The Sofia office market is developing well and today we can point out a few tendencies that characterize it. In the last couple of years in the city of Sofia have been constructed smaller, boutique-type office buildings for mixed usage. This means that these buildings offer residential zone and office zone. The main reason behind that is that the investors are trying to answer the demand of the buyers in the city of Sofia. In year 2012, the focus was on small to middle-sized office premises with coverage of 80 to 200 sq.m of area. Of course, there was also a demand for large offices with size exceeding 1 000 sq.m, mainly from certain companies from the IT sector and from companies that were looking to expand their business. In general however, the large office buildings in Sofia often remained with too many large offices that had no companies to rent them. At the same time the smaller offices were answering the needs of the small business. According to the experts, in the near future there will be a balance between the supply of office centers in Sofia and their demand.
In the last few years, many companies in Sofia decided to relocate their offices from the old buildings and locations into modern business centers due to the better working conditions and the reduced office rental levels in Sofia. For example, in year 2012, the offices in business centers of class A and B have reduced their selling prices with almost 7.5 %, compared to year 2011 and their rental prices with almost 16 %. In the end of last year, the average price of the office premises in Sofia was 5.80 Euro per sq.m. Currently, the office market in Sofia city is stable and no major changes are expected. The investment in Sofia offices is attractive and the companies are improving their offices and looking for more and better extras and facilities.
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.
In year 2012, the office market in Sofia city was characterized with dynamics as far as the renting of administrative premises is concerned. The number of the rented offices last year exceeds the number of the offices that have been taken in 2011 and 2010. The total square surface of the rented offices in Sofia for year 2012, the capital of Bulgaria, is estimated to be 76 500 sq.m. On these basis have been calculated a 30 % increase in the rental levels of the office premises and 1.5 sq.m increase in the offered office premises area. Currently, in the beginning of year 2013, there are 330 000 sq.m. of offices offered on the market, with most of the business premises being concentrated outside the city center, in the business zone of Sofia.
The main factor that has influence on the rental market of Sofia offices is the unstable economic situation in the country. Because of that, two offices out of ten are empty and in search of a company to rent them. Later in 2013 and in 2014 there will be several big projects for office buildings that will be released, like Bulgaria Tower with its 20 000 sq.m, followed by Vertigo Business Center with its 18 000 sq.m. In the end of 2014, the office market will welcome three other projects City Tower Capital Fort and Millennium Centre, which are expected to add another 100 000 sq.m. of office premises. These business buildings will be constructed according to the latest technologies and will have all extras required for making business. The offices there are expected to be rented or purchased by registered IT companies, off-shore and outsourcing companies.
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.
Once you have registered your company in Bulgaria and you are planning to open your own office in Sofia, you will face the challenge to get the right one for your needs. You can run a foreign company, an outsourcing company or another type of company, but definitely you will need a good office. The small companies and businesses, which do not know the Bulgarian market well, will most probably be afraid to proceed and open an office in Sofia straight away. Most probably they will start with securing a virtual office before they open an office in Sofia or another major city in the country. The services of the virtual offices are perfect for the aim of the small foreign companies to get an idea about the market, the current business situation, to arrange some meetings, even to make interviews with future employees. This is a great option for these companies that allows them to be flexible, to know the market and morals and ultimately to decide whether to step on the market or not.
Those companies that have already done their research and have decided to be presented on the Bulgarian market are trying to rent offices. The location and type of the offices are usually directly related to the activity of the newly registered company. These could be a large office of the “open space” type, set in a modern business building in the business zone of Sofia, but it can also be a representative office in the center. The options are varied according to the demand and the business needs. In the capital Sofia, there are many and varied options for renting an office or buying an office. The office rental prices are stable and significant changes are not expected. The managers of registered companies are able to choose between offices in the center of the capital along “Vitosha” Blvd., “Dondukov” Blvd. and “G.S. Rakovski” Street, next to all administrative and government buildings, as well as a number of bank offices. The offices in the center and those in the top neighborhood “Lozenets” are usually scattered in different buildings or gathered in several major business centers. The second most logical option to rent an office in the Business Park, which is located in the “Mladost” District next to the ring road. There are focused most of the offices of the large corporations in Bulgaria.
Besides these major office locations in the capital were built many other business complexes along “Bulgaria” Blvd. and “Tsarigradsko Schousse” Blvd. near the big shopping center “The Mall”. In general, during the last years, the demand of the new companies in Bulgaria is for first-class offices with parking and other amenities. There are many companies that are already established on the Bulgarian market, which also looking for new offices. They are usually from branches which are not so much affected by the crisis, namely telecommunications and information technology, insurance and financial services sector, energy, pharmaceuticals, service centers and call centers. These companies come from office buildings with lower quality and level of service, and a worse location that the options available now.
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.
Now that year 2013 is ahead of us, many are wondering what to expect from the office market in the next twelve months. According to the research, the main driving force will most probably be the foreign companies which work in the production and services sphere, as well as the outsourcing companies. These will most probably be registered companies in Bulgaria, which will pay taxes here and will hire local employees. The big international companies are focused on the optimization of their expenses and that is why they will keep on searching for other ways and countries to make business. These will be destinations, where the political situation is stable, the tax levels are low and the sums for salaries are affordable for them to cover.
This tendency has already started in Bulgaria and will be valid for the next year as well. Bulgaria, and especially its capital Sofia, as well as other of the major cities like Plovdiv, Varna and Bourgas, will put efforts into creating corporate business centers, which will be modern, with the required facilities and prestige city address. These business centers will be of the highest class A and will answer the requirements of the international companies that plan to operate here. These will be IT and HR companies, accounting companies, logistic companies, express services, call centers and companies that offer different administrative activities and services. Besides the already existing outsourcing companies, there will be new ones that will emerge on the market and this will lead to demand for new working places in modern offices. Big investments are also expected in the industrial sector, which will be stirred by companies that want to relocate their production to Bulgaria and reduce their expenses made in the process of production.
The rented offices in Sofia during the first nine months of 2012 amounted to 71 150 sq.m, which is with 50 % more if compared to the same period the previous year and with almost 18 % more when compared to year 2010. In year 2012 the tendency of the big companies to expand their business to Bulgaria continued. Companies like Coca-Cola Enterprise and Ingram Micro are just two of the companies that set the example. The bank sector was also busy moving offices. Two of the bank institutions, Alpha Bank and Post Bank moved to new head offices in modern office buildings of their own. In general, the companies are looking for office buildings of the high class, with the required facilities. Some of the companies are searching for top locations in the city center, others are looking for the business zones along “Bulgaria” Blvd. and “Tsarigradsko Schousse”, while others are considering the new office building “Sofia Airport Center”. The rental levels are varying between 9 and 15 Euro per sq.m., depending on the location and the class of the office building. According to the statements of the experts and their prognoses, the offices that will come into operation in year 2013 will amount to almost 28 000 sq.m.
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