Monthly Archives: October 2009

Located in Eastern Europe, Bulgaria is offering the key managers of global US and European companies a great base for the outsourcing of their businesses. Once concentrated in countries like India and also having China and Vietnam in their shortlist, today the European and the North American companies are looking towards a country which has less social and cultural differences. Bulgaria is such a country for them – it has stable economy, a well-developed educational system forming specialists in computer sciences, electronics and engineering, physics and mathematics, etc. The excellent education has placed Bulgaria into the fifth place in the world when it goes to sciences which make it today a tempting zone for outsourcing of businesses because of the high mental potential of the young specialists. An interesting fact to mention is that Bulgaria ranks second in the IQ tests made by MENSA and the SAT test results. In the IT sphere, the country is among the top ten destinations when it goes to certified IT professionals.

Which are the global companies that have already outsourced their business in Bulgaria? Several major companies have established their branches in the Bulgarian capital Sofia in the last few years. Among these outsourcing pioneers are the German software company SAP, which has focused some of its major Java software development in Sofia. Another giant company that has outsourced part of its business activities is IBM, which was soon followed by HP, Oracle, Cisco Systems, Ericsson, Siemens, etc. and many more companies which joined the group after Bulgaria entered the European Union in January 2007.

One of the main questions that the outsourcing companies often face is connected to the potential of the Bulgarian professionals and their ability to develop and further educate themselves. These young people have several main qualities – they speak good English, they are technically aware and they know how to program well. The Bulgarian programmers have proven their ability to understand and work perfectly with the software code and to observe the deadlines of the different projects. This turns Bulgaria and its capital Sofia into a tempting offshore destination, which has potential and all the preconditions for remaining such country for a very long time.

Bulgaria is among the most tempting countries to start a business in because of the favorable business conditions, the modern ways to make business including the options for opening virtual offices and renting serviced office in Sofia, and of course thanks to the competent young professionals, including accountants, lawyers, property managers, etc. Foreign investors, who wish to start business in the Bulgarian capital Sofia, should know that currently both the flat income tax rate on the individuals and the standard corporate tax is 10 %. All individuals in Bulgaria are subjects of a tax on their income as employees or self-employed persons. When a foreign individual is a permanent resident of the country, tax will be calculated on the income earned in Bulgaria and the income earned outside the country. If a foreign resident is employed in the country, then the tax is set on the income earned in Bulgaria. This income tax and the national insurance are deducted by the employers from the salary of the employees every month. Besides the 10 % corporate tax, the companies are further subjects to special tax rate if they are dealing with insurance or gambling.

The corporations in Bulgaria could be four types – this information would be useful to you no matter if you set up a virtual office, a serviced office or an office for long-term rent.
– The first option is to set up a limited liability company which in Bulgaria is with the suffix OOD. To set up such a company is needed at least one shareholder, that could be a company or an individual but director must be appointed. According to the new laws, no initial capital is needed to set up a company. The minimum share capital in this case is five thousand leva and the owners of the company are liable only for that amount.
– The second option is to set up a liability company with one shareholder only where the suffix in Bulgarian is EOOD. This company is owned only by one individual who can be also a foreign resident and is seen as a director of the company.
– The third option is the so called consolidated company with the suffix AD in Bulgarian. This company has at least one shareholder with the minimum value of the share – one leva. The minimum registered capital of the consolidated company is 50 000 leva and at least one fourth of the registered capital must be paid before the registration is made. The consolidated company is managed by a board of management.
– There is yet another, final option to set up a company with a single shareholder, where the suffix is EAD and the company is owned and controlled only by one shareholder. In such cases the owner is obliged to fill in an annual balance sheet for the tax authorities.

The other basic information for the investors who are planning to set up a virtual office, to use the service of the one-day offices or to rent a long-term office in Sofia or in any other place of Bulgaria concerns the capital gains tax, which is paid by individuals when there is a sale of real estate, vehicles, etc and this tax is paid on the difference between the sale and the market price. The capital gains tax for Bulgarian companies is added to the regular income. It is important to remember that the tax year in Bulgaria ends on 31st December, while the annual report of the limited companies must be presented by 31st March. Individuals should file this annual report by mid of April. The companies which had profit the previous year, should pay twelve monthly payments in advance during the following year, while the new companies should make four advance payments, one each third month of the year.

Will you set up a virtual office or will set up a company and need an office for a long-term in Sofia? Then it will be good to know that in Bulgaria the employer is obliged to deduct tax at source from the employee and in this way to make an additional contribution to the social security sphere. The social security rates are around 21.4 per cent for the employers and 13 per cent for the employee. Tax deductions at source are also made in case of dividends when the standard deduction is 5 %, in case of interest or royalties with the standard tax is being 10 %. In situations of foreign residents, the tax deducted at source is always subject to the Double Taxation Prevention Treaty.