Company in Bulgaria or Estonia: what are the downsides ?

[Oumerty]

Hi
Asking tofor veterans running a limited company-> e-commerce business in one of these two jurisdictions :

- what challenges have you encountered ?
- what nasty issues (if any) did you find ?
- did you encounter restrictions to operate in Europe ?

(For comparison purpose: I have experience only running an Ltd contractor in UK)

 

[bigdaddyleon]

I have no experience with either country, but I would probably prefer Estonia.

 

[Don]

Hi
Asking tofor veterans running a limited company-> e-commerce business in one of these two jurisdictions :

- what challenges have you encountered ?
- what nasty issues (if any) did you find ?
- did you encounter restrictions to operate in Europe ?

(For comparison purpose: I have experience only running an Ltd contractor in UK)

Statistics show that while Estonia is 5 times smaller in population it has a bigger e-commerce market than Bulgaria. In Estonia, you have better automation opportunities and way lower accounting costs. Bulgaria is not the best for e-commerce, due to outdated accounting regulations, which generate some extra work making it more expensive.
In Estonia, you have EUR while Bulgaria has LEV.
However, Bulgaria has the lowest personal and corporate tax rates within the European Union (10%) + dividend withholding tax of 5%.
In Estonia, you only pay corporate tax when you withdraw dividends. Income tax is flat at 20% and there's no withholding tax.

It would help to know what is your business model, budget, etc.

 

[Dasilva]

I’m running a e-commerce company (EOOD) in Bulgaria for more then a year now, I have no complains so far with what is written above. Everything is straight forward regarding taxes and accounting.

 

[Don]

I’m running a e-commerce company (EOOD) in Bulgaria for more then a year now, I have no complains so far with what is written above. Everything is straight forward regarding taxes and accounting.

Care to share the service provider? I had difficulties in finding a trustable service provider, especially one which offers nominee services as well (even after meeting like 10 law firms or tax attorneys).
I have setup businesses in both countries and must say both have certain benefits. For best asset protection and tax planning you anyway need to combine multiple jurisdictions.

 

[MarkusCostigan]

Always remember, Estonia doesn't like tax planning.

 

[Jerry1911]

Always remember, Estonia doesn't like tax planning.

Any practical examples you could share?

 

[Don]

Any practical examples you could share?

Remember these countries are part of the EU.
https://taxation-customs.ec.europa.eu/anti-tax-avoidance-directive_en

 

[pfser]

Hi
Asking tofor veterans running a limited company-> e-commerce business in one of these two jurisdictions :

- what challenges have you encountered ?
- what nasty issues (if any) did you find ?
- did you encounter restrictions to operate in Europe ?

(For comparison purpose: I have experience only running an Ltd contractor in UK)

With regards to Estonia
Challenges: local banking (unless you are a resident of Estonia), for sure you can open an account with Revolut or Wise, but forget about traditional banks.
Nasty issues: It's funny, but I've seen a couple of cases when state authorities asked foreign entrepreneurs with Estonian companies to translate their websites into the Estonian language. Language act Language Act–Riigi Teataja
Restrictions: it's all about your niche; without knowing it, I can't give any comments

 

[hlepic211]

Forget Estonia. When you get your VAT number you have to file an accounting report every month (if your turnover is above 15k EUR you are obliged to do it). The first year the taxmen don't touch you but then it's a nightmare if you go above 7 figures in turnover.

Banking - 0 options. Even if you manage to open a bank account they'll close it down in around 3-4 months without an explanation. If you manage to find a good bank in Switzerland or Liechtenstein it'll probably work out but then the taxmen problem won't go away.

If at some point you file a legit VAT return this is the point when the fuckery starts. Your mailbox will get bombed with stupid questions from the tax authorities.

If you want to pay yourself a salary that's below what the labour market dictates then they'll "advise" you to raise it and don't even think about saying that you don't want to do it.

 

[Don]

Forget Estonia. When you get your VAT number you have to file an accounting report every month (if your turnover is above 15k EUR you are obliged to do it). The first year the taxmen don't touch you but then it's a nightmare if you go above 7 figures in turnover.

Banking - 0 options. Even if you manage to open a bank account they'll close it down in around 3-4 months without an explanation. If you manage to find a good bank in Switzerland or Liechtenstein it'll probably work out but then the taxmen problem won't go away.

