly maintenance are from 7 to 15 BGN.
Notice! The bank cards for the company’s bank account must be received privatively by the cardholder at any branch of the bank.
ACCOUNTING SERVICES BULGARIA may help you to open a company bank account.
Power of attorney (POA)
The power of attorney is a kind of a letter that is necessary for doing legal actions (all actions required by a law) such as opening bank account, signing some kind of a contract or being representative to different National agencies. The POA authorizes a person, to represent the other side (for example the owner of the company) in a way that their actions will lead to favorable consequences for the authorizer. By the POA the representative performs actions on the behalf of the other side. Normally the POA should be notary attested.
End of the financial year
The income tax rate is Bulgaria is 10 % and it is payable until the 31st of March of the year following the recent one.
When the company is established after the beginning of financial year the tax should be paid until 31st of March by a single payment. For every further year each company should definite their prognosis profit for the next financial year. Quarterly (on every three months) the company pays “advance tax” based on this prognosis profit. After the end of the current financial year the sum between the prognosis and the real income tax should be balanced or compensated.
The company’s financial period consists of 12 calendar months. The end of the financial year in Bulgaria for entities is 31st December and the declaration and the payment of the taxes in this context should be made not later than 31.03 of the year following the recent one for companies. This act is declared to the National Revenue Agency (NRA) and National Statistical Institute (NSI).
Financial statements should be filed to the Bulgarian Trade Registry also and this is obligatory to all companies. The deadline for this is 30th of June. The fee for this publication is 25 – 50 BGN. If these documents are not published sanctions will be enforced.
ACCOUNTING SERVICES BULGARIA could prepare your company annual report.
In Bulgaria the dividend is share out and it should be paid quarterly within the financial year.
The tax rate on dividends is 5% on the actual profit per quarter. The declaration and payment must be made as follows:
- For the first quarter the dividend must be declared and paid from 01st to 30th April;
- For the second quarter - the dividend must be declared from 01st till 31st July;
- Fort the third - from 01st until 31st October;
- For the fourth quarter - from 01st to 31st January the year following the recent one.
ACCOUNTING SERVICES BULGARIA would prepare and calculate your declaration.
Each company that receives payment in cash should have a cash register device that must be connected to the National Revenue Agency (NRA). Unless the company has such a device fees and sanctions will be enforced to the company by NRA. The payments form the services or the goods that you provide to your clients are directly transferred to your bank account it is not necessary to have a fiscal device
Representative expenses tax
Almost each company makes representative expenses such as dinners, consumption of drinks and food, organizing dinners, parties, business meetings, hotel expenses for company’s guests, trips, presents, bunches etc.
What is important is that these expenses should be connected to the popularization of the activity of the company.
However, expenses such as conferences and congresses are not supposed to be representative expenses. In other words the expenses are representative only if they are connected with partners that have regard to the business. The tax rate of these expenses is 10% of their value. The sum should be paid and declared once after the end of the financial year.
Maternity leave allowance
Every employee has the right to have a maternity leave for pregnancy and childbirth at the amount of 410 days for each child.
45 days of it must be used before the estimated date for childbirth. The maternity leave allowance is paid and its amount is 90 % of the average gross salary or the average daily income on which I owed and have already made insurance payments.
After the first year of the maternity leave period the payment per month will be minimum gross wage in Bulgaria. At that moment (2013) the amount is 310 BGN; in 2014 it will be 340 BGN. This money is paid not from the employer but by National Insurance Institute.
The minimum benefit for maternity leave should be not lower than the minimum monthly gross wage which from 01.01.2014 will be 340.00 BGN.
ACCOUNTING SERVICES BULGARIA can help you for that calculation.
Owner of the company and manager of the company
The role of the manager could be implemented by the owner itself or by other person who is able-bodied person and who hasn’t got any prohibition of doing this activity. For example, if the person who wants to fulfill the role of a manager has outstanding contributions (for instance for health-insurance) he would not be able to perform this activity. The document that authorizes the manager is a contract for management and control.
If the manager is the owner of the company he has the right to self-insure himself.
There are two options to insure you as a manager. The first one is to have a contract for management and control and the other one is to do it as a self-insured person.
In the first case the insurances are charged to the monthly wage that could not be lower than the average social security threshold according to the activity of the company.
