Bulgaria is still out of Schengen after Germany opposed to it joining the no borders area. The regime of travel without borders is left for the future, after the meeting of the interior and justice ministers of the European countries in Brussels in the beginning of March. In order for the country to be accepted in the Schengen zone, all ministers have to be unanimous in their approval. According to Germany, Bulgaria has still not met the fundamental conditions required for being accepted in the Schengen area and has to be more decisive and strict when fighting against the corruption in the country. The annual report of the European Union declared that both Bulgaria and Romania have shown progress, but still have to achieve more.
The concern of the German Minister Friedrich, there is a risk that citizens who are outside the European Union can enter Bulgaria and then go to the rest of the European countries if the borders are open and there is lack of control. He claimed that he wants to keep the European Union from such invasion of immigrants. The Schengen zone allows for free travel with no visas and no passports being checked at the borders. Besides that, all European Union citizens are allowed to remain in any state in order to study or to work. Currently, the Schengen zone covers 22 states, members of the European Union, which means approximately 400 million residents. The countries that are not included are Bulgaria and Romania, Cyprus, Ireland and Great Britain. On the other hand, four countries that are not members of the European Union are part of the Schengen agreement and these are Norway and Iceland, Liechtenstein and Switzerland.
Even if the free movement of people from the European Union within the Schengen area is now largely achieved, there are a few exceptions. Under certain circumstances, internal border checks are introduced again for a temporary period of time. For example, the moments when such check borders were used are during the Football World Cup and the European Championships, as well as during the NATO summits and the meetings of the Group of Eight. In the summer of 2012, Germany, France and several other countries used border checks when a member country of the European Union allowed refugees that were too many. Such measures however, could be used in case there is serious threat to the public safety. For example, Germany and France were afraid that Greece was no longer able to patrol its border with Turkey in an efficient way due to its inner problems and crisis. In general, the countries that are part of the Schengen zone are trying to be as careful as possible, since when a person is already inside the Schengen are, there are no more borders or other checks applied.
Currently, Bulgaria is still outside of the Schengen zone, but will eventually become one in the future. The country is trying to answer all requirements that are applied, to fight corruption on all levels and to be strict with the crime fight. The country now has a new, interim government and new elections coming in May.
The ruling party in Cyprus lacked just one vote in the parliament to push on the bailout conditions it agreed upon on Saturday. The main dispute is about the one-off tax measure on deposits in the country, that are expected to gather some 5.8 billion Euro in order to stabilize the banks. The initial reports were for two rates – 9.9% for deposits over 100 000 Euros, and 6.7% for those below this sum. Now Cypriots try to renegotiate these terms in favor of the smaller depositors. The unofficial consensus is for 12.5% on the deposits above 100 000 Euros and 3 % on those below that sum. Several authoritative business newspapers predict even a higher rate of 15% for the deposits over 500 000 Euro. According to the governor of the Cyprus Central Bank people with relatively small amounts in all banks should be exempted from tax.
Today will be organized a teleconference between the finance ministers and central bankers of the European Union area, during which shall be discussed whether the new ideas are acceptable. The European Central Bank announced that Cyprus has to decide how and by whom it will collect the sum of 5.8 billion Euro. The finance ministers and the creditors in the face of the European Commission, the European Union and the International Monetary Fund are ready to confirm their promise of 10 billion Euros, but first they want to hear the exact figures and arguments that the measure will be efficient. The financial services in Cyprus make 70% of the gross domestic product. Currently, there is no such statistics for Bulgaria.
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.
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.
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.
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.
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