Registration of a company in Bulgaria during temporary residence abroad
Registration of a company in Bulgaria during temporary residence abroad
Question:
Hello!
I am a 20 year old student currently studying and living in Germany. I recently decided that I wanted to start my own dropshipping business. For this purpose I have to register my own company, bearing in mind that the only person in this company will be me, I settled on ET. Here is the moment to clarify that I have Bulgarian citizenship and after the end of my studies I plan to go home to live in Bulgaria, which is also the reason why I want to register my company there. The questions I have are: Is it really better to register a company in Bulgaria, given that for the next few years I will manage it from abroad? Is it possible to do the registration in question from Germany - online? Where will I have to pay taxes and will I have to have health insurance? As a student, I am currently insured without paying anything.
Thanks in advance!
Answer:
Hello,
First of all, we do not advise you to register an ET. What we would advise you to do is to register a sole proprietorship with limited liability. We will try to present you the main differences in the two options (ET and EOOD).
From a tax point of view, things look like this:
- with ET you declare the amount of income for the year. From the amount received in this way, you deduct the insurances paid during the year and you owe 15% tax on the amount received.
- with an EOOD, you declare the amount of income and expenses related to the activity. If the income is more than the expenses, then you make a profit and it is taxed at 10%.
From an insurance point of view, the situation is as follows:
- with ET, you are insured monthly, and accordingly you must declare and pay insurance every month. The minimum insurance income is currently BGN 780.00, which means minimum insurance payments of BGN 250.00 per month. At the end of the year when the annual tax return is submitted, an adjustment is made. It looks at the realized profit during the year. If the amount exceeds the amount on which you were insured, you must add insurance on the difference. The amount on which insurance is paid on an annual basis cannot be higher than BGN 40,800.00.
- with EOOD, insurance is paid again on the minimum insurance income for the year - BGN 780 on a monthly basis, the difference being that there is no annual equalization.
I.e. purely from a tax and insurance point of view, you will need to assess and make some kind of plan, what income you expect to receive and what expenses you would have. Only in this way would you be able to determine which form of activity is economically more profitable (ie you would pay less tax and insurance).
Beyond these differences there are also several purely functional ones:
- the money you earn as an ET is really your money and you can "spend" it whenever and on whatever you want. With an EOOD, the money the company earns stays with the company. If you, as the owner, want to have this money available, there are several options - to give yourself a salary, to give yourself a loan, or after the financial year is over and if the company has made a profit, to distribute a dividend to yourself, as you will have to to pay an additional 5% dividend tax on this amount.
- as an EOOD, the company is responsible for its obligations to the extent of its own assets and capital. As an ET - you are the company, which means that you are personally responsible with all your property for any liabilities arising from your activity as an ET. (which is also the most serious advantage of EOOD over ET).
Given that the activity will be carried out entirely online, it is not a problem that you will be physically located in Germany for a certain period. The company will owe taxes in Bulgaria. It is considered that it is a better option for the company to be Bulgarian in terms of less taxes and insurances that are due than in Germany.
Unfortunately, there is no way to open an EOOD in Bulgaria without your presence. Even if all documents can be submitted online, one of the requirements is to open a collection account in Bulgarian Bank, which cannot be done remotely or through a power of attorney. Banks require the account holder to be present in person.
If you choose the ET registration option, it can be registered without your presence. What is more specific in this case is that one of the documents is notarized by a Bulgarian notary, which means that you will have to go to a Bulgarian embassy convenient for you, where this will happen.
Regarding insurance - as a company manager, you will owe insurance according to the scheme described above, regardless of the fact that you are a student and in Germany you have health insurance on this basis.
Even if you work as an individual, without any registration, carrying out activity at your own risk for the purpose of profit, then according to the law you are carrying out commercial activity and are a trader. We understand that it is important for any start-up business to minimize its costs (including insurance), but at the end of the day, there is always the risk that the business you start may not turn out to be profitable and profitable enough.
In theory, company registration is the only legal way to do this business. In practice - many people do it even without registration, but as we have already mentioned, the law equates such persons to traders and - more specifically to ETs, and from this arise exactly the same obligations for declaring and paying taxes and insurances as for ETs - dad.
We hope we have been helpful!
Greetings!
