How to Open a Company in Bulgaria as a German Citizen

Bulgaria's 10% flat corporate tax is the second-lowest in the European Union. For German entrepreneurs paying an effective combined rate of 28–32% (Körperschaftsteuer plus Solidaritätszuschlag plus Gewerbesteuer), the arithmetic is compelling. But compellling arithmetic alone does not make a compliant structure — understanding both the opportunity and its legal boundaries is essential before you begin.

1. Why German Entrepreneurs Are Looking at Bulgaria

Germany's tax burden on owner-managed businesses is among the highest in the EU. A GmbH paying corporate income tax (15%), solidarity surcharge (0.825%), and Gewerbesteuer (averaging 14–17% depending on municipality) faces an effective combined corporate rate of around 30%. Distributing profits as a dividend then triggers a further 25% Abgeltungssteuer plus solidarity surcharge, bringing the total tax drag on a euro of company profit to roughly 48%.

Beyond the headline numbers, German founders contend with dense bureaucracy: the Handelsregister, mandatory Gesellschafterbeschlüsse through a Notar for many changes, strict Buchführungspflichten, and compliance overhead that can consume significant management time.

Bulgaria, an EU member since 2007 and Eurozone member since 2026, offers: 10% corporate income tax, 5% dividend withholding tax, a streamlined Commercial Register, and a fully digitalised tax authority (NRA). For founders whose operations are genuinely portable — software development, consulting, digital marketing, e-commerce — the case for a Bulgarian entity is strong, provided it is structured correctly.

2. EU Freedom of Establishment

Article 49 of the Treaty on the Functioning of the European Union (TFEU) guarantees every EU citizen the right to establish a company in any member state on the same terms as nationals of that state. As a German (and therefore EU) citizen, you have an unconditional right to incorporate in Bulgaria. Bulgarian company law imposes no minimum residency requirement and no citizenship restrictions on shareholders or directors.

The European Court of Justice confirmed in Cadbury Schweppes (C-196/04) that a company incorporated in another member state cannot be taxed by the home state's CFC rules unless it is a wholly artificial arrangement with no genuine economic activity. This is an important protection — but it cuts both ways: genuine economic activity is required.

3. Step-by-Step Registration Process for German Citizens

4. Tax Comparison: Germany vs Bulgaria

A worked example: a consulting EOOD earns €200,000 profit. After 10% corporate tax (€20,000), the company retains €180,000. Paying this out as a dividend to a German-resident owner triggers 5% Bulgarian WHT (€9,000), leaving €171,000 net — before any German personal tax obligations (see CFC section below).

5. Hinzurechnungsbesteuerung: What German CFC Rules Mean for You

Germany's Controlled Foreign Company (CFC) rules — Hinzurechnungsbesteuerung under §§ 7–14 Außensteuergesetz (AStG) — are the single most important factor for any German-resident shareholder of a foreign company. Understanding them honestly is non-negotiable.

Active trade income is different. If your Bulgarian EOOD performs genuine commercial activities — software development, consulting to third-party clients, e-commerce fulfilment — and those activities are conducted with real economic substance in Bulgaria (a director, a place of business, genuine decision-making), the income is classified as active and the CFC rules generally do not apply, even though Bulgaria's rate is below 25%.

The key question your German Steuerberater will ask: where are the substantive decisions made? If you sit in Munich every day and the Sofia company is merely a billing address, the Finanzamt may argue that the company's effective place of management (Ort der Geschäftsleitung) is Germany — making it a German-resident company for tax purposes and eliminating any structural benefit.

6. What You Can and Cannot Do

7. Common Mistakes German Founders Make

• Ignoring AStG until year-end: CFC income can crystallise retroactively. Engage a Steuerberater with Auslandssteuerrecht experience before incorporating.
• Underestimating apostille lead times: German Notare have varying turnaround times, and apostille issuance at the Landgericht can take 1–3 weeks. Plan ahead.
• Assuming the virtual office alone creates substance: A registered address in Sofia is legally required for every Bulgarian company, but it does not, by itself, create sufficient economic substance to satisfy a German tax audit. Real activity matters.
• Not registering the company with the German Finanzamt: German tax residents with controlling interests in foreign companies must report them on their annual Steuererklärung (Anlage AESt). Omitting this is a separate compliance risk.
• Confusing minimum share capital with actual capital: While BGN 2 is the legal minimum, banks and clients often expect a more meaningful capitalisation. Depositing €1,000–€2,000 signals credibility.

8. Costs and Timeline

Total time from first contact to registered company: typically 10–18 business days, depending on how quickly you can obtain the apostilled POA from Germany.

9. Frequently Asked Questions