Doing Business Analysis: How Bulgaria differs from Ukraine

Being comparatively small, Bulgaria manages to develop different spheres of businesses that help increasing the country’s economy. Besides highly developed tourism and IT industry, Bulgarian government attempts to create favorable conditions that will involve more foreign companies to the local business markets. Last week in our Blog we also compared Bulgaria with Ukraine in terms of their IT outsourcing potentials. This time we provide an analytical view of Ease of Doing Business Index established by the World Bank. We would also like to compare Bulgarian and Ukrainian economies in general and how friendly are the two to foreign cooperation.

Ease of Doing Business Index

Bulgaria was ranked 38th among the countries included in the global rating for ease of doing business. The country joined the EU in 2007 and starting from 2013 its citizens gained the right to be officially employed in the EU member-countries. To the most of the world, the country is known for being a tourist destination for summer vacations since it offers different level services at comparatively low prices. Yet, the country is viewed by the World Bank as the one with the mid-income economy, therefore, it would be wrong to claim that Bulgaria is poor. The indicators that compose the Ease of Doing Business are extremely significant for those who are considering Bulgaria in terms of establishing a business from scratch starting with registering a business and ending up with crediting opportunities and support from local authorities. The indicators matter less if you consider outsourcing your IT or BPO, which is one of the most popular models in the country. However, certain clients consider Bulgaria as a good place for relocation.

Starting a business is probably one of the easiest procedures in Bulgaria, since it only takes 18 days to officially register a company there and go through 4 procedures only. However, to get all the permits related with moving business to the country such as establishing offices and other premises may be a bit troublesome.

Dealing with the construction permit, getting electricity supply and registering property will take longer, since going through the whole set of procedures may last from 250 days up to 1 year, depending on the scale of the construction plan. Yet, one of the main advantages is corruption, well, actually, its extremely low level. Local authorities attempt to do everything to develop country’s economy. Perhaps this is the reason why there are so many large IT market players: HP, EPAM, Luxoft, Ciklum, etc. Such aspects as getting credit, protecting minority investors, and resolving insolvency are not taken into consideration while establishing cooperation in IT outsourcing sector. However, the country stands strongly for supporting those companies or entrepreneurs being credited or provide credits. Still, the index of protecting minority investors is not that high, therefore, there are certain risks present, like elsewhere in the world.

Paying taxes and trading across borders is not so much complicated since Bulgaria is the EU member and has the right to officially employ foreign specialists or its specialists being employed within the EU. An entrepreneur or a company in Bulgaria is making 14 official tax payments within one year. The tax rate differs depending on the type of taxpayer: Personal Income Tax (10%) + Social Taxes equal to 22.9%, whilst Employers Social Tax amount to 17.8%-18.5% + 10% Income tax.

Main legislative requirements

Bulgarian legislation is built in a way to protect employees from unfair treatment and prevents any violations of the human rights. Local legislation envisages the same regulations related to working conditions as the Ukrainian, however, with some slight difference:

  • Fixed-term contracts aren’t prohibited for permanent jobs
  • Fixed-term contracts shouldn’t last more than 36 months
  • Minimum monthly wages - $241
  • Incentives provided for employing <25 aged employees
  • Max working week – 6 days
  • 3% of an hourly pay over the salary for night shifts, no additional payment for working weekly rest day
  • Overtime work payment – 50%+ to the salary from an hourly rate
  • 20 working days of the paid annual leave

Bulgaria vs. Ukraine

Bulgarian economic environment is calmer than Ukrainian since the last has faced military aggression on the one hand, and annexation of a significant part of the territory on the other hand. Comparing the market opportunities, for instance, Ukraine IT outsourcing sector offers the wider scope of services owing to the number of specialists: Ukrainian market amounts to over 100K specialists whilst the Bulgarian has less than 10K.

The total period for arranging the documents and register a business will take 20 days in Ukraine, and 14 in Bulgaria, and, unfortunately, many business owners are scared of going to Ukraine since the corruption level in the country is way too high. Despite the fact that the minimum salary in Ukraine will amount to almost $115 (in Bulgaria it is $241), the prices for the services in the sphere of IT and BPO are a bit higher and the number of services is also bigger. The cost of life on average in Bulgaria is higher than in Ukraine, however, average monthly cost of living in Sofia and Kyiv do not differ much.

On deciding which country should be the next home for one’s business or where the business will be best treated, discovering the main pros and cons of all the potential targets and only then going for it. IT Outsourcing Review team will continue revealing the most topical and interesting information that will help business owners to make up their mind.

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