The parliament of Cyprus is to hold an important emergency session this afternoon in order to discuss a bailout scenario. The plan is expected to save the country from bankruptcy but the deal is not to the liking of the people. The bailout deal is expected to come into force on Tuesday, 19th March, when Cyprus will get a financial packaged of 10 billion Euro as agreed with the European Union and the International Monetary Fund. The debt is expected to be 100 % covered by year 2020.
The parliament aims introduce a one-time levy on the deposits over 200 000 Euros in the Cypriot banks with 9.9 % and all the rest deposits with 6.75 %, thus aiming to collect around 5.8 billion Euros. The plan aims to compensate the owners of deposits by offering them shares in the bank. There will also be taxation on the interest rates, that generate income form the deposits. The bailout plan for Cyprus further includes an increase from 2.5 % to 12.5 % in the nominal corporate tax, aiming to collect additional 200 million Euros a year.
There are expectations that the International Monetary Fund will probably help Cyprus, but the amount is not specified yet. Russia is expected to help with the extension of five years of the loan and a reduction of the interest on it from the current 4.5%. At the same time, Nicosia may be forced to privatize its telecommunications company, ports and energy company. Until 2018, the banking sector in Cyprus should match the average size of the banking sector in the other EU countries. Currently Cypriot financial sector is eight times larger than the national economy, compared to the European Union where it is about 3.5 times. At the same time the situation in Bulgaria remains stable, with the new interim government already in charge and operating.
Located in Luxembourg, the small village of Schengen played an important role back in year 1985. Then was signed the first agreement among several countries of the European Union that aimed to remove the border controls between these countries and to get common borders. The agreement was named after the village and the free travel zone became popular as Schengen zone. Ten years later, in 1995, the countries that applied these rules were eight. Throughout the years, their number increased to twenty-two states, members of the European Union but also non-members such as Liechtenstein and Switzerland, Iceland and Norway. Other countries, such as Ireland and Great Britain, do have border controls but are still sharing information with the countries from the Schengen zone. Bulgaria, along with Romania and Cyprus are waiting to be accepted. In order for Bulgaria to be accepted in the Schengen border free travel zone, it still needs to cover certain requirements and standards.
The Sofia based politicians are making their best to answer the requirements and to make sure that Bulgaria secures its borders with the neighboring countries that are not members of the European Union, in order to prevent crime and to stop the entry of illegal immigrants. Bulgaria has already gone through a certain transition period of several years, but in the beginning of March, its entry in the Schengen zone was postponed.
Schengen zone could be entered from many parts of Asia and Africa through a special visa. This is also valid for countries like Turkey and Russia. People from Australia and Japan, North and South America can enter the zone without a visa. At the same time, the Western Balkan countries except Kosovo, do not need visas for the Schengen area.
All good company managers know that once the company is registered and the office is available, they have to look for a good accountant or an entire accounting company that will take care of the taxes. The accountants will be able to plan all corporate taxes of the company. These include the value added tax (VAT), the income tax, the tax impact on the business and the dividends tax. Actually, the accountants will play a vital role in the company’s life and in every financial move in Bulgaria that has to be done. That is why getting an experienced accountant or a professional accountant company that can offer comprehensive consultation on all taxes in the country and the changes they often go through is important. These accountants will be able to keep the tracks of the monthly expenses of the office, but will also provide the managers with tax information on the Bulgarian tax rates, the due dates for these taxes, as well as the so called process of tax planning. They will be able to support the company with information that concern the applicable VAT in Bulgaria and the VAT registration, and shall be able to represent the company before several national institutions or take care of the property tax.
Currently Bulgaria offers good and acceptable income tax system, which is the lowest one within the tax rates of the European Union. This tax rate is 10 % for corporate tax and withholding tax rate for the non-residents. There is also 5 % tax rate on dividends and tax from shares. The VAT rate is 20 % and there are no plans for its reduction at the moment. There is a reduced rate of VAT that amounts to 9 % for the hotel accommodations and the tourism sector. The good accountant will be able to inform the managers of the company in advance, so that they can use the most profitable way of making business and handling the tax liabilities of the registered company in Bulgaria.
The plans of the Finance Minister Simeon Dyankov include imposing of a 10 % tax on the income from the bank deposits and other taxes on the profit from the stock exchange in year 2013. These measures are taken by the government, as it aims to ensure an equal tax treatment over the income which actually underlines the idea of the flat rate. The plans of the Finance Minister do not include aligning of the tax rates with the rates that are implied in the other European Union countries. On the contrary, he put a stress that he plans to preserve the low taxation in Bulgaria. The stable politics that concern the taxes in Bulgaria and the new changes to the better that are expected in year 2013 are great news for the companies that are still hesitating whether to open offices in Sofia and other cities in Bulgaria.
You have already registered a company in Bulgaria and plan to start making business in Sofia before you expand and head towards the rest of the big cities in the country. However, finding the right office might not always be an easy task. It turns out however, that despite the crises, many new offices in Sofia are completed and opening soon with almost 80 or 90 per cent of them being already rented. In other words, despite the bad news and the financial situations, the office market in Sofia is doing just fine. This is so, as there are plenty of international companies registered in Bulgaria, which are looking for prestige office address. These companies are looking for the right infrastructure, but also for suitable atmosphere and for well-trained and highly motivated professionals.
The completed office buildings in Sofia, which are of the highest class are not that many, however. There are many offices of the lower class, but they do not meet the requirements of the big companies for one reason or another. Business class A buildings enjoy prime location and are about five in total in Sofia. The rental levels there vary from 11 to 15 Euro per sq.m. The rental levels of the buildings of the lower class are lower. Besides the location and the rental price, the companies are also interested in the monthly bills they are expected to pay for electricity, management and other costs. It is believed that the office environment is becoming quite important for the companies. That is why many companies express the desire to relocate, as they aim at improving the working conditions and to get a better business address. These companies are also looking for office buildings that have certain zones for extra activities of the employees like a fitness center, zones for socializing, etc. Managers are aware that they have to create a different working atmosphere and to encourage their employees to communicate more among each other and to work with pleasure.
According to the reports that cover the first half of year 2012, several of the big companies moved their headquarters to other office buildings. Among these financial institutions could be pointed out “Postbank”, “Alfa Bank” and ” Texim Bank”. During this period of the year have been completed around 80,000 sq.m of new and modern offices. According to the same reports, the offices with prestigious and convenient location in Sofia and high quality of the construction could be rented at 9 to 12 Euro per sq.m for the areas outside the city center and at 12 to 15 Euros per sq. m for the central part of the city. The experts on the office market predict good future for the office sector in Sofia and the country in general. During the next year will be completed many quality office projects of class A, as well as new ones will be started. They will wait for their new tenants – prosperous big companies that want to hire local professionals.
The process of tax planning and also tax management is quite complicated one and this is valid for Bulgaria as well. There are plenty of changes in the law on taxes and they have to be tracked down carefully by all people who decide to register a company in Bulgaria, pay company taxes here and operate one’s business. This is not easy, as with each new year that comes, the changes in the Bulgarian tax law are becoming more complex. The good point here is that in year 2013, there will be many positive changes as far as taxes are concerned. New directives will be adopted by the European Union, which will concern the process of invoicing. A new invoice will also be introduces, which will have less data and will simplify the accounting operations. In addition will be introduced the so called “Summary Invoice”, which will be issued once a month and will include several supplies made through that period. Certain changes to the better will also concern the online invoices. These changes in the tax system in Bulgaria will set the base for other changes to be made in the future, until the administration in Bulgaria and the tax system of the country make it quite attractive to the investors.