If at some point you file a legit VAT return this is the point when the fuckery starts. Your mailbox will get bombed with stupid questions from the tax authorities.

If you want to pay yourself a salary that's below what the labour market dictates then they'll "advise" you to raise it and don't even think about saying that you don't want to do it.

I agree Bulgaria has better banking options, although it seems your problems are because of the lack of substance in Estonia.

Indeed Estonian tax authorities can bombard your mailbox. It's their way of working. Instead of them starting a tax audit (which they rarely do) they kindly send you emails with inquiries. With tax audits, you are obliged to send all your documents within 5 days.

If you pay someone a salary that is below the market rate they see a higher risk that you are paying an undeclared (“envelope”) wage, so it kind of triggers them to conduct a tax audit or send you an inquiry, but no way they can determine the amount of salary you pay.

 

[Oumerty]

Wonderful to see a few insights

Seems like the situation is pretty much the same across the whole Europe. You get different tax rates and different kinds of paperwork
Yet all tax authorities seems to behave the same way…

The e-commerce I’m starting up is an intermediary; pretty much like Airbnb, but in a different sector.
So we’ll collect payments, like ebay, Airbnb, Uber… do and then pay the seller, minus our service fee. We are only going to sell digital services. No physical products

 

[Jade33]

the nominee services from accountancy firms I found in BG where around 600-1500 year but no idea on reliability.
does nominee even work with ubo register as they want to know the responsable person at the end of the line...

 

[SayMyName]

Care to share the service provider? I had difficulties in finding a trustable service provider, especially one which offers nominee services as well (even after meeting like 10 law firms or tax attorneys).
I have setup businesses in both countries and must say both have certain benefits. For best asset protection and tax planning you anyway need to combine multiple jurisdictions.

If you need a good and reliable provider I can share the contacts of mine. Helped me with number of issues even which sounded not legal

 

[Jerry1911]

@hlepic211 so what are you suggesting as an alternative to Estonia?

 

[myhand]

Hi
Asking tofor veterans running a limited company-> e-commerce business in one of these two jurisdictions :

- what challenges have you encountered ?
- what nasty issues (if any) did you find ?
- did you encounter restrictions to operate in Europe ?

(For comparison purpose: I have experience only running an Ltd contractor in UK)

You will find lot's of threads around the forum about Bulgaria and Estonia, Bulgaria always win's, people are happy with the setup.

 

[Don]

You will find lot's of threads around the forum about Bulgaria and Estonia, Bulgaria always win's, people are happy with the setup.

It depends on your business model and activities which one is the best choice.
Actually, there are number of people who combine both jurisdictions.
Estonian company + Bulgarian personal tax residency can be a good solution for example:

• The business might have a higher tax burden with just Bulgarian setup due to more withholding taxes (e.g. marketing, salaries, etc.) - immediately add 10% tax. It makes a big difference when you operate with a remote team of contractors.
• You would very likely pay a % for currency exchange to get LEV
• Estonian company allows for 0% effective tax (you only pay tax when you withdraw profits)

 

[Don]

Tax evasion in Bulgaria and criminal responsibility​

Bulgaria enjoys the lowest EU flat tax rate of only 10%. But as is often the case, the coin has two sides. The dark side of Bulgarian legislation is the ultra-low level of tax evasion that triggers criminal responsibility.

Anyone who fails to declare or pay taxes in excess of 3000 BGN (€ 1534) is punished with imprisonment from one to six years and a fine of up to two thousand BGN. When the tax obligations are more than 12000 BGN (€ 6135), the penalty is imprisonment from three to eight years and partial or full confiscation of the property of the perpetrator.

Regardless, this fairly sparsely populated country has room for more digital nomads and the like:

Good Luck!

 

[Don]

Bulgaria Business Tips series #39: if you like to eye on other man's dogs Bulgaria is not a place for you.
You can end up in prison for 6 years if you steal a dog worth GBP 7 (even if you technically did not steal it).

SOURCE (video from 14:00):

 

[AndyAresa]

If you need a good and reliable provider I can share the contacts of mine. Helped me with number of issues even which sounded not legal

Hi SayMyName, can you share the contacts of a good and reliable provider for Bulgaria? Same question to everyone. Thanks