Implementation of a construction company abroad
Implementation of a construction company abroad
Question:
Hello!
We wish to open a construction company in Bulgaria, which will work on the territory of the EU. Most clients will be Spanish companies (not private individuals) who do not mind paying for the work done in Spain at the expense of the company in Bulgaria. We should be able to issue invoices that are registered in the EU system with a European number. Our main interest is to take advantage of the low taxation in Bulgaria and the generally lower costs. The company can be in any administrative form as long as costs are saved.
Thanks in advance!
Answer:
Hello,
It is not a problem to create a Bulgarian company and work with it in Spain, as you invoice the Spanish clients and they pay you in Bulgaria. Subsequently, you pay the taxes due in Bulgaria. There are a few points that are important and we want to note so that you are aware before taking any concrete steps.
- First, it must be specified what the nature of this construction activity will be. If it is a question of some minor construction and assembly works, finishing works with a brigade (several brigades), which do not require you to have a warehouse there or some base (production, office, etc.), then it is not a problem to carry out the activity with the Bulgarian company. The workers will be posted there, the necessary construction equipment will be brought and the activity will be carried out. However, if we are talking about some large-scale construction, for example, a production base, warehouses, halls, offices, etc. will be needed, then this will be indicative that the center of economic activity is in Spain. Then, for the Bulgarian company's activities there, a branch in Spain will have to be created, which will be subject to local legislation, which means that the taxes will be Spanish for the branch itself. In reality, this is equivalent to having opened a Spanish company. In short - if you have some base there, then a branch will have to be registered, if you have nothing there (only workers), then you can safely work with the Bulgarian company.
- Second - taxes and insurance. If we stick to the hypothesis from the first point, that there is no need for a branch, it is not a problem to operate with the Bulgarian company and pay your taxes and insurance in Bulgaria. The issue of taxes is undisputed - 10% corporate tax (on the profit that is formed from all income minus all expenses) and 5% dividend tax (if you wish to withdraw one from the company). However, the insurance issue is a bit more interesting. All other things being equal, workers who work in Spain will have to be insured under Spanish law, at the relevant local tax rates, which are likely to be higher than ours. Each country in the EU has minimum wage requirements and workers will need to be paid at least this minimum and be insured on top of it. What can hypothetically be avoided is to pay the insurances according to the Spanish legislation (not the salary, it is in absolutely all cases at least the minimum that is for Spain for the relevant activity). In order to pay insurance under Bulgarian legislation, it is necessary to produce document A1, which defines the Bulgarian legislation as applicable. For this purpose, it is necessary for the company to meet certain conditions, some of which are:
- for the last 12 months, to have at least 25% turnover realized on the territory of Bulgaria
- for the last 12 months, to have at least 25% turnover realized with Bulgarian counterparties
- for the last 12 months, there should be at least 25% of workers from the main activity (builders) who work on the territory of Bulgaria.
If desired, the NRA can add additional requirements. The aim is to clearly see that the company was not created just to export workers abroad, but that the company is a normal working construction company in Bulgaria, which mainly works here, but in this particular case will work abroad. As you can see from the minimum requirements, if you are a new company, you will soon have no way to meet these conditions, which makes the issuance of A1 practically impossible until the company has gained a certain experience, history in Bulgaria, and begins to meet the minimum requirements. In principle, it is not a problem for the company to work in Spain, just as we specified above, there will be no difference in taxes, there will be no difference in salaries (it is always at least the minimum for Spain), the only difference will be in the insurances (it will are at Spanish rates, which are most likely higher).
We hope we have been helpful!
Greetings!
