Where is it better to register a company: in Bulgaria or Romania?

Choosing a location to register a company is an important decision that can significantly affect the success of your business. Bulgaria and Romania are two attractive countries for company registration, each offering its own unique advantages and features. When choosing between Bulgaria and Romania, it is important to consider many factors such as tax policy, legal environment, cost of doing business and access to markets. Bulgaria attracts with low tax rates and a stable economy, while Romania attracts with its lack of bureaucracy and a rapidly developing market. In this article, we will take a detailed look at the advantages and disadvantages of registering a company in each of these countries to help you make the right choice.

When it comes to choosing between Bulgaria and Romania, there are a number of key factors to consider, such as taxes, geographic location and employee costs.

Tax policy of Bulgaria and Romania

Both countries offer relatively low corporate taxes, but there are differences in rates and tax incentives that can significantly affect the profitability of a business.

Bulgaria: Bulgaria offers one of the lowest corporate tax rates in the European Union – 10%. This low tax rate applies to both residents and non-residents but only to those who earn profits in Bulgaria. In addition, Bulgaria has a personal income tax rate of 10%, making the country attractive to both businesses and employees. The standard VAT rate in Bulgaria is 20% and can be reduced to 9%, which applies to certain goods and services.

Dividend tax – 5%.

In order to be able to register a business in this country, the director must obtain a residence permit.

Romania: In Romania, the standard corporate tax is 16%. For micro-enterprises with revenues of up to 500,000 euros, the rate can be reduced to 1% or 3%, depending on the type of activity and turnover.

In addition, there are preferential corporate tax rates: – 50% discount on R&D expenses – for companies that carry out innovative and scientific and technical activities, including IT; – 10% – for personal crypto-income. The standard VAT rate in Romania is 19% and can be reduced to 9%, which applies to certain goods and services, such as food, medicine, books and tourism services.

The dividend tax is 8%. At the same time, to register a business in Romania, there is no requirement for the director or shareholders to have a residence permit.

Thus, the tax systems of each country have their own set of advantages and disadvantages, it is important to focus on the goals of creating a business and choose the appropriate system depending on the specifics of your activities and the planned volume of operations. In Romania, the advantages are the relative simplicity of the procedures and the absence of requirements for a residence permit, which facilitates the rapid registration of companies and the development of entrepreneurial activity. However, the system can be complex in terms of administration. On the other hand, the tax system of Bulgaria, although it offers low tax rates, which can also attract potential businesses, but at the same time, to register a business, the director will need to obtain a residence permit, which, on average, takes up to four months.

Geographical location and market

Bulgaria has a favourable geographical location at the crossroads of important transport routes. The country is a member of the EU, which provides easy access to the markets of other member states and the opportunity for international trade. However, Bulgaria’s domestic market is relatively small, which may limit growth opportunities.

Bulgaria has a well-developed transport infrastructure, including seaports on the Black Sea, modern airports, and an extensive road and rail network. This makes the country convenient for logistics and trade.

Romania also has a strategic geographical location in Eastern Europe. With EU membership and access to its markets, Romania offers great business opportunities. In addition, Romania’s domestic market is larger than Bulgaria’s, which may be an advantage for companies focused on domestic consumption.

Romania also has a well-developed transport infrastructure, including seaports on the Black Sea, numerous airports, and good road and rail connections. Romania’s central location in Eastern Europe makes it a strategic point for trade and logistics.

Employee costs

In Bulgaria, the personal income tax system is relatively simple and attractive compared to other countries in the European Union.

Income tax is 10%.

In addition to income tax, social contributions are charged on wages in Bulgaria. These contributions are divided between the employer and the employee as follows:

Employer contributions:

• Social insurance – 13.72%.
• Health care – 4.8%.
• Industrial accident and occupational disease fund – 0.4% – 1.1%.

The total amount of social contributions paid by the employer is approximately 18.92% – 19.62% of the employee’s salary.

Employee contributions:

• Social security – 10.58%.
• Health care – 3.2%.

The total amount of social contributions paid by an employee is about 13.78% of his salary.

Personal income taxation in Romania is a balanced system with relatively low rates and contributions.

In Romania, the income tax rate is 10%. In addition to income tax, social contributions are levied on wages in Romania. These contributions are divided between the employer and the employee as follows:

Employer contributions:

• Social insurance – 4-8%.
• Unemployment insurance contribution – 2.25%.

Employee contributions:

• Pension insurance – 25%.
• Health insurance – 10%.

Choosing between Bulgaria and Romania for company formation depends on priorities and business strategy. If low taxes and labour costs are important, a company in Bulgaria may be the better choice. If you are looking for a larger domestic market and a strategic location, a company in Romania may offer more opportunities. Both countries have their advantages, and the final decision should be based on a thorough analysis of business needs and long-term goals, which the legal team at Azola Legal Services can help you with.