Country report Bulgaria 2022

Economic overview

An emerging but integrated market in the European Union, with important elements of attraction for Italian companies, namely the low cost of labor and energy, accompanied by advantageous tax policies. 

This is the picture that Bulgaria can offer to companies that are not yet present in the country, without considering the many sectors where the Sofia authorities rely on the investments and experience of Italian companies to develop the local economy. Added to this are the benefits that Bulgaria enjoys due to its geographical position, a natural bridge between the European Union market and Turkey, in turn a link to the Middle East region. This translates into a particular attention towards the construction of new road and energy infrastructures that cross the Bulgarian territory. 

The country is in fact crossed by 5 Pan-European corridors, has four international airports (Sofia, Plovdiv, Burgas and Varna), as well as two of the largest ports on the Black Sea (Varna and Burgas). Another aspect to underline is the attraction of European funding, which allows Bulgaria to count on huge resources from Brussels for economic development projects. From 2014 to 2020, Sofia had 11.73 billion euros available, a figure similar to that allocated for the seven-year plan 2021-2027 and to which funds for the Next Generation EU must be added.

To conclude the overview, those that instead constitute critical issues with which those interested in investing in the country should eventually be confronted are the shortage of skilled labor and the demographic factor, where the Bulgarian population has suffered a constant decline for several years now, with the exception of of the capital Sofia.

Main sectors of industry

Chemicals, mechanics, tourism, agri-food and transport: these are the sectors on which companies wishing to invest in Bulgaria should keep an eye on. Furthermore, these are particularly attractive sectors also as they are linked to the Treaty of pre-accession to the European Union and therefore subject to funding from multilateral organizations.

The chemical industry, according to the guide to the “Internationalization of Italian companies in South Eastern Europe and the Balkans”, drawn up by the Ministry of Productive Activities, absorbs 12.4% of the total Bulgarian industrial production and represents 12.8% of the country’s exports. The main items of the sector, on the production front, are fertilizers, soda, plastic and PVC.

Mechanical engineering, on the other hand, represents the fourth item of industrial production in the country (9.1%) and counts on 510 companies, mainly active in the production of tools, tractors and agricultural machinery.

According to a Phare study, tourism is one of the key factors in Bulgaria’s development: the tourism industry contributes 8.5% to GDP and could absorb foreign investments of 423.5 million dollars in the next 5 years. .

The agri-food industry is one of the primary sectors of the Bulgarian economy: the products of the sector, in fact, contribute 18.4% to national production and represent 5.5% of Bulgarian exports. What makes this sector very attractive, in addition to the tradition and variety of products, is the Community Sapard program, which grants annual funding of 53 million euros for the period 2000-2006. A substantial part of these grants can in fact be used for private investment projects presented by companies registered in Bulgaria.

Finally, as far as transport is concerned, Bulgaria is an important crossroads for European and extra-European trade and communication. The development of communications networks in the country will therefore play a key role in the development of communications between Europe, Turkey and the Middle East. The main projects to be carried out in this sector are the modernization of the Sofia and Bourgas airports and the construction of a second bridge over the Danube, between Vidin and Kalafat.

Taxation for businesses in Bulgaria

Bulgaria is the state of the European Union with the lowest tax burden, with a flat tax of 10% direct taxes on both individuals and companies, VAT from 9% to 20% (with possible exemptions), agreement between Italy and Bulgaria to avoid double taxation, withholding tax of 5% on dividends. Bulgarian legislation also provides for various tax incentives for investments in Bulgarian territory.

A single tax of 10%, the so-called “flat tax”, is applied to legal persons, such as companies, associations and foundations. While resident companies have the obligation to pay taxes in Bulgaria wherever their income is produced, for non-resident companies the obligation applies only to income produced in Bulgaria.

The tax base is calculated by overlapping costs and revenues, thus adjusting the result by adding non-inherent or undocumented expenses and subtracting exempt revenues. The deductible cost coefficients are established by law; thus, while machinery can be deducted at 30%, real estate is deductible at 4%, software and hardware at 50% and vehicles at 25%.

