Bulgaria is country located in the South-Eastern Europe, in the eastern part of the Balkan Peninsula. It borders on Romania in the north, Serbia in the north-west, Macedonia in the west, Greece and Turkey in the south. The area of Bulgaria is 110 993.6 sq.km, the population is 7 050 034 people (2017). The ethnic composition: 83.9 % of the Bulgarians; 9.4 % of the Turks; 4.7 % of the Gipsy; 2 % - others (including the Macedonians, Armenians, Tatarians, and Circassians). The capital of Bulgaria is Sofia. The official language is Bulgarian. The national currency is the Bulgarian leva (BGN). USD1 is equal to 1.66 BGN. The climate of Bulgaria is moderate; cold wet winter; hot and dry summer; the average temperature of January is from +2°С to -2°C, the average temperature of July is from + 29°С. The time difference with Moscow is minus 1 hour. The literacy rate is 8.2%. The telephone code is +359.

The Bulgars, Central Asian Turkic tribes integrated with the local Slavonians at the end of the VII century before the first Bulgarian state was established. In the next two centuries, Bulgaria fought with the Byzantine Empire for the Balkans. By the XIV century, the country had been seized by the Osmanli Turks. The North Bulgaria became autonomous in 1878, and completely got independent from the yoke of the Osman Empire in 1908. Bulgaria fought on the side of the lost party in both World Wars. Then Bulgaria got under the influence of the Soviet Union and became People`s Republic in 1946. The dominance of the Soviet power ended in 1990 that was the year when the first multi-party elections were held in Bulgaria since the times of the Second World War The country became member of NATO in 2004 and joined the EU in 2007.

Bulgaria is a parliamentary republic. The President is the head of the state to be elected based on the universal adult and direct suffrage for a five years` term. The executive branch is represented by the Council of Ministers consisting of the Prime Minister and ministers. The legislative branch – the unicameral National Assembly (240 deputies) to be elected for a four years` term. The judicial power: the supreme court of the common jurisdiction is the Supreme Court of Cassation (Върховен касационен съд), appellate courts - courts of appeal (Апелативен съд), first instance courts – District Courts (Окръжен съд), lower courts of the legal system — country courts (Районен съд). The Supreme Administrative Court is pronounced under subordinate acts of all the levels of state and local administration. The Supreme Legal Counsel shall identify the members of the court bodies, prosecutor`s office and investigator`s office of Bulgaria.

The economy of Bulgaria suffered significant crisis after the Council for Mutual Economic Assistance was dismissed and business connections and ties with former socialist counties were weakened. Moreover, sanctions imposed against Yugoslavia and Iraq negatively affected the condition of the Bulgarian economy. Due to the inflation, denomination of the national currency was executed on July 05, 1999: a new leva was used instead of 1000 old leva. The population living standard significantly deteriorated and only in 2004 the country managed to achieve the level of 1989. Reforms contributed to the stabilization in economy, upswing of industry and increase in the inflow of foreign investments into the country. The European Commission acknowledged Bulgaria to be the market economy in 2002, therefore recognizing the success of the government in performing market-type reforms. As of January 01, 2008 the income tax for all the categories of citizens amounted to 10%. This is one of the lowest rates in the world and the lowest rate in the EU.

Bulgaria belongs to the Roman and Germanic legal system. The modern legal system of Bulgaria started developing after the statehood became restored in 1878. The first codes were adopted at that time based on the European samples (Russian, Hungarian, and German). After the declaration of the people`s democratic state in 1946 the validity of the previous legislation was fully cancelled. Since the end of 1989 radical transformations of the political and economic systems started to unfold in Bulgaria, and the country set the course for democracy strengthening and transition to the market economy. Bulgaria returned to the Roman and Germanic legal system as result of the full scale reform in 1990-s that affected all the branches of law thus preserving the previous structure of the legal system as a whole. Most branches are codified. The basic source of the law - laws and other statutory and regulatory enactments. The judicial practice is deemed to be the source of law (close to the judicial precedent in its meaning) only at the level of decisions taken by the Plenum of the Supreme Court.

