Company Formation Bulgaria: In Pursuit of Success and Happiness? Try Bulgaria!
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- OECD: Articles of the Model Convention with Respect to taxes on income and on capital
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- Basic considerations within the framework of international taxation
In Pursuit of Success and Happiness? Try Bulgaria!
Hit hard by the financial crisis, citizens from across Eastern Europe can, and often do, tell tales of economic woe. But a number of surveys, indices, analysts and international media have lately shown that economic optimism is found in some surprising places, such as Bulgaria.
Bulgaria’s ruling GERB party won July parliamentary elections by promising to uproot rampant corruption and shield the emerging economy from the global economic crisis. Broadly speaking Borissov has done a good job in reassuring the rest of Europe that he means business.
The government has successfully implemented a number of reforms aimed to rid Bulgaria of its reputation as the European Union’s most corrupt country and free up millions of euros in EU aid which Brussels froze due to fraud and lack of results in fighting graft. The new cabinet has undertaken steps to prosecute senior officials for graft and to curb the grey economy.
Bulgaria has managed to win back the trust of Brussels, which has unfrozen more than one billion euros of aid since the new center-right government came into office. Herman Van Rompuy, the new EU president, visited Sofia in December. 2009 and stated: “Bulgaria is again on the right track.”
Following is a list of the positive changes that Bulgaria has recently seen, in the fields of economics and corruption combat, as covered by international organizations (Moody’s Transparency International) and foreign media (Wall Street Journal, Reuters):
- According to Moody’ s ‘Misery Index,’ which adds projections of fiscal deficits to unemployment numbers as a measure of economic gloom, the least miserable of the 23 states ranked will be Bulgaria. Slammed by the financial crisis and enduring spending cuts from a center-right government determined to balance 2010’s budget, this may come as a surprise for many in the EU’s poorest member state. But Moody’s says expectations of a negligible 2010 budget deficit combined with predictions of a jobless rate below 10% will see the EU newcomer even less downbeat than super-rich Switzerland, where real economy indicators have fared far better than the European average.
- Bulgaria is among the countries with the strongest index in the fight against corruption, according to the latest report of the US Global Integrity organization. With a “strong” index of 87 (out of 100) Bulgaria ranks second behind Poland among the 57 countries included in the study, followed by Hungary and Japan. The Index assesses the existence, effectiveness, and citizen access to key anti-corruption mechanisms at the national level in a country.
- Bulgaria has become less corrupt in 2009 according to the corruption perceptions index (CPI) published by Transparency International (TI). Bulgaria moved up one place from 72 to 71 and has become less corrupt than its close neighbors Romania and Greece according to the index.
- Bulgaria’s government has announced plans that the Value-Added Tax (VAT), which currently stands at 20%, could be cut to 17% in 2011, either at an one-off move or gradually by 0,5% every six months, starting as early as 2010.
- Bulgaria has the lowest personal and corporate income tax in the EU at 10%, which was introduced at the beginning of 2008, replacing the previous system, which combined several different tax rates – between 20 and 24%, depending on income.
- Bulgaria is the only country, whose outlook was lifted to stable from negative by Standard & Poor’sRatings Services in 2009 due to its strong track record of prudent fiscal policy and low gross debt.
- The country will apply at the end of January 2010 to join the exchange-rate mechanism, the two-year currency stability test prior to euro adoption, and seek to switch to the common currency by 2013. Joining the exchange-rate mechanism would bring Bulgaria closer to the umbrella of the euro region and the protection of the European Central Bank.
- The lev is already linked to the euro in a currency board that keeps the Bulgarian currency at 1.9558 to the euro. Joining the exchange-rate mechanism may allow the lev to fluctuate by as much as 15 % around a central band, though the central bank has said it will leave the lev tightly pegged to the euro through the duration of the two years.
- Bulgaria joined the EU in 2007 and posted the smallest budget deficit among the 27 member states last year, according to the finance ministry. It is expected to be the only EU nation to balance its budget in 2010. Foreign economists say Bulgaria’s economic and fiscal management has made it a role model for other countries in Europe.
- Bulgaria’s new government has linked information systems between its tax and customs authorities in order to clamp down on the fraud and corruption.
- The new cabinet has patched up Bulgaria’s leaky budget by cutting spending by 15 percent and taking steps to crack down on smuggling and tax evasion to boost revenues. It has also sacked hundreds of customs officers and taxmen in efforts to stamp out official corruption and organised crime.
As a result Bulgaria, the poorest EU nation in terms of GDP per capita, is expected to end 2009 with a small deficit of 0.76 percent of GDP, the lowest in the bloc. It also approved an austerity budget for 2010 with a deficit of 0.7 percent.
Company Formation Bulgaria
Bulgaria (10% income tax rate, independent of profits, no taxation of distribution of profits, EU company: EU freedom of establishment applicable, therefore EU directive on parent companies and their subsidiaries, DTA concept).
There are several types of company appropriate for conducting business in Bulgaria. Regardless of the type of business, all details must be entered in the Commercial Register, which is maintained by the District Court of the area in which the business is to be located. The whole registration process should be completed within 30 days. Registration at the local tax office and the National Social Security Institute are mandatory. Once the company has been registered, the National Statistical Institute issues a BULSTAT number, but this must be requested and, again, is a mandatory legal requirement.
Bulgaria Private Limited Company (OOD)
A Private Limited Company has share capital and the liability of shareholders is limited to the amount of each individual’s shareholding. One or more individuals can form this type of company. The minimum start-up capital is BGN5,000, which must be divided into shares of BGN10 each. A minimum of 70% of share capital must be paid up on foundation of the company. Shareholders must meet at least annually and a Board of Directors must run the company.
The main requirements to set up a Private Limited Company are the availability of the Articles of Association, the appointment of a managing director, and confirmation of paid-up share capital.
Bulgaria Single Person Private Limited Company (EOOD)
This is a form of company that is owned by a single shareholder, who appoints a Board of Directors (or Managing Director) to run the business. The legal requirements for the foundation of a Single Person Private Limited Company are the same as for a Private Limited Liability Company. Proper accounts (balance sheet and financial statement) must be prepared annually.
Bulgaria Public Limited Liability Company (AD)
A Public Limited Liability Company has share capital and is owned by the shareholders. Liability of shareholders is limited to the value of the shareholding. Two or more people can found a Public Limited Liability Company. There is a requirement to have minimum capital of BGN50,000, or BGN100,000 if by public issue. A minimum of 25% of share capital must be paid up upon inception. As with other company forms, shareholders must meet at least annually and proper accounts and financial statements must be maintained.
Bulgaria Holding Company
A Holding Company is permitted in Bulgaria, provided that it has some role in the management or investment of a Public or Private Limited Liability Company. Legally, at least 25% of the capital of a Holding Company must be invested in its subsidiaries. A Holding Company must control a minimum of 25% of the shares of a company.
Bulgaria Joint Venture
This is a popular form of business in Bulgaria, where a Bulgarian company is joined by a foreign company in a Joint Venture. The business form of the Joint Venture must comply with any of the business forms stipulated in the Commercial Code, but the size of any Joint Venture is without limit.
Any legal entity registered in another country can register a Branch of the business in Bulgaria. This is provided that the necessary legal registration in the country of domicile has been properly completed. A Branch is not regarded as a legal entity, although it must maintain accounts.