A Sole Proprietorship (ET) is a straightforward and adaptable business structure in Bulgaria, well-suited for freelancers and small businesses. It offers simplicity and minimal administrative burden, making it an attractive option for entrepreneurs starting their ventures. However, it’s essential to understand the requirements and implications of this structure before proceeding with registration.
Requirements for ET Registration
To register an ET in Bulgaria, you’ll need the following:
- Bulgarian Personal Identification Number (PIN): This unique number is issued to Bulgarian citizens and permanent residents. Foreigners typically need to obtain a PIN before registering an ET, although there might be exceptions or alternative pathways.
- Registered Office Address: You must have a physical address in Bulgaria where your business will be officially registered. This address will be used for official correspondence and legal purposes.
- Bank Account: A Bulgarian bank account is necessary for your ET to manage finances, receive payments, and pay taxes.
Registration Process
The registration process for an ET involves these key steps:
- Obtain a PIN: If you’re a Bulgarian citizen or permanent resident, you can obtain a PIN from the National Revenue Agency (NRA).
- Gather Required Documents: Prepare the necessary documents, including your PIN, proof of address, and any other documents required by the Commercial Register.
- Submit Application: Submit your application to the Commercial Register, either online or in person.
- Pay Registration Fees: Pay the associated registration fees to the Commercial Register.
- Register with the NRA: Register your ET with the NRA for tax purposes. This step ensures you comply with tax regulations and can fulfill your tax obligations.
Tax Implications for ETs
- Personal Income Tax: Profits generated by your ET are subject to personal income tax of 15% in Bulgaria.
- Social Security Contributions: As an ET owner, you are required to make social security contributions. These contributions fund social security benefits, such as pensions, healthcare, and unemployment.
- VAT Registration: If your annual turnover exceeds 50,000 BGN (increasing to 100,000 BGN from 2025), you must register for VAT. Businesses involved in intra-community supplies of goods within the EU must also register, regardless of turnover.
- Annual Tax Return: ETs must file an annual tax return by April 30th of the following year. This return summarizes your income and expenses for the tax year and determines your tax liability.
Key Considerations for ETs
- Unlimited Liability: As an ET owner, you are personally liable for all business debts and obligations. This means your personal assets are not protected if your business incurs debt or faces legal issues.
- Limited Growth Potential: While ETs can hire employees and grow, they may face limitations in terms of raising capital and scaling up compared to other business structures like LLCs.
- Administrative Requirements: Although ETs have fewer administrative burdens compared to LLCs, they still require compliance with tax and accounting regulations. It’s essential to maintain accurate records and fulfill your tax obligations on time.
Advantages and Disadvantages of an ET
| Advantages | Disadvantages |
| Simple and easy to set up | Unlimited liability |
| Minimal administrative burden | Limited growth potential |
| Full control over the business | Can be less attractive to investors |
| Profits are taxed directly as personal income | May face challenges with business expansion |
For foreigners who want to start a business in Bulgaria, an LLC (OOD/EOOD) is generally the more suitable option. It offers limited liability and more flexibility for foreign entrepreneurs. You can learn more about setting up an LLC in our comprehensive guide: How to Set Up an LLC in Bulgaria (OOD/EOOD) – 2025 Guide.
Need help setting up or managing your sole proprietorship in Bulgaria? Our team of experienced accountants and advisors can guide you through the process, ensure compliance with regulations, and optimize your tax obligations. Contact us today for a free consultation!
Frequently Asked Questions (FAQ) about Sole Proprietorships in Bulgaria
- Can a foreigner register a sole proprietorship (ET) in Bulgaria?
Generally, foreigners need a Bulgarian Personal Identification Number (PIN) to register an ET. However, there might be alternative options or exceptions. It’s best to consult with a legal professional for specific guidance. - What are the main advantages of an ET?
ETs are simple and easy to set up, have minimal administrative burden, and offer full control over the business. Profits are taxed directly as personal income, which can be advantageous in certain situations. - What are the main disadvantages of an ET?
The main disadvantage is unlimited liability, meaning the owner is personally liable for all business debts and obligations. ETs may also face limitations in terms of raising capital and scaling up the business. - How do I obtain a Bulgarian PIN?
Bulgarian citizens and permanent residents can obtain a PIN from the National Revenue Agency (NRA). Foreigners may need to explore different avenues to obtain a PIN, such as establishing long-term residency or exploring specific business registration options. - What are the tax implications of an ET?
ET profits are subject to personal income tax. ET owners must also make social security contributions. If the annual turnover exceeds 100,000 BGN (166,000 BGN from 2025), VAT registration and monthly VAT returns are required. More on VAT in Bulgaria you can find here. - What are the record-keeping requirements for an ET?
While ETs have fewer administrative burdens than other structures, they still require proper record-keeping for tax and accounting purposes. Maintaining accurate records of income, expenses, and other financial transactions is crucial.