Companies that invest in particular depressed areas indicated by the law are exempt from paying part of the expected fee, but are obliged to reinvest the amount not paid to the tax authorities in the company itself.

Direct taxes on the income of individuals

Since Bulgaria’s entry into the European Union, the personal income tax is 10% (the so-called flat tax), which replaces the previous rates, calculated on a progressive basis. Taxable income is calculated by subtracting contributions, health insurance, life insurance and other compulsory or not compulsory installments.

Indirect taxes

VAT is the main indirect tax in force in Bulgaria. The standard rate is 20%, but in order to encourage tourist services, a lower rate has been established for accommodation facilities, equal to 9%.

VAT on the purchase of vehicles from companies is 100% deductible.

The category of indirect taxes also includes excise duties applied to particular products, such as alcohol, tobacco, coffee, items of clothing in genuine leather, precious metals, cars and fuels.

Advantages of setting up a Bulgarian company:

  • The lowest formation costs in the EU
  • The lowest minimum share capital in Europe, 1 €
  • Lowest dividend tax in the EU, only 5%
  • The lowest corporate income tax, 10% flat rate
  • Lowest social security contributions in the EU
  • 0% VAT within the EU
  • Easy, fast and secure setup service
  • Accounting and legal services at affordable prices
  • Establishment of the company within 24 hours
  • Treaties to avoid double taxation with over 70 countries
  • No dormant company tax
  • Low expenses
  • Cost of energy among the lowest in Europe
  • Lowest cost of labor in Europe
  • Simple bureaucracy
  • Companies can be anonymous with bearer shares
  • It is not on the blacklist of tax havens
  • Double currency. euro and lev linked to the euro

Investing in Bulgaria

It is a member state of the EC and the European country with the lowest tax burden. 10% on business profits. Among all, Bulgaria is by far the one in which it is most convenient to relocate a men work bulgria 2016industriale production, thanks to regulations that cancel the income tax of investing companies and the presence of numerous free zones for the application of VAT. (source wikipedia).

Second reason for investing in Bulgaria: the low cost of labor. In Bulgaria the average cost of an hour of work is 3.8 euros at the antipodes with Denmark 40.3 euros per hour, Italy reaches remarkable levels with 28.3 euros, the EU average is 24.6 euros time. As always, our country excels in these unenviable rankings. The only countries where labor costs have fallen in recent years are Cyprus, Portugal, Croatia and Ireland (source Eurostat, Sole 24ore European Statistics Institute).

Third reason for transferring your company to Bulgaria: if you decide to open a company, or to transfer the Italian company to Bulgaria, you can obtain the domiciliation plovdiv bulgaria 2016 company, no residence requirement, open a bank account and operate online from anywhere in the world, to be registered in the name of the Bulgarian vehicle company and to circulate in all EU countries and extra U.E. with ridiculous management costs when compared to Italy.

The road tax is less than 100 euros per year, even for large-engined vehicles, the same for insurance with costs between 100.00 and 200.00 euros per year. Fourth reason for moving to Bulgaria: you are not going to be pioneers but to join the many Italian entrepreneurs who have already decided to move the company to Bulgaria before you. Over 40% of them chose the city of Plovdiv, the second largest industrial center in Bulgaria and now known as the city of Italian entrepreneurs.

The reason is closely linked to the personnel costs much lower than the average in the country, about Bulgarian Plovdiv 2016 100.00 euros less per month than in Sofia and other more famous places. The fifth reason for moving to Bulgaria and doing business is given by the optimal position, a crossroads between Asia, Eastern Europe and Russia, furthermore the protection of foreign investments from expropriation and nationalization is guaranteed, the possibility of freely moving profits and capital, to investments foreigners registered before the introduction of any restrictive rules, the aforementioned rules will not apply for a period of ten years.

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