Getting Bulgarian tax residency for digital nomads

by Anna Pelova

I met Dominik in Budapest. We stayed in the same hostel room which is how we met. Back then, he told me that he was living in Bansko, Bulgaria. We chatted a little and then he left. We didn’t exchange any contact details but I had a feeling that I will meet him again. A month later, I saw him in Coworking Bansko, just when I arrived there for the Nomad-In-Residence program. Dominik recently got his Bulgarian residency ID and has set up a company here. He is one of the many digital nomads who now choose to make Bansko their home base.

Dominik tells me how he came to Bansko for the ski season, without knowing anything about Bulgaria. He found an apartment for €250 per month and thought it was a good idea to optimize his expenses and get to snowboard while doing that. He tells me how he has been looking for a place to come back to, ‘When you travel around you always buy stuff and throw it away. I wanted a place where I could keep my stuff and actually come back to when I want some downtime. And when the ski season started I realized how cheap it was here. And then there was the coworking space, I met cool people. It all worked out.’ When he found out that the tax was 10% he felt like he had to get this set up because he was still getting taxed 30% in Australia, even though he wasn’t living there.

‘Evtim, the lawyer ,took care of everything. I spoke to some people who got it set up themselves and didn’t use a lawyer and they ended up going to Blagoevgrad (the nearest bigger city) like five times, trying to figure it out all by themselves. At the end of the day, I just figured that it’s better to pay the lawyer.’ All that Dominik had to do was follow his lawyer around for a day and sign documents. ‘It’s ridiculous how many documents there were.’ He also tells me how he got pulled into the immigration office, a regular procedure that wasn’t as scary or as formal as it sounds. ‘It was more like a chat. He asked if I liked the food in Bulgaria.’

‘After I paid the lawyer it took a couple days. The company got set up pretty much straight away and the residency took a couple more days because I had to wait for the company to be set up.’ As a Bulgarian resident, he can still do his business globally and pay himself a salary and dividends in Bulgaria, optimizing 20% of his taxes.

Pierre is another digital nomad I met at Coworking Bansko who has set up a Bulgarian company. ‘I can do everything with the company. I can make my money with the company. Maybe I will pay myself some salary. The rest of it is paid as dividends at the end of the year (which is and additional 5%). I have a VAT-registered company because I mostly deal with companies.’ Pierre tells me how Europe is the best option for him since there is cultural diversity and countries are close to each other. ‘And then Bulgaria stood out because there’s no other country in Europe like that.’ Like Dominik, Pierre also wants to have a home base and to keep coming back to Bulgaria while traveling.

The European tax system still needs to catch up with the digital nomad lifestyle that is becoming a global trend. As we can choose to change our home we should be free to choose our home base too while we travel for most of the year. Check the tax treaty for the country you are a citizen of to determine if you can fully optimize your taxes and how to do this in your specific case. The first step is to make sure that you are no longer a tax resident somewhere else, otherwise you might have to pay taxes in both countries.

Here is a simple three-step guide on how to set up your company and tax residency in Bulgaria.

Step 1: Find an apartment and get a lease

Before you do anything, you have to find an apartment and get a notary-verified lease to prove your intention that you want to live in Bulgaria. To avoid being ripped off, find a local you can trust and who can help you get a good deal. On average, you can expect to pay between €150 and €250 per month for an apartment for one person. The owner needs to be present when signing the lease at the notary office. You also need to have a translator who can be a local friend willing to help you and who speaks good English. Your lawyer can also be your translator. This is a legal requirement to make sure that you are signing a contract you understand. The members at Coworking Bansko who have done this can help you find a place to rent in the region.

Step 2: Find a good accountant who speaks English to set up your company and do your accounting

Now that you have an apartment you rent, you can use it for your business address and set up your company with it. Your company name must be unique for the country and it will be written in both Cyrillic and Latin. You can register a Limited Liability Company (OOD) or a sole owner Limited Liability Company (EOOD). The minimum capital you can put in your company is BGN2 (around €1) but you probably want to have a bigger capital to cover your initial company expenses. If your Bulgarian company sells services to non-Bulgarian companies, then you also must get a VAT registration. When buying goods and services for your company, you will get the VAT you paid back every 3–4 months. If you work with non-EU companies then you won’t have to apply VAT to your invoices at all. The VAT in Bulgaria is 20%.

As a company founder or co-founder, you need to pay yourself a salary. The minimum salary you can pay yourself is BGN460 (€230) per month. If you pay yourself the minimum, then expect to pay around BGN120 (€60) per month on your salary. You will have to pay social security tax, health insurance, and income tax on your salary too. There is an upper cap of BGN2600 for the social security and health insurance. If your salary is higher than this amount, you only pay these on BGN2600 which is 26%.

Your company profit is taxed with 10% corporate tax at the end of each tax year. The corporate tax needs to be paid by 31st March. If you would like to pay the company profit to yourself then you have to pay an additional 5% dividend tax.

The easiest option to set up and maintain your company is to find good accountants who speak English to do it for you. If your company is VAT-registered, expect to pay around €100-€150 per month. If you issue more invoices and pay salaries you might have to pay more than that. You can get in touch with Angelov Auditing (office@anodit.com) to get a quote (mention Anna Pelova’s article so that they know how you found them). I have worked with them for more than 3 years and I fully trust them with my accounting. They have also helped a few of my friends like Pierre and Dominik. The initial consultation is free.

Your accountants will also represent you when dealing with the tax authorities, which happens every few months if you are VAT-registered. The Bulgarian institutions can fine you if your accounting is not done properly so trusting the professionals can save you money and your nerves.

Step 3: Get your Bulgarian residency

Once you have an apartment and a company, you can go to the local immigration office in the Bulgarian city where you want to register to get your residency. In Blagoevgrad, the office is located at street Vlado Chernozemsky 3.

That’s it. :-)

PS.:

If you like to take care of your far away future then you can also consider investing in a fund outside Bulgaria as here you can’t expect to get a high pension when you retire based on your minimum social security contribution. Getting an additional private health insurance in the country is also a good idea. Check Allianz for supplemental health insurance in addition to the mandatory Bulgarian health insurance.