The legislation of Bulgaria sets forth the opportunity to establish the following types of business: collective society (Събирателното дружество – СД); a limited partnership (Командитното дружество – КД); a limited liability company with two and more shareholders (Druzhestvo z Ogranichena Otgovornost – OOD); a limited liability company with one shareholder (Еднолично дружеството с ограничена отговорност – EOOD); a joint-stock company (Акционерното дружество – АД); a limited partnership with shares (Командитното дружество с акции – КДА); a sole proprietor (Едноличен търговец – ЕТ) Most popular and widely used forms of business are a limited liability company with two and more shareholders (Druzhestvo z Ogranichena Otgovornost (OOD) and a limited liability company with one shareholder.

The following requirements for the company name are applicable in Bulgaria: the name shall not be identical to or similar to the existing name of a company; the name shall end in the form of incorporation: OOD or EOOD; words indicating types of business activities, requiring special legal regulation shall not be used in the company name (bank, insurance, investment, financial, trust); words specifying the national and international nature of business activities shall not be used in the company name (national, imperial, European, Global).

The company registration process includes the following stages: the name of the company, the structure (director, shareholder, beneficiary), the size of the joint stock capital, the type of business activities shall be determined; the uniqueness of the company name shall be verified; the services shall be paid; relevant documents shall be prepared; registration with the tax authorities shall be performed. Registration of a company with the Register takes 1 week provided the shareholder is present (a one day visit). The company registration process takes 2-3 weeks without the personal visit by a shareholder, since at first a company shall be registered after a local agent and then is transferred to the client.

No requirements for the registered office are imposed.

No requirements for the stamp are imposed.

No requirements for the director`s residence are imposed. The local director is not required since the company residence is determined according to the place of incorporation (Bulgaria), however, in case of any regulations conflict, when a company is actually managed from a different country; the double taxation agreement concluded between the countries shall be studied.

No secretary for Bulgarian limited liability companies is required.

Requirements for shareholders: for OOD two or more shareholders are required, for EOOD, one shareholder is required. No requirements for shareholders residence are imposed. Information about shareholders is included into the open register.

Despite the fact that a lot of jurisdictions discuss the issue of generating the open register of beneficiaries, no such register is drawn up in Bulgaria. It means that there is no free access to the information about a beneficiary owner. The service provider keeps this information, namely, the company, firm, registering company, trusting manager, lawyer, accountant and etc., provided that confidentiality is strictly observed. Information about beneficiaries may be disclosed only to the regulatory authorities (for example, during verification for its availability) or based on the judicial act.

Minimum charter capital of a Bulgarian limited liability company is BGN 1. The standard charter capital size is BGN 5 000. Bearer shares and non-par value shares are not allowed.

The taxation system in Bulgaria is similar to that of other European countries. The following taxes are imposed in Bulgaria: VAT, income tax, real estate tax, road tax, property tax, inheritance duty, excise duty, estate transfer tax and environmental taxes. Each tax is governed by an individual law. The Ministry of Finance and its subordinate authorities are liable for taxes collection.

The income tax for individuals in Bulgaria is charged from the worldwide income of residents and incomes of non-residents obtained within Bulgaria. Resident individuals are charged with worldwide income taxes, non-resident individuals are charged with income taxes only for the incomes from Bulgarian sources. The income tax rate is 10%.

The income tax is paid by all the resident companies from their worldwide income and income gains and is evaluated based on the annual net profit of the company minus expenses to be deducted. Non-resident companies pay taxes from the income gained in Bulgaria. The income tax rate is one of the lowest in Europe and makes 10%. The undistributed income of a company is not charged with the tax.

Assets sale return is usually included into the taxable income and is charged with the income tax at the standard rate.

Losses can be carried forward for 5 years and compensated with the future taxable income.

The tax year for companies coincide with the calendar year.

VAT is charged from most goods delivered and services rendered at the standard rate of 20%. The reduced rate of 10% is applicable for certain goods and services. Goods export - zero rate.

Companies registered in Bulgaria with the turnover of more than BGN 50 000 per year shall be VAT registered. There are also some other bases for immediate VAT registration of a company.

VAT shall be paid and VAT tax returns shall be submitted during 14 days since the end the taxable period. The taxable period is the calendar month.