All companies which are registered in Bulgaria and operate in the city of Sofia or other major cities in the country have to obey the Bulgarian Law, but also they have to keep up with the changes in the European Law, since Bulgaria is a member of the European Union. When taxes are concerned, we have tax management and tax planning, we have also tax forecasting, tax budgeting and VAT tax return, etc. As all managers of big companies know, just like the ones of the companies registered in Bulgaria, the process of tax management is really important part of the accounting of the company and its financial activity, its investments and profit. That is why it is quite a complicated process. The tax accounting services include tax documentation and tax rate modeling, tax account analysis and tax assistance, as well as income tax forecasting. Other useful services include tax compliance, which includes analysis of data, filling of documents and evaluation of the tax returns. Tax management for companies that are registered in Bulgaria could also include tax planning, where the aim is to reduce the tax liability, to control the risk from tax credits and increase the cash flow. Registered companies can also use the VAT tax services, which include VAT tax documentation preparation, VAT tax return and VAT bookkeeping. If they own a property like an office for example, or a car, companies should also have information on the immovable and movable property taxation. There are taxes on buying and selling of properties, there are local property taxes, etc. The good accounting offices can help the outsourcing and other companies in Bulgaria to use all credits and deductions available in order to minimize the tax liability that is due. Besides taxes, companies registered in Bulgaria should also pay national insurance that depends on the status of the people the company employs.
For several years already Bulgaria keeps on being quite appealing for the outsourcing companies. This sphere of business in Sofia and the rest of the big cities in Bulgaria is generating significant income for the international companies that have decided to make this step. According to the British newspaper “Financial Times”, this sector employs more than 15 000 people in the country. Although not as famous outsourcing destinations as the Philippines or India for example, Bulgaria and the city of Sofia in particular attract investors due to several factors. Among them are the good location, the professional and well trained staff and the relatively low wages. Many popular and large international companies have already opened and successfully run their outsourcing centers in Bulgaria. Among the leading ones are such solid companies like Hewlett-Packard and IBM, Coca-Cola, as well as Telus – the Canadian company, which bought part of the Bulgarian company CallPoint New Europ.
Outsourcing sector in Sofia is open to anything that will make the work easier and the employees – satisfied. The goal is for the work to be done and the customer to receive what one paid for. The outsourcing companies, like all other companies, have certain positions that do not require the employees to work from the office. The outsourcing sector welcomes this idea and this opportunity and even encourages some employees to work from home and visit the office once or twice a week. In this way they save time and money for travelling. These outsourcing companies also have open positions to part time employees and are happy to hire people with disabilities. After all, we all live in an era where one needs a computer, a telephone and a good Internet connection in order to do one’s work. The outsourcing companies appreciate the general knowledge of their employees and their great professionalism, and cherish the knowledge of different languages. It is this knowledge of languages make Bulgaria stand out from the other countries that are destinations for outsourcing. That is why we have to put our emphasis on this. In conclusion, Bulgaria is expected to attract many new outsourcing companies in the future. Young people will have the opportunity to benefit from the knowledge and skills that they have, to learn how to take risks and to set the basis for their career growth.
The outsourcing sector is driven by the state in many direct and indirect ways. These include infrastructure improvements and tax exemptions, logistics support and training of the personnel. Those major players who wish to register a company in the country and operate their business from Sofia are further encouraged to do so by the relatively low wage costs. In an interview that was published by Economy.bg, Mr. Joseph Lazarus, the manager of IBM Global Delivery Center Bulgaria, stated that at present Bulgaria provides the right balance of talented and ambitious professionals with experience and reasonable costs. The big companies that decided to outsource their business to Bulgaria have invested a lot of energy and money here in order to expand their business and offer competitive products and services. Big obstacles in the expansion of their business are the costs and taxes they have to pay, but this is a sphere that could be interfered with government's changes.
