Bulgaria New Tax Heaven for Romanian Companies

Romanian investors are increasingly deciding to register firms in Bulgaria, the Romanian paper Ziare wrote Tuesday in a report.

Ziare points out that in 2011 the number of Romanian companies registered in Bulgaria increased by 50% year-on-year.

The report adds that the same goes for Greek investors, with the number of Greek companies in Bulgaria increasing by 72% in 2011 year-on-year reaching a total of 3 781.

The main reasons for Romanian investors to choose to start business in Bulgaria are the flat corporate tax (10% - editor's note), the VAT levels, and the cap of the social security payments, according to Gabriel Biris, a Romanian tax lawyer.

"From a fiscal point of view they [Bulgaria] are in a much better situation than us with respect to both the flat tax which is 10% in Bulgaria, and the VAT, which is 20%; and even more so with respect to the social security payments which are 29%, and are capped at BGN 2 000," he explains.

Regardless of a Bulgarian's salary, one never pays more than EUR 290 for social security payments – which is the total for the employee and the employer, the lawyer says.

"They [Bulgaria] have a much more efficient tax administration than ours, and they have restructured it with projects funded by the World Bank," Biris adds.

The paper points out that Romania's flat tax is 16%, and the VAT rate is 25% after it was raised by 5% in the summer of 2010.