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Hiring staff without establishing a branch in Bulgaria

Many German companies do not know that – especially now, when working from home (home office) is becoming more and more widespread – Bulgarian employees who (want to) live in Bulgaria can also be hired directly by the German company, in accordance with Bulgarian labor, tax and social security law, without having to set up its own subsidiary in Bulgaria, with the associated legal consequences and administrative effort.
A German company can be registered for tax purposes as a foreign employer in Bulgaria and, with this registration, can conclude employment contracts in accordance with Bulgarian labor and social security and tax law with the corresponding low income tax rate of 10% and the corresponding Bulgarian social and health insurance rates. This is the most cost-effective way for plans to set up a hub in Bulgaria with ultimately only wage costs and costs for the monthly payroll and reporting to the tax office, which would have to be created and submitted from Bulgaria. A Bulgarian contract for occupational medicine would also have to be concluded. Later, legal questions about labor law (hirings, terminations, vacation entitlements) could arise; However, this employment law advice also applies to other forms of economic involvement in Bulgaria. The ongoing matters on site can be handled by means of a power of attorney through lawyers or accountants. If the project proves successful, you can always decide later to set up a local company. This would be particularly the case if your own office space or storage space is required.
If you need business premises, it is not necessary that this establishes a permanent establishment in Bulgaria. The Bulgarian Investment Law has provided for in Article 24 the possibility of registering a so-called “commercial representation”, or more precisely a passive representation, with the Bulgarian Chamber of Industry and Commerce. These representative offices are not allowed to carry out economic activities in Bulgaria. This construct is often used in sales, whereby all contractual matters are handled via Germany and only the local employees initiate the conclusion of contracts as salespeople. The payroll procedure described above also applies to these Bulgarian sales employees. For the passive representation, a simplified annual financial statement would also have to be submitted for the wage costs and other expenses incurred in Bulgaria.