According to the recent analyses of the National Statistics Institute and the leading media, the business climate in Bulgaria is good and faces an increase of almost one percent in November compared to its level in October. The expectations of the managers in the industry sphere and in the sphere of services are for an increase with 3.5 per cent during December. A great part of the contractors plan to freeze the prices for the next three months. In general, Bulgaria and especially Sofia city keep their stable positions when the investment in office centers and trade buildings is concerned. There are several reasons for that. Bulgaria is in stable economic position and political situation. The country is also a member of the European Union. All these premises lead to an increase of 4.3 % in the investments during year 2012 compared to the investments made during the previous year 2011. The prognoses for year 2013 are for an increase in the investments made in the light and heavy industry including the processes of mechanization, automation, new production technologies, etc. The tendencies are for registration of companies in Bulgaria which trade with the European Union, but also with Turkey and China, Russia and USA, Serbia and Macedonia. The direct investments made in the country during the first nine months of the year are estimated at almost 972 million Euro, compared to the 712 million Euro for the same period in 2011. Great deal of investments was made from registered companies from The Netherlands, Switzerland and Russia.
In August 2012 it became clear that the Finance Minister of Bulgaria, Mr. Simeon Dyankov, stated that there will not be an increase in the value added tax in the end of 2012. In his statement however, he added that such a change is possible by the end of 2013. The Finance Minister also stated that our country does not approve the European Union tax harmonization and will not support it. This is so, as the country needs its flat tax, which amounts to 10 %, in order to be stable and to have an economic growth. Actually, the plans of this minister are for the flat tax to remain for the next ten or even fifteen years. The predictable policy of the government, as well as the stable political situation, make the country look quite appealing to the foreign investors. Many big companies are now looking towards Bulgaria and plan to outsource their business here or at least certain specific branches of their business. The good news is that the country can offer them stability and excellent infrastructure, as well as reasonable tax policy and option to register companies in Bulgaria. The other assets of the country, which are concentrated in the capital Sofia are the talented and experienced professionals, as well as the business centers of the highest class, which enjoy central and prestige locations and business addresses.
The companies which decided to outsource their business to the capital of Bulgaria and those foreign citizens who registered companies in Sofia are obliged to obey the legal requirements of the country. They have to be strict with the laws and to be responsible for the welfare of their personnel, just like all the other companies formed by Bulgarian citizens do. The basic requirements for employment relations in the country are arranged in the Labor Code. Here are also set the regulations that concern the working time and the breaks, as well as the holidays. All investors who decide to register a company in Bulgaria and hire employees should be aware of these rules and regulations. There is also the so called Social Security Code, which covers the issues with social security in case of general sickness, maternity leaves, cases of occupational illness and different accidents at work, unemployment situation and so on.
Absolutely compulsory in Bulgaria are the health insurance and the social security. There is also an option for supplementary health insurance and social insurance. The amount due for social and health insurance depend on the income of the employees and are covered by the employers. In addition to that, employers are the one to provide safe and healthy environment that will be pleasant for the people who will work there. The modern office buildings are arranged in accordance to these requirements and usually the registered companies have just to rent one of the office units to secure the requested healthy and safe environment. Today in the capital Sofia are to be found many modern business centers, special office centers and separate offices in commercial and residential blocks. There are a few business areas that are quite popular among the companies thanks to their location and these are the administrative zone of the city center, Lozenets district, the Business Park Sofia placed in Mladost district, and of course the new business area along the southern part of the ring road.
Besides registering a company in Bulgaria and finding a safe office with healthy working conditions, the employers have to follow a few social rules for equal opportunities of the employees, non-discrimination and gender equality. There is a so called Discrimination protection low, which gives the standards and protects the right of individuals to work and secures for equal working conditions and equal payment for same work done. It also secures equal opportunities for career development and training. Foreign investors who have formed companies in Bulgaria should also be aware of the Disabled People Integration Law. According to that law, the employers who offer job to disabled people will be stimulated by the government. At the same time, the employers should be obliged to adapt the working environment for the people with special needs. In case of disputes between the employer and the employees working in the registered company shall be applied the Collective Labor Resolving Disputes Law. It sets the methods for solving the collective disputes between the company employer and the employees. The disputes might be regarding the working conditions or the insurance conditions. The disputes should be arranged through a process of mediation or arbitration by the organizations of the employers and the trade unions, as well as by the National Arbitration and Conciliation Institute.
Foreign companies and citizens that have an intention to run a business in Sofia should set up their own companies. The conditions for them to do so are the same ones that are applied to the Bulgarian citizens and are set in the Bulgarian Commercial Code. The legal forms of starting a business that are most popular are limited liability companies and joint stock companies, though there are other options too like sole traders, holdings, etc. In order to be successful, the newly registered companies should have a secure financing and a solid commercial strategy. Before starting its business, the company has to go through a commercial registration at the Central Register and through a registration for VAT, which is mandatory if the turnover of the company is more than 50 000 BGN.
Investors who wish to register the so called public company, also known as joint stock company, shall go through specific procedures. These include for their company prospect to be received and approved by the Financial Supervision Commission. This commission is the one that issues permits for the companies that can operate as investment companies, companies with special investment aims, management companies, companies that manage mutual funds, etc. There are certain companies that operate on the capital markets, which have special requirements that concern their capital, their activities and the way of management. They work in close proximity with the Financial Supervision Commission.
Good news for all people that want to start doing business or to offer temporary services in a foreign country like Bulgaria, for example, is that there is a European law called Services Directive. Its purpose is to make registration of a company easier and to offer more services on the territory of the European Union, which includes all its twenty seven member states, as well as Norway, Lichtenstein and Iceland. This special Services Directive makes the member states reduce the level of bureaucracy and to simplify the formalities that are necessary to start a company, as well as to make the entire public administration work in a more efficient way. As a result of the efforts made and the Directive issued, the member states of the European Union had to organize online government portals and thus arrange all these administrative procedures in an easy and fast way. These special electronic government portals provide a lot of useful and practical information on all administrative issues that concern the start or the expansion of the business services in the country. Bulgaria is no exception to that and Sofia is proud of its online government portal. There one might find information and advice on every aspect of doing business, getting permits, applying for a license and so on. This online system allows for sending online applications to the authority that is in charge. In addition to all that, the online government portals in the countries that are members of the European Union are connected in one main network, which is also quite useful.
Since Sofia is the capital of Bulgaria, it is no surprise that most of the big companies head to this city when they decide to start a business in the country. The other cities they usually choose are Plovdiv, Varna and Bourgas. These companies have two options to start. Usually the smaller companies prefer to try the market at first and use the services of the virtual offices that are provided in Sofia. In this way for a certain period of time they can process their correspondence without physically being here, they can present the services of their company on the market, arrange meetings and job interviews, etc. The bigger companies tend to make their research well before they actually establish themselves in Sofia, so that when they actually open an office in Sofia, they have already done their math’s.
All companies that decide to start business in Sofia city will be pleasantly surprised to find real professionals in the spheres of legal services and consulting, Bulgarian company registration and taxation, financing, etc. These companies will be able to choose from several types of legal forms depending on their business. These could be sole trader enterprises, joint stock companies, limited liability companies, holdings, etc. For the registration of a company in Bulgaria one needs to fill in a set of documents arranged according to the laws in the country. The first thing is for a company name to be chosen, reserved and registered. Once this is done, there are certain documents that have to be prepared like an agreement of the association, a specimen of the signature of the managers, resolution from the meeting of the managers, etc. After that a company bank account is to be open by the manager or by a person who is authorized by that manager with a power of attorney signed in front of a Notary Public. Several other registrations need to be made as well – with the National Statistical Institute, with the National Insurance Institute, with the Local Tax Authority, with the Commercial Register, the personal data protection and the labor inspection committees, etc.
After the documentation is organized or along with its organization, the investors could look for an office. The city of Sofia has excellent business areas with modern business centers of class A, where the offices come with top location and are supplied with all facilities required for an efficient working process. In addition are available meeting and conference halls for different events with the coworkers and employees. Offices could be fully equipped and furnished to meet the needs of your business. They could be set in the center of Sofia or in the main business areas like Business Park Sofia in Mladost District, several large business areas near the southern part of the ring road of the capital and the office zone in Lozenets District, which is also set near the center and is served by the new line of the metro.
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