Bulgarian law lets anyone own and manage a company from any country, and the whole registration can be done by power of attorney. With 10% corporate tax and 5% on dividends, that makes Bulgaria attractive to founders abroad. But the rules of your own country travel with you: if the company is really run from where you live, your home tax authority may claim its profits, and the Bulgarian rate stops being the one that counts.
Where the company pays tax
A company incorporated in Bulgaria is Bulgarian tax resident, whoever owns it. Many countries, however, also treat a company as resident where its effective management is — where the key decisions are actually made. A company registered in Sofia but run day to day from Berlin, Madrid or Dubai can therefore be resident in two countries at once. A tax treaty usually settles the tie, often by looking at where effective management really sits, or through agreement between the two tax authorities.
Controlled-foreign-company rules
Even where the company stays Bulgarian, your home country may tax its profits in your hands. EU countries apply controlled-foreign-company (CFC) rules to companies their residents control that pay much less tax than they would at home, and many other countries have similar rules. A 10% rate is low enough to trigger them in several countries, especially for passive income or arrangements without real activity in Bulgaria. Check your home rules before you rely on the Bulgarian rate.
Building real substance
- Decisions in Bulgaria. Key decisions taken and minuted in Bulgaria — by a manager who lives here, or at meetings held here.
- People. A manager, employees or regular contractors in Bulgaria who actually run the business.
- A real address. An office, or a professional registered-office service where post genuinely reaches the company.
- Local operations. A Bulgarian bank account, a Bulgarian accountant, and contracts, invoices and records kept here.
- A business reason. Clients, suppliers or markets that explain why the company is Bulgarian.
How much substance is enough depends on your home country’s rules and on what the company does. A holding company with its manager abroad and no staff in Bulgaria is the riskiest combination.
Obligations when the manager lives abroad
- Contact person. A manager who is not permanently resident in Bulgaria must register a contact person living here. Missing it risks a fine, which can be imposed again every month.
- Beneficial owners. Changes in who ultimately owns or controls the company must be registered within seven days.
- Electronic filing. Most filings are made online with a qualified electronic signature, usually by your lawyer or accountant under a power of attorney.
The yearly calendar
| When | What |
|---|---|
| Every month, by the 14th | VAT return, if the company is VAT-registered |
| Every month, by the 25th | Income tax and social security on pay for staff and paid managers |
| By 30 June | Annual corporate tax return, and payment of the tax due |
| By 30 June | Declaration of no activity, for a company that did not trade during the year |
| By 30 September | Annual financial statements published in the Commercial Register |
A local accountant tracks these as part of the monthly service. Missed deadlines lead to fines and, over time, to questions from banks and the register.
Questions clients ask
Do I have to move to Bulgaria to run my company?
No. The law does not require a resident owner or manager. Moving, or appointing a manager who lives here, mainly helps with the tax questions above.
Can a nominee manager solve the substance problem?
Not on paper alone. A manager in Bulgaria helps only if they really run the business and take the decisions. A signature-only arrangement can be disregarded by tax authorities — and leaves you exposed if the nominee acts against your interests.
Where do I pay tax on dividends?
Bulgaria withholds 5% on dividends paid to individuals; your country of residence may tax them again, usually with credit for the Bulgarian tax. See taking profits out of a Bulgarian company and becoming tax resident in Bulgaria.
This guide is general information about Bulgarian law as it stood on the date of publication. It is not legal advice for your specific case. Unfamiliar terms are explained in our glossary.
