11. Should the minimum share capital be paid up in the Bulgarian bank?
A: At least 75% of the share capital when establishing a LLC shall be physically paid in the bank account at the time of company’s incorporation.
12. Should the shareholder of such company be a resident of Bulgaria?
A: No, this is not necessary. In Bulgaria the local and foreign individuals have equal rights and obligations towards the corporate, the commercial and tax legislation.
13. Is there any obligatory requirement that management should be situated on the territory of Bulgaria when one of directors should be resident in order to admit the company as being resident?
A: No, this is not necessary. There are many examples of incorporated Bulgarian companies with shareholders foreign individuals which have never visited Bulgaria before. In case that the management is situated abroad then the Bulgarian accountant shall complete all local obligations involved by power of attorney.
14. Q: How are indirect expenses defined and what do they include?
A: The Bulgarian Corporate Income Tax Act provides the following types of expenses which are INDIRECT EXPENSES for a company:
I. Indirect expenses which are accompanied with invoice:
1. Representative expenses related to the activity performed – These are documented /by invoice/ company expenses such as given lunch/dinner, food for the office, accommodation in hotel, coffee and water for the office and ect.
2. Social expenses, provided in kind to workers, employees and individuals hired under management and control contracts. The social expenses, provided in kind also include:
a) expenses for contributions (premiums) for additional voluntary social security, for voluntary health insurance and for life insurance;
b) expenses for food vouchers.
3. Expenses related to the operation of vehicles when the vehicles are used in order management activities to be performed. The indirect expenses accompanies with invoice are not VAT refundable.
II. Expenses without documents
The “Expenses without documents” is the second type of INDIRECT expenses. They are accompanied only by cash receipt, bill or any other paper /but not invoice/. This is the main difference from the Expenses accompanied with invoice.
The “Expenses without document” are booked in the account “Other expenses” and there is no monthly tax to be paid for them. At the end of the year they are included in the Annual Tax Declaration in the ”increasing part”. Therefore they increase the financial result of the company and as a result the company pays more Annual Corporate Income Tax /which is again 10%.
15. Q: When does the exemption from taxation apply?
A: 1. Exemption is applied to social expenses for contributions (premiums) for additional voluntary social security, for voluntary health insurance and for life insurance – up to BGN 60 per month per each employed person, when the taxable persons have no public liabilities subject to enforced collection at the time of the expenses’ incurrence.
2. Exemption is applied to social expenses for food vouchers, when they do not exceed BGN 60 per month per each employed person and when the following conditions are cumulatively fulfilled:
– the agreed basic monthly remuneration of the person in the month of the vouchers’ provision shall not be less than the average agreed basic remuneration of the person for the preceding three months;
– the taxable person shall not have public liabilities subject to enforced collection at the time of the vouchers’ provision;
– the vouchers shall be provided to the taxable person by a person authorized by the Minister of Finance, on the basis of a tender, to act as an operator of such activity;
– the amounts for the provided vouchers, paid to the operator by the taxable person, shall be used solely for bank transfers to the persons who have concluded contracts for provision of services with the operator, or for reimbursement purposes so that the taxable person can receive the face value of the vouchers in the cases that the latter haven’t been used;
– the persons the operator has concluded contracts for provision of services to the employees shall be registered under the Value Added Tax Act.
3. Exemption is applied to social expenses for transportation of workers and employees and the persons hired under a management and control contract – from their place of residence to the place of work and back.
Exemption does not cover expenses for transportation carried out by car or by extra bus services except for the cases where such transportation is being carried out by car to hardly accessible and remote areas, and where the taxable person cannot guarantee the execution of its activity without additional expenses occur.
Terms for payment of the tax – The tax on indirect expenses accompanies with invoice shall be paid until the 15th day of the month succeeding the month in which the expense was assessed. Where the taxable company has overpaid tax on expenses or corporate tax, the company’s tax may be deducted from the tax on expenses due.