In the second case the insurances are charged to a monthly base defined by the Law (for 2013 this base is 420 BGN)
When the employee is a person who performs single service to the company or in some cases he/she performs the service once in a few months the document signed with this person should be civil contract. This person is more like to be considered as a provider of a service rather than an employee.
What is important is that employees on civil contracts have only health and retired pay insurances.
ACCOUNTING SERVICES BULGARIA could prepare civil contracts for your company
Employment contract (labor contract)
The employment contract regulates the obligations and responsibilities between the employer and the employee. It should be in written form and both sides sign it. The monthly salary should be also defined in the contract. The major difference is that the person who provides the service is employed to perform it weekly every month and for this service a wage is paid.
Pursuant to Art 66 of the Labor Code the employment contract must contain:
1) the place of work, the position taken by the employee and the obligations connected with his position are indicated
2) the place where the employee must fulfill his work
3) Salary indicates the amount of the basic and the additional wages arising from the terms of the contract. The employment contract may be signed for: 1) indefinite period or 2) as fixed-term contracts. Employment contract is deemed to have been signed for an indefinite period, unless other agreement has been expressly made. The employment contract of indefinite duration can not be transformed into a contract for a set time limit, except on the express request of the employee, expressed in written form.
To be registered, the contract shall be notified to the NRA within 3 days, according to Article 62 of the Labor Code and 7 days of its termination. Documents required at the conclusion of the employment contract are:
1 )Document for identification;
2) Proof of the acquired education
3) A medical certificate;
4) Certificate of conviction;
5) Document for internship acquired
6) Permission of the Labor Inspectorate, if the person is under 16 years;
7 ) Preparation of a job description
Preparation of employment (labor) bilingual contracts by HR specialists is included in the price of the services provided by ACCOUNTING SERVICES BULGARIA
Registration of the labor contract
When the company hires a new employee on a labor contract or changes the employee’s contract within 3 days a notification to the NRA should be handed. The confirmed notification should be signed by the employee.
In case of termination employment contract the deadline to hand a notification to NRA is 7 days from the date of termination.
ACCOUNTING SERVICES BULGARIA could assist you with the registration of labor contracts. The price is included in the price of the services
The minimum wage in Bulgaria is an amount defined for the whole country.
The minimum wage from 1-th of January 2013 is 310 BGN per month.
With decree № 249 of the Cabinet new amount of the minimum monthly
wage of 340BGN was defined for the next year.
The minimum hourly wage will be 2.03 BGN for 8 working hours per a workday
and 5 days workweek.
Tax treatment of the car expenses such as fuel, car repair, spear parts etc.
According to the VAT law the expenses for company’s cars, their repair, the expenses for spear parts for them, for fuel etc should be divided into two groups:
- Expenses for maintenance, repair and operation of vehicles when they are used to perform the basic activity of the company. The basic activity is the one form which incomes are received.
These expenses are not subject to taxation. In this category would be also the costs associated with the delivery and transport of necessary materials, if they are substantiated by the required documents such as invoices, road book etc.
In case of absence of documentary they will be not be recognized as expenses for tax purposes.
- The second group is the expenses for maintenance, repair and operation of vehicles when they are used to perform management activities.
These costs are subject to taxation. The tax rate is 10% .In this category would be also the cases in which the vehicle is used by the manager for visits of the company’s objects in relation to the management activity. These expenses justified with documents. Even fiscal receipt form fiscal device is enough.
The expense and the tax for it shall be recognized for tax purposes in the year of accrual. The tax is final. When the passenger car is used for both the main activities and management activities of calculation of the tax base should be done as follow:
Operating costs related to the management activity based on the base of traveled kilometers or this activity in the current month;
the expenses on maintenance and repair shall relate to the management operations on the basis of the kilometres covered for the said operations in relation to the total kilometres covered by the relevant means of transport during the calendar year.
The expenses for cars used for representational purposes, are charged with 10% VAT
ACCOUNTING SERVICES BULGARIA could give a consultation for the treatment of the car expenses priceless for its clients
In the Law for healty and safety labor conditions the rights and obligations of employers and employees on safety and health at work of those who work for their own purpose or in partnership , and other organizations and entities that ensure healthy and safe working conditions.
Occupational health service units have predominantly preventive functions. The main activities of the occupational health services are to:
1) advise employers on safe and healthy working conditions for employees by implementing the measures;
2 ) prevention of occupational risks;
3 ) providing information and training;
4 ) providing the necessary organization and environment.