Since 2009, tax residents of the EU countries as well as of countries that make up the European Economic Zone are obliged to submit the tax return at the end of the tax period where they can specify the expenses against the incomes from Bulgarian sources (for example, interests or royalty). If the tax withheld exceeds the amount of the local tax to be paid, then the tax surplus occurs and a foreign country shall be entitled for compensation. The dividends incoming from other countries can be charged with taxes at the rate of 0% in Bulgaria depending on the payer country. Most tax agreements allow insignificantly decreasing the dividends tax rate for the source of payment (15%). The dividends outcoming to the EU non-resident countries - 5%, to the EU countries (Cyprus, for example) - 0%. According to DTA, rates for UAE and Qatar can also be reduced down to 0%. The incoming interests shall be charged with the taxes at the common rate of the corporate tac that makes 10%. The outcoming interests - no tax is charged irrespective of the jurisdiction. Royalty to be paid to non-residents shall be charged with the tax at the rate of 10%, if the rate is not reduced in accordance with the tax agreement or the EU directive is not applicable.

No stamp duty is charged in Bulgaria.

No annual fee is charged in Bulgaria.

Real estate tax is an annual tax for real estate to be charged from the real estate owner in the amount from 0.01% to 0.45% of the cost of the property for the purpose of taxation. Inheritance tax shall be charged from the property inherited at the rate of 0.4 - 6,%. Some types of inheritance are not charged with taxes. The gift tax is a single time tax that shall be charged from the free acquisition of property. The tax shall be charged at the rate of 0.4 - 6.6%. Social insurance deductions - an employer shall pay from 18.92 to 19.62%, an employee shall pay 13.78%.

Transfer pricing: when using the standard of rights equality, Bulgaria implements OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations. No requirements are set for the documents; however, the tax authorities may request for documents on transfer pricing during audits. In case of transactions with non-residents, the burden of evidence shall be transferred to the Bulgarian taxpayer to show the nature of a transaction / Thin capitalization: rules of thin cap are applicable to related persons and loans from unrelated persons, if the related persons are obliged to submit the directly related loan to the unrelated party. The financial losses associated with loans where the interest or payback period depends on the borrower`s income shall not be deducted. Controlled foreign companies: n/a

Bulgaria entered into several double taxation agreements and tax information exchange agreements: 69 DTC: Austria, Azerbaijan, Albania. Algeria, Armenia, Bahrein, Belarus, Belgium, Great Britain, Hungary, Vietnam, Germany, Greece, Georgia, Denmark, Egypt, Zimbabwe, India, Indonesia, Jordan, Iran, Ireland, Spain, Italy, Kazakhstan, Canada, Qatar, Cyprus, China, Korea, Kuwait, Latvia, Lebanon, Lithuania, Luxemburg, Malta, Macedonia, Morocco, Moldova, Mongolia, Netherlands, Norway, Poland, Portugal, Russia, Romania, Serbia, Singapore, Syria, Slovakia, Slovenia, USA, Thailand, Turkey, Uzbekistan, Ukraine, Finland, France, Croatia, Montenegro, Czech Republic, Switzerland, Sweden, Estonia, RSA, Japan. 1 TIEA: Guernsey.

No currency exchange regulations are applied in Bulgaria, however, some requirements for reports are used.

Bulgaria applies IFRS as the basis of the accounting records. Only certified companies are allowed to use national standards of financial records for small and medium-size companies.

Некоторые компании должны также подавать финансовую отчетность согласно Международным бухгалтерским стандартам. К таким компаниям относятся те, которые выпускают ценные бумаги, зарегистрированные на рынке ценных бумаг в одной из стран ЕС. Финансовая отчетность должна включать баланс, отчет о прибыли и убытка и приложение. Также она может включать отчет о движении денежных средств и обзор изменений капитала. Финансовая отчетность хранится в Торговом реестре в открытом доступе.

Since the concept of the Annual Return is not applicable for the Russian law, we consider it to be necessary to clarify this concept. Annual Return is a brief statement of the current company structure that shall be prepared annually by the company secretary. As a rule, it includes: the startup data (date of registration, legal address); details about directors and their dismissals; details about secretaries and their dismissals; details about the incorporation capital, nominal prices of shares, the number of issued shares; details about shareholders and shares transfer. Bulgarian companies that are obliged to perform audits shall prepare and submit the Annual Return to the Commercial Register. The Annual Return of companies is publically available.

The tax year for companies can coincide with the calendar year, economic year, and the period since the moment of merge till the end of the calendar year or the financial year, if this period exceeds 12 months. The economic year is a 12 months period that starts on the first day of any month except for January. The tax shall be paid within the deadline period for the tax return submission. Penalties and fines are set forth for the late payment of taxes, failure to submit or late submission of the tax return and concealment of incomes.