How to Set Up a Branch Office in Bulgaria: A Practical Guide

For foreign companies eyeing the Bulgarian market, setting up a branch office can be a practical first step. Unlike a subsidiary, a branch is not a separate legal entity; it is an extension of the parent company. This guide explains the essentials you need to know before taking the plunge.

What is a branch office in Bulgaria?

Under Bulgarian law, a branch office is a registered presence of a foreign company that allows it to carry out business activities in the country. It is not a separate legal person, which means the parent company remains fully liable for the branch's obligations. A branch can sign contracts, employ staff, and generate revenue, but it operates under the name and responsibility of the foreign entity.

Registration process

Registering a branch office is done through the Bulgarian Commercial Register, which is part of the Registry Agency. The process typically involves submitting an application along with a set of documents. These include the parent company's articles of association, a decision to open a branch, and details of the appointed branch manager or legal representative. The branch must also obtain a BULSTAT identification number and register with the National Revenue Agency for tax purposes.

Tax and accounting obligations

A branch office is taxed on the profits it generates in Bulgaria at the standard corporate income tax rate. It must keep accounting records in accordance with Bulgarian legislation and file annual financial statements. If the branch's turnover exceeds the statutory threshold, it must also register for VAT. Payroll taxes and social security contributions apply if the branch employs staff.

Advantages and drawbacks

One advantage of a branch is that it usually involves less formal setup than a subsidiary, and there is no minimum capital requirement. The parent company retains direct control over operations. However, the parent is fully liable for all branch debts and obligations, which can be a significant risk. Additionally, a branch may not benefit from certain double tax treaty provisions as easily as a locally incorporated subsidiary.

Ongoing compliance

Once established, a branch must comply with annual reporting requirements, including filing financial statements and tax returns. If it hires employees, it must adhere to Bulgarian labour law, including contracts, working hours, and health and safety standards. Regular updates to the Commercial Register may be needed if details such as the branch manager or registered address change.

Setting up a branch office can be a smart way to test the Bulgarian market or handle specific activities with minimal bureaucracy. However, it is wise to consult with local legal and tax professionals to ensure full compliance and to assess whether a branch or a subsidiary better suits your long-term goals.