Company types

The most common company structures in Bulgaria are Limited Liability Companies (LTDs, known as OOD or EOOD) and Joint-Stock Companies (JSCs, known as AD or Aktsionerno Druzhestvo). An EOOD (Ednolichno Obshchestvo s Ogranichena Otgovornost) designates a single shareholder, while an OOD (Obshchestvo s Ogranichena Otgovornost) indicates multiple shareholders. LTDs are a popular choice for smaller businesses due to their relatively simple setup and operational requirements. Notably, LTDs have a minimum capital requirement of BGN 2 (€1), making them accessible to entrepreneurs with varying levels of investment. JSCs, on the other hand, are typically used by larger companies and require a minimum capital of BGN 50,000 (€25,000). JSCs also necessitate at least three board members, a deputy director, and a mandatory annual audit conducted by an independent accounting firm. Furthermore, bearer shares, which allow for anonymous ownership, are not permitted in Bulgaria, enhancing transparency in corporate ownership.

How to form a company

Setting up a company in Bulgaria is fast and efficient. With proper documentation, registration can be completed in a few days. The process of forming a company in Bulgaria generally involves a notary. The initial step involves drafting the company's articles of association, which outline the company's purpose, structure, and operational guidelines. These articles of association can be prepared in both English and Bulgarian, facilitating international business dealings. The company formation process is typically efficient and streamlined, minimizing administrative hurdles. While physical presence is often required for certain steps, remote setup using powers of attorney may be possible in specific cases, offering flexibility for foreign entrepreneurs. Once the company is registered, opening a business bank account is essential. Banks typically require in-person meetings with company representatives to establish a relationship and understand the nature of the business. Accounts are usually opened in both EUR and BGN, catering to both local and international transactions. USD accounts are also readily available. Similarly, the dissolution of a company, should the need arise, also requires the involvement of a notary and adheres to a well-defined legal process.

Steps to register a company:

• Choose a company type (e.g., EOOD or OOD) and unique name.
• Draft and notarize company documents (bilingual options available).
• Deposit the minimum share capital (if required) in a bank.
• Register with the Bulgarian Trade Register and obtain a BULSTAT (unique identification code).
• Register for VAT (if applicable).
• Open a business bank account (banks usually require in-person verification).

Labour Costs in Bulgaria

Bulgaria offers some of the lowest labour costs in the EU, making it an attractive destination for businesses looking to optimize operational expenses. Below is an overview of the key aspects of labour costs in Bulgaria.

Salary Levels:

The average gross monthly salary is around BGN 2.000–3.000.

The minimum wage (January 2025) is BGN 1,077 per month, this applies to a standard 8-hour workday and a 5-day workweek. This figure represents the baseline for labour costs and is subject to periodic adjustments by the government.

Salaries vary

Salaries vary based on industry, experience, and location, with Sofia having the highest wages. IT, finance, and engineering sectors offer higher wages compared to manufacturing or services. Highly skilled workers such s IT, engineering, and finance professionals earn between BGN 3.000 – BGN 8.000 per month.

Employer Social Security Contributions:

Employers in Bulgaria are required to contribute to social security funds on top of gross salaries. Total employer contribution rate is 18,92% – 19,62% of gross salary. This covers pension, health insurance, unemployment, and other social funds. The contributions are subject to a cap

Employee social security contributions and income tax:

Employees also contribute to social security and pay income tax. The employee Social Security Contributions rate is around 13,78%. of gross salary, allocated to pensions and health insurance.

Income Tax is a flat rate of 10% applied to taxable income after deducting social security contributions.

For example, an employee earning BGN 1.000 gross would pay:

• Social contributions: BGN 137,8 (13,78% of BGN 1.000).
• Income tax: BGN 86,22 (10% of BGN 862,2, the net after social contributions).

Maximum Social Security Contributions cap:

Social security contributions in Bulgaria are capped at a maximum monthly income threshold. For 2025, the cap is BGN 4.130. This means that employers and employees only pay social contributions on income up to BGN 4,130, even if the salary exceeds this amount. Income above this threshold is subject only to the 10% income tax.

Other Mandatory Contributions:

There might be other mandatory contributions, such as contributions to guarantee funds or occupational health services. Depending on company policy and employment contracts, businesses may offer additional benefits like meal vouchers, transportation allowances, or supplementary health insurance, which add to the overall labour cost.

Severance Pay and termination Costs:

Bulgarian labour law regulates severance pay and termination costs

Severance Pay, depends on the reason for termination and length of service. For example:

• Redundancy: 1 month's salary for up to 5 years of service, increasing to 4 months' salary for over 20 years.
• Unfair dismissal: Up to 6 months' salary as compensation.

Notice Period is typically 30 days, but can vary based on employment contracts.

Unused leave, employees must be compensated for unused vacation days.

Termination costs are relatively low compared to Western Europe, making workforce adjustments more manageable for businesses.

Factors Affecting Labour Costs:

• Industry, certain industries, like IT or finance, typically command higher wages due to specialized skills and demand.
• Location. labour costs might vary slightly between different regions within Bulgaria.
• Skills and Experience, highly skilled and experienced professionals naturally earn higher salaries.
• Collective Bargaining Agreements, in some sectors, collective bargaining agreements between unions and employers can influence wage levels.

Conclusion

From a business perspective, Bulgaria offers a compelling combination of low labour costs, a skilled workforce, and a favourable tax environment. Employer and employee social security contributions are reasonable, and the flat income tax rate simplifies payroll management. Additional benefits and low termination costs further enhance its appeal. These factors, combined with Bulgaria's strategic location and EU membership, make it an ideal choice for businesses looking to optimize costs while maintaining high operational standards.