Company formation in brief

Modern Bulgarian legislation allows setting up various types of enterprises, but in practice, only the following two may be of interest to a foreign investor:

Limited Liability Company (LLC)
Joint Venture (JV)

The choice of one of the two types of companies mainly depends on the type of activity and the volume of the proposed transactions. For example, only a joint venture can obtain a banking or insurance license, and an LLC can be registered for trading and investment activities.

Foreigners or foreign companies can fully own the shares of both LLC and JV. The most common foreign investment in 100% of the shares of an LLC. Managers of LLCs and JVs can also be foreigners.


The tax regime for all companies in Bulgaria is the same. All companies, regardless of whether they conduct trade and economic activities or not, are required to register for tax purposes.

All types of enterprises are subject to taxation in Bulgaria on the worldwide income.

According to the practice of applying the tax legislation of Bulgaria, income from paid dividends is not included in the taxable base of a legal entity. Such income is a subject to withholding tax.

While all other “passive” incomes of local enterprises in Bulgaria are included in the taxable base of income tax, for the income of foreign persons, the Bulgarian law establishes different rules, according to which the following types are subject to taxation (at source of payment):

* income from interest on securities;
* income from financial leasing;
* fee for technical support of transactions;
* income from franchising and factoring;
* income from the sale of financial assets;
* royalties from licenses to exercise intellectual rights;
* compensation under management agreements and
* compensation received as one of the members of the management of Bulgarian legal entities.

A foreign person - the recipient of the above-mentioned income - is not formally obliged to pay income tax, except for the case when the JSC, for some reason, the company-source of income itself does not pay tax. However, in this case, the refusal of the source company to withhold and then pay the tax results in joint liability of the paying company and the recipient of the income to the state.

Bulgaria is not an offshore destination. There are no tax-exempt enterprises in Bulgaria and all enterprises in Bulgaria must submit audit reports.

Bulgaria Double Taxation Agreements

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