Occupational Medicine keeps and maintains records. Also operates in accordance with regulations to ensure the health and safety at work.
All companies that have staff are required to have a contract with a licensed occupational health service to carry out regular inspection of documentation and guard their interests before the authorities of the General Labor Inspectorate (GID). The penalties provided for violations of health and safeties imposed by the CEO are serious and high.
ACCOUNTING SERVICES BULGARIA can offer a partner company to perform occupational medicine services
Using VAT for company’s cars
According to the VAT deductibility tax credit is available for purchase, lease, maintenance and operation of vehicle that is used for transportation of loads or for vehicle which has permanently built in additional technical equipment for the activity carried out by the registered person. In other words those are the automobiles that are not supposed to be passenger cars. The term passenger car is defined in VAT Act.
Passenger car is the one in which the number of seating positions, excluding the driver position does not exceed 5. This clarification actually gives the right for tax credit for certain categories of passenger cars. These are automobiles that have more than 5 seats, not counting the place for the driver. Ordinarily, those are vans and jeeps.
A car is considered as a vehicle used for transportation of loads when the following requirements are fulfilled:
- A bench without any seatbelts that could be easily removed is situated at the back side of the vehicle;
- There are windows on the walls at the rear;
- A separate cabin for the driver and passengers;
- There should be a barrier between the cab and the rear;
- Lack of elements of comfort on the loading platform (e.g. carpet, interior lighting and ashtrays).
Rental expenses of company’s cars are recognized for the tax credit.
In companies where the vehicle is personal but not a company’s property a lease contract should be signed between the company and the owner of the car. A rental price should be written in the contract only to be charged but not to be paid so that an income tax not to be paid of the owner.
By signing a lease contract the owner of the car would be able to use company’s funds to pay for fuel expenses, repairs and spare parts, etc.
To legal entities that are subject of charge with alternative tax or which are not obliged to pay corporate tax, including sole proprietor, which are subject to a license tax the cars used for the activity of the company are not an object to additional taxation. An exception of this rule is the situation in which company’s cars are used for transportation of employees or people appointed under management contract form the working to the living place
ACCOUNTING SERVICES BULGARIA could assist you to solve any problems in relation to the VAT of the company’s vehicles
There are two types of countries that could use VAT refund:
- Countries form the European Union
If your company has implemented an activity that was subject to taxation in a country of the European Union, it might be entitled to get a refund of the VAT by the authorities in that country.
A refund of the VAT should be requested online by the authorities in the country in which the company is registered. They will transfer your application to the authorities in the other country, if you are entitled to a VAT refund.
If the other country is late with the refund of VAT, interest rates might be paid to your company.
- Countries outside the European Union
If the country in which the company was registered is not established in the EU and you it has been VAT charged for business activities in EU country in which you haven’t supplied goods or services you might be entitled to a refund from the authorities of that country. Application for a refund should be requested directly to the authorities of the country that is in the EU.
ACCOUNTING SERVICES BULGARIA could answer to any questions for the VAT refund
Annual financial statements of non-profit legal persons designated as operating for the public benefit and listed in the Central Register with the Ministry of Justice shall be subject to an independent financial audit by registered auditors where for the current year they exceed one of the following criteria:
1. Balance sheet assets as of 31 December: BGN 1 million;
2. Income from for-profit and not-for-profit operations for the current year: BGN 2 million;
3. Total amount of financing received during the current year and financing received in previous reporting periods not absorbed as of 31 December: BGN 1 million.
Unless otherwise provided for by law, annual financial statements of the following shall be subject to an independent financial audit by registered auditors:
1. Joint stock companies and partnerships limited by shares;
2. Enterprises which are issuers in the meaning of the Public Offering of Securities Act;
3. Credit institutions, insurance and investment undertakings, companies for additional social security and the funds managed by them;
4. Enterprises for which this requirement is established by a law;
5. All enterprises not mentioned in the items of the above, with the exception of enterprises applying a simplified form of financial reporting and budget-funded enterprises.
Entities eligible to apply simplified form of financial reporting are not subject to audit when in the current or in the previous year two of the following indexes haven’t been exceeded the
- Balance value of the assets at 31-st of December - 1.5 million BGN;
- Net incomes of sales for the year - 2.5 million BGN;
- Average number of the staff for the year - 50 people
ACCOUNTING SERVICES BULGRAIA could help you with any issues related to the audit
Currency in Bulgaria is BGN
1.95583 BGN = 1 EUR