The accounting and consulting company “Elan Consulting” is your reliable partner in the accounting and registration of a construction company in Bulgaria. Whether it's “building construction accounting,” “small business bookkeeping,” or questions like “how do you do a construction company,” we're here to help. With extensive experience and professionalism, Elan Consulting provides first-class accounting services for construction companies in Bulgaria, covering all aspects from VAT, taxation, accounting of expenses and income, to issues related to foreign workers.
Our customers often ask us: “What are the specific requirements for accounting for construction costs?”, “How to account for income and expenses in construction?”, “What is the construction accounting standard?” and “What are the specifics of keeping accounting of a small construction company?”. We offer solutions and answers to these and many other questions, taking into account the latest changes in legislation and good practices in the field of accounting.
Other important aspects that we often touch on include: “How is registration of a construction company carried out?”, “What is the subject of activity of a construction company?” and “How much does it cost to open a construction company?”. Whether you are in Sofia, Burgas, Pomorie, Karnobat, Sunny Beach, Aytos, Nessebar, Sozopol, Primorsko or any other place in Bulgaria, we are ready to assist you.
“Elan Consulting” not only helps you understand how to check a construction company, but also provides guidance on developing a “business plan for a construction company” and strategies on “how to develop a construction company”. Our experts are at your disposal to provide you with the necessary support and advice so that your construction company thrives and develops sustainably.
With this full range of services and expertise, Elan Consulting is your ideal partner for accounting and consulting in the construction sector. Our team is here to answer all your questions and provide you with the solutions you need to succeed in your construction business.
Requirements for registration of a construction company in Bulgaria
Registration of a construction company in Bulgaria requires compliance with several key legal and administrative requirements, which are defined in various regulatory acts. The first step is the choice of the legal organizational form of the company. You can choose to register the company as a limited liability company (LLC), a sole proprietorship limited company (EOOD) or a variable capital company (DPC). The Commercial Law (TC) regulates the rules for the incorporation and registration of these legal forms. The Memorandum of Association or the company agreement must be notarized and contain information about the name of the company, the registered office and address of management, the subject of activity, the amount of capital and the distribution of shares between the partners and managers (art. 119 TZ).
The next step is registration in the Commercial Register and the Register of Non-Profit Legal Entities (ZTRRULNC). The application for registration must be accompanied by the Memorandum of Association or the company agreement, notarized samples of the signatures of the directors (Art. 141, para. 3 TC), proof of contributed capital (Art. 137, para. 4 TC) and a declaration under Art. 13, para. 4 ZTRRULNC.
It is important to know that in many cases the construction company must register under the Value Added Tax Act (VAT) if the company's turnover exceeds or is expected to exceed BGN 100,000 for a period of 12 months (BGN 166,000 will become the threshold for registration from 01.01.2025). The application for registration under the ZVAT is submitted to the territorial directorate of the National Revenue Agency (NRA). You should bear in mind that VAT registration can also be requested at the time of registration of the company in the Commercial Register, but it is not mandatory.
Is registration with the Chamber of Builders mandatory?
To carry out construction activities, some construction companies must be entered in the Central Professional Register of Builders(CPRS), administered by the Bulgarian Chamber of Builders. Registration in the CPRS is mandatory for constructions from the first to the fifth category according to Art. 137 of the Spatial Planning Act (ZUT). It is necessary to submit an application for registration, which includes information about the legal entity, data on managers and technical personnel, evidence of professional competence and experience, the availability of the necessary technical means and equipment, as well as a statement of the financial condition of the company.
If your construction company is going to carry out works that do not fall into the categories requiring registration in the CPRS, you can start your activity without this registration process. However, for any construction activity it is necessary to obtain the appropriate building permit, which is issued by the municipality where the construction work will be carried out. This permit is issued on the basis of an approved investment project, pursuant to Art. 148 para. 1 RUB. The investment project must be coordinated and approved by the relevant competent authorities (Art. 144, para. 1 BAR).
According to Art. 137 of the ZUT, not all construction activities require registration in the CPRS. Here are some of the main exceptions:
- Buildings of the sixth category- This includes small constructions, such as single-storey buildings with a low area, agricultural buildings and similar structures, which do not require special professional qualifications for execution.
- Ongoing repairs- Activities that do not change the construction or purpose of existing buildings do not require an entry in the CPRS. Ongoing repairs include the replacement of roofs, maintenance of facades, repairs of internal installations and other non-structural works.
- Internal rearrangements- Internal redevelopments of existing buildings, which do not affect the supporting structures and do not change the purpose of the premises, also do not require entry into the CPRS.
- Installation of equipment and installations- The installation of various types of equipment and installations (for example, air conditioning systems, solar panels, heating systems) in existing buildings does not require registration in the CPRS, provided that the load-bearing structures of buildings are not affected.
- Reconstruction and renovation of existing roads and facilities- Maintenance and renovation of existing road infrastructure, without significant change in design or purpose, does not require entry into the CPRS.
Registration in the CSB is carried out by submitting an application to the Commission for the maintenance, maintenance and use of the CPRS. The application must be accompanied by a number of documents, including evidence of legal capacity of the company and technical personnel, evidence of completed construction sites and documents certifying the availability of the necessary technical equipment and financial resources (Art. 11, para. 1 of the Rules of Procedