Social Law in Bulgaria
TYPES OF BRANCH OFFICES
The Contract Representation is amended in The Commercial Code of the Republic of Bulgaria (The Code of Law 1. No. 48 of 1991, valid wording of the Law 1 No. 105 of 2006) in Article 32 - 48. A commercial agent is a self-employed trader authorized to act or conclude business deals in the behalf of another businessman for repayment. With the exception of the Ban on Competition and the claim for a settlement of contracting parties at a withdrawal, a form of a contract is optional.
Searching for the agents is extremely difficult because there is not any traditional profession of an agent.
Sometimes a foreign company which has already had a branch office in Bulgaria whether it is a commercial company or a complementary producer can function as a representative and in this way make the best of its branch office.
Representative Office (Agency)
According to the Article 6 of The Investment Support Act, any foreign person with a character of a sole-trader can set up his own agency office (“Agent” or “Contact Office”). From the legal point of view, commerce agencies are not legal subjects so that they cannot perform their own economic activity (“non-self-contained branch office without commercial full powers”).
From experience, an agency office is a very easy way to enter the Bulgarian market. However, possibilities for legal acts are limited.
A registration at the Commercial and Industrial Chamber is sufficient for formation of an agency office.
Naturally, very important is the choice of a director of the office, as well as the choice of office space unless the director´s apartment is suitable for this purpose.
Whereas such an agency office is not a legal entity and cannot perform its own economic activity, the Legal Entity Income Tax comes off. The personal tax duty of a director of the office and the employees (Article 6, the Law of Income Tax, valid wording of the Law 1. No.95 of 24 November 2006 in efficiency from 1 January 2007) but not the duty of the Social Insurance (Article 5, the Social Insurance Code, valid wording of the Law 1. No. 105 of 22 December 2006) passes on you from the point of view of the Labour Law.
Apart from this, there is also the possibility of formation of “non-self-contained branch office with agent´s full powers”, which must be inscribed at the court (Article 17, The Commercial Code, valid wording of the Law 1. No. 105 of 22 December 2006).
The law of Business Corporation is amended in the Third part of the Second Book of the Commercial Code. On the basis of the equal negotiation with domestic persons, the Commercial Law of Bulgaria is valid for foreign company formation, too.
Business Corporations (the Article 64, pp. 1, the Commercial Code) can be formed as
According to Article 64, pp. 2, the Commercial Code, only the types of Business Corporation mentioned above can be formed. It is also possible to create the Syndicate of Businessmen in a form of Corporation of the Civil Law. All the forms of Business Corporation are legal entities in contrast with the Austrian Law (Article 63, pp.3, the Commercial Code) and are liable to the Legal Entity Income Tax.
The form of a branch office as a sole trader is possible for foreign investors (supposition: a sui iuris person in a branch office in Bulgaria) is amended in Article 56, the Commercial Code.
The Austrian specialty of GmbH (Limited Liability Company) as a limited partner, which is “GmbH&Co KG” assuming nothing in the Commercial Law in Bulgaria. The establishment would not be excluded, but because of the duty of the Legal Entity Income Tax of the Commandite it is less purposive. Instead of this, there is a possibility of the Limited Partnership with shares where the participations of the limited partners are issued in a form of the shares.
Generally speaking, a branch office in a form of a personal company (Sole Trader, Open Business Corporation, Limited Partnership and Limited Partnership with Shares) is rather unusual and it is connected with many risks and similar disadvantages. Usually, an ordinary way is: to enter with a Representative (Agency) Office and with increasing trade volume form a Limited Liability Company.
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