Regulations for Foreign Companies in Bulgaria

Published on September 30, 2025 and written by Cyril Jarnias

In Bulgaria, the economic landscape attracts numerous companies eager to benefit from a business-friendly climate and fiscally advantageous legislation. However, the legal framework for non-resident foreign companies establishing or operating within the territory sparks ongoing discussions and constant evolution. With increasing interest from international investors, Bulgaria is implementing specific regulations to ensure compliance while preserving its competitiveness on the global stage. This delicate balance between economic openness and strict control invites deep reflection on the challenges and opportunities facing companies seeking to prosper in this dynamic environment.

Understanding the Legal Framework for Non-Resident Foreign Companies in Bulgaria

Legal Framework for Non-Resident Foreign Companies

The Bulgarian legal framework applicable to non-resident foreign companies is primarily based on the Commercial Law and the Corporate Income Tax Law. These texts define the registration, operation, and taxation rules for these entities within Bulgarian territory.

Registration and Operations

Non-resident foreign companies wishing to conduct business in Bulgaria must register with the Commercial Register. They can operate through a branch or representative office. The branch must be registered in the register and has separate legal personality, while the representative office lacks this capacity and is limited to auxiliary activities.

Tax and Accounting Obligations

Non-resident companies are taxed only on their Bulgarian-source income at a rate of 10%. They must maintain accounting records compliant with Bulgarian standards and submit annual tax returns by March 31 of the following year. A tax representative may be required for non-EU companies.

Sectoral Restrictions

Certain sectors, such as financial services or telecommunications, may be subject to specific permits or foreign ownership restrictions. Non-resident companies must verify sectoral regulations before engaging in these activities.

Consequences of Non-Compliance

Failure to comply with legal obligations may result in fines, suspension of activities, or even removal from the commercial register. Bulgarian tax authorities may also impose penalties for non-compliance with tax rules.

Case Law Examples

A recent case involved a foreign company operating without proper registration, resulting in a substantial fine and the requirement to regularize its situation. In another case, a non-resident company was penalized for failure to declare income generated in Bulgaria, highlighting the importance of tax compliance.

Specifics for EU Companies

Companies based in the EU benefit from simplified procedures for registration and operations in Bulgaria. They can register for VAT without a tax representative and enjoy certain tax exemptions under European directives.

Economic Substance Requirements

Bulgaria has recently strengthened its rules on the economic substance of foreign companies. Businesses must demonstrate significant physical presence and real economic activities to benefit from Bulgarian tax advantages.

Controlled Foreign Company Rules

Since 2021, Bulgaria has applied rules on Controlled Foreign Companies (CFC). If a Bulgarian resident holds more than 50% of a foreign entity subject to low taxation, the profits of that entity may be attributed to the Bulgarian resident and taxed in Bulgaria.

Registration Process: Steps and Requirements for Non-Resident Companies

Key Steps for Registering a Non-Resident Company in Bulgaria

The registration process for a non-resident company in Bulgaria includes several essential steps:

1. Choose the legal structure: The most common form is the OOD (equivalent to an LLC) or EOOD for a single-member company.

2. Reserve the company name: Check the availability of the chosen name with the Bulgarian Commercial Register and reserve it. The name must be in Cyrillic alphabet.

3. Prepare the incorporation documents: Draft the company statutes, deed of incorporation, and minutes of the constitutive assembly. These documents must be in Bulgarian or accompanied by an official translation.

4. Appoint a legal representative: Nominate a manager or director who will be responsible for the company in Bulgaria.

5. Open a bank account: Deposit the share capital into a special capital collection account in a Bulgarian bank.

Required Documents and Legal Requirements

Documents required for registration include:

– Company statutes – Deed of incorporation – Minutes of the constitutive assembly – Notarized signature specimens of directors – Copies of passports or ID cards of shareholders and directors – Certificate of share capital deposit – Legal compliance declarations signed by directors

Specific requirements for non-resident companies:

– Registered office address in Bulgaria (domiciliation possible) – Designation of a Bulgarian national as contact person if directors do not reside in Bulgaria – Translation and legalization of all foreign documents

Timelines, Fees, and Competent Authorities

– Average registration time: 3 to 5 business days after submission of complete file – Registration fees: Approximately 80 BGN (40 EUR) for electronic filing – Competent authority: Commercial Register of the Registry Agency

Other procedures: – Tax registration with the National Revenue Agency – VAT registration if turnover exceeds the threshold of 166,000 BGN

Practical Tips for Smooth Registration

– Engage a local lawyer specialized in corporate law to ensure document compliance and facilitate procedures – Plan for professional translation of all documents into Bulgarian – Anticipate requirements of Bulgarian banks for account opening, particularly regarding the company’s economic substance – Consider appointing a manager residing in Bulgaria to facilitate administrative and banking procedures – Prepare a detailed business plan to justify the company’s real activity in Bulgaria

Attention: Bulgarian banks may be reluctant to open accounts for companies without significant physical presence in the country. It is recommended to have substantial activity or employees in Bulgaria to facilitate this process.

Tax Implications for Foreign Companies Operating in Bulgaria

Tax Implications for Foreign Companies in Bulgaria

Foreign companies operating in Bulgaria must navigate an attractive yet complex tax environment. The 10% corporate tax rate is one of the lowest in the European Union, making the country particularly attractive to foreign investors. However, understanding the nuances of the Bulgarian tax system is crucial to avoid costly non-compliance.

Taxation of Locally Generated Income

Non-resident companies are taxed only on their Bulgarian-source income. This includes:

– Profits realized by a permanent establishment in Bulgaria – Rental income from real estate located in Bulgaria – Capital gains on the disposal of Bulgarian assets – Dividends, interest, and royalties of Bulgarian source

The standard tax rate on this income is 10%. However, certain types of income, such as dividends and interest, may be subject to a 5% withholding tax.

Reporting Obligations and Compliance

Foreign companies operating in Bulgaria through a permanent establishment must:

• Register with the National Revenue Agency
• Maintain accounting records compliant with Bulgarian standards
• Submit annual tax returns by March 31 of the following year
• Pay corporate tax through quarterly advance payments

Subsidiaries of foreign companies are considered Bulgarian resident entities and are subject to the same obligations as local companies. They must notably prepare annual financial statements and file them with the Commercial Register.

Double Taxation Agreements

Bulgaria has concluded tax treaties with over 60 countries, aimed at avoiding double taxation. These agreements may reduce or eliminate withholding taxes on certain types of income, such as dividends, interest, and royalties.

For example, under the tax treaty between Bulgaria and Germany, the withholding tax rate on dividends may be reduced to 5% if the beneficial owner is a company directly holding at least 10% of the capital of the company paying the dividends.

Case Study: Subsidiary of a Technology Multinational

Consider the case of an American technology multinational establishing a subsidiary in Bulgaria for software development services. The subsidiary generates an annual profit of 1 million euros.

– Corporate tax: 100,000 euros (10% of 1 million) – If the subsidiary distributes the entire after-tax profit to its parent company: – Withholding tax on dividends: 45,000 euros (5% of 900,000)

Thanks to the tax treaty between Bulgaria and the United States, the parent company could benefit from a tax credit in its home country for taxes paid in Bulgaria, thus avoiding double taxation.

Transfer Pricing Rules

Foreign companies must be particularly vigilant regarding transactions with related parties. Bulgaria has adopted strict transfer pricing rules, aligned with OECD principles. Companies must prepare detailed documentation justifying that their intra-group transactions are conducted at arm’s length conditions.

In case of non-compliance with these rules, the Bulgarian tax administration may adjust taxable profits and impose significant penalties.