Bulgaria is a great place to do business, but there is no room for complacency: not knowing local legislation can play a nasty trick on foreign entrepreneurs. What mistakes do Russian-speaking businesspeople in Bulgaria make most often?
Running a business in a foreign country is always harder than at home: the language barrier and unfamiliarity with local laws make the work more difficult. For this reason, when opening a business in Bulgaria it is very important to find a competent accountant. For some reason, Russian-speaking businesspeople in this situation often make one and the same mistake: they entrust their accounting not to a specialist in the field, but to a lawyer.
This is a poor decision. A lawyer may take on such work, but lawyers are not sufficiently well versed in accounting legislation, do not track changes in it and, as a result, make a great many mistakes. And it is the company’s owners who have to deal with the consequences.
Another common mistake concerns company reporting. Many company owners limit themselves to filing reports only with the tax and statistics authorities, forgetting about the need to publish reports in the Commercial Register. An unprepared accountant can make the same oversight.
You can easily check whether the reports on your company’s activities have been published. How to do this is described in our article “Remote control of your company in Bulgaria”.
Many mistakes are made when filing VAT returns. For some reason there is a belief that with zero VAT there is no need to show incoming and outgoing invoices at the zero rate in the annex to the return. This is incorrect. Even if the state suffers no loss, concealing invoices is still punishable by a fine, which for incoming invoices amounts to about 5% of the turnover on the specific invoice. Outgoing invoices can be entered within 12 months, so there is an opportunity for correction; as for incoming invoices, that is, any income of the enterprise, no correction is allowed here — the invoices are recorded in the current period with a date from the previous period, which leads to an immediate inspection by the National Revenue Agency (NAP). Nevertheless, this option is better than having NAP establish on its own that operations are missing from the report.
Administrative fines are not the biggest problem. It is far more unpleasant if an NAP inspection uncovers violations, and the fine for them is far larger.
Many people forget to file the declaration on the commencement of activity and, as a result, face administrative fines. It should also be taken into account that from the moment the company begins operating, social security contributions are accrued and must be paid.
There are pitfalls here too. Social security contributions are often paid into the wrong accounts. This is because the payment orders are very similar for the company and for the payment of contributions for the manager. Many people simply copy the details without looking into them, and as a result the amounts go into the wrong accounts and accumulate there, while debts pile up on the others.
Lawyers keep quiet about this possibility. What is more, not every accountant will tell the company’s manager that VAT overpaid to the state can be reclaimed so that the enterprise can use this money. Unscrupulous specialists who do not want to do extra work simply fail to inform company owners that they may claim a refund of value added tax. Meanwhile, the law provides for special VAT refund procedures, including, for example, on the purchase of real estate registered in the company’s name, which can amount to a considerable sum.
The accountant’s task is to prepare the VAT refund documents correctly and to get ready for inspections. A competent specialist will help the company recover money that it can use as an interest-free loan for many years.
When starting a business in Bulgaria, it is worth taking a responsible approach to choosing an accountant. The slightest mistakes in this area threaten serious complications in the future, and they usually cannot be corrected without fines. There are not so many competent specialists in Bulgaria, especially when it comes to international operations within the EU and beyond, so you should start looking for an accountant to whom such work can be entrusted well in advance.
Read our other articles:
Accounting services for your company in Bulgaria.
Corporate income tax in Bulgaria: you won’t find lower
VAT registration of a company: Why? When? Is it mandatory?
What not knowing Bulgarian legislation means for your business
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