How much does it cost to set up a company in Bulgaria or Dubai and why is it not a good idea

More and more Romanian entrepreneurs express their desire to leave the domestic fiscal system, against the background of economic uncertainties, discussions about progressive tax and VAT increase to 24%. Experts consulted by “Adevărul” explained why it is not a good idea and what risks they take.

Many Romanians are interested in setting up a company in Bulgaria or Dubai

Among the reasons invoked by entrepreneurs to move the company outside Romania are:

• The reduction of the tax burden – Hungary, for example, has a profit tax of only 9%.

• Legislative stability – in some European states, tax changes are rare and predictable.

• Specific facilities – deductions for investments, innovation, IT or green energy.

In fact, there are a lot of ads on the establishment of a company in Bulgaria or Dubai, some of them even offering a registered office.

How much does the registration of a company in Bulgaria or Dubai cost

For example, a company offers in addition to documents and registered office: “It is easier and cheap is to open a new SRL, but you can also open a branch of an existing company. (…) 335 euros costs the establishment of a VAT SRL with a single associate – natural person and 550 euros costs the establishment of a company, registered for VAT purposes and as an intra -Community operator with all the taxes (…) Ruse.”, It is mentioned in one of the ads.

Another announcement concerns the registration of a company in Dubai and the related costs.

“The cost of setting up a company with foreign capital in Dubai depends on a few key factors: the type of activity, the location (free zone or continent), the type of license, as well as the extent of the planned activity. It is estimated that the establishment of a company in Dubai costs between 10,000 and 40,000 AED (12,000 RON – 45,000 RON), which are not taxes related to the cost. They also include licenses and authorizations in Dubai, whose cost depends on the activity sector – the requirements are different for commercial, services or technological companies.

The process of registering a company includes several stages: you must gather the compliance documents, check the availability of the company name, establish the type of activity and prepare and sign the company contract, which it is recommended to consult with an experienced accounting firm. The next stage is the opening of a bank account, which will be necessary to start the activity ”specified in the announcement.

Contacted by “Adevărul”, Marius Stanciu, a lawyer specialized in taxation, claims that there are very high risks, behind this tendency to set up some companies in Bulgaria or Dubai hiding numerous myths and traps.

“It is a fashion now for the Romanian entrepreneurs to look at Bulgaria, Dubai, Malta or offshore, islands in the Caribbean. But, in reality, it is not easy to move the tax residence. Simple to move the company, the tax residence in other countries.he said.

How complicated is, in reality, move fiscal residence

According to him, the process of changing tax residence implies:

• Complex legal and administrative procedures, which can take months or even over a year.

• Significant costs: fees for lawyers and consultants, local taxes, rents, accounting.

• the obligation of a real presence: employees, workspace, concrete economic activity.

• the risk of non -compliance: non -observance of conventions to avoid double taxation or economic requirements may attract fiscal recalification and sanctions.

Tax illusions versus bureaucratic reality

The movement procedure to another country can be simple or easy, depending on the case. Essentially, it is not so simple to move fiscal residence.

Bulgaria is often promoted as a regional fiscal paradise, with a profit tax of only 10%. But in order to legally benefit from this regime, the contractor must actually live in Bulgaria at least 183 days a year, without frequent return in Romania. At the same time, the company must have a concrete activity there – employees, office, local billing, according to lawyer Marius Stanciu.

At the same time, Dubai is the fiscal dream of many entrepreneurs: without income tax or dividends, a seemingly relaxed fiscal environment. But the procedure for obtaining fiscal residence is rigorous: it involves the real move, renting a home, local expenses, constant presence and activity registered in the emirate. In the absence of these conditions, the Romanian fiscal authorities can challenge the status of non -resident and can tax the income.

“The procedure itself to move the company to Bulgaria is quite cumbersome, and in Dubai more complicated. And many entrepreneurs give up the idea, when they find out that they have to move to that country. It is not so easy, it is not just a matter of modifying the papers, real talking to a risk of recalification from ANAF. Specifically, ANAF, especially in the current economic context, will check if the center of your interests is there, even if you have a certificate of tax residence in Bulgaria. If the Romanian authorities determine that, in fact, the move was artificial, they can retreat your business operations from a fiscal point of view and to be subject to Romanian taxation, that is, practically to pay, besides the taxes and taxes in the respective country ”said the expert for “Adevărul”.

Malta especially attracts entrepreneurs from Crypto and Gambling fields, due to the clear regulations and attractive tax regimes. But relocation remains as rigorous. Offshores (for example, Seychelles) are increasingly risky and no longer allow easy repatriation of capital in Europe. In addition, international regulations (BEPS, DAC6, CRS) have dramatically reduced their advantages.

The advantages of an offshore company

Georgiana Găman, an accounting expert, financial auditor and fiscal consultant, presented the advantages and disadvantages of an offshore company.

Of the advantages, it listed:

1. Tax optimization

One of the biggest motivations to set up an offshore company is the fiscal advantage. Many offshore jurisdictions provide low tax rates or even zero tax for certain types of income.

2. Protection of assets

Offshore companies can be used to protect assets against potential processes or forced execution. In many cases, offshore jurisdictions offer increased legal protection for companies.

3. Privacy

Offshore jurisdictions are famous for the high level of privacy, protecting the identity of the owners. This aspect can be important for business that prefers to keep their structure and private operations.

4. reduced administration costs

In many countries, the costs of maintaining an offshore company are much lower than in other jurisdictions. This can make an offshore company a viable option for lower budget business, which want to reduce administrative expenses.

The disadvantages of an offshore company

Regarding the disadvantages of setting up an offshore company, the tax expert listed:

1. Rules and regulations

Although the flexibility of regulations can be an advantage, there are risks in choosing a jurisdiction with too relaxed rules. It is important to make sure that the jurisdiction has a solid legal framework, to avoid financial and image risks.

2. Image problems

Registering an offshore company can raise questions about transparency and business intentions. In many cases, the use of offshore companies is associated with avoiding taxes and other unethical practices, which can affect the company's reputation.

3. Legal risks

If the offshore company is used to avoid taxes or for other illegal purposes, there are considerable legal risks. Many international governments and organizations, including the EU have begun to impose strict measures to prevent fiscal avoidance through offshore structures.

4. Limited access to loans and funding

Some banks and financial institutions may be reluctant to grant loans to offshore companies, due to perceived risks. This can limit your company access to funding, which can be a problem for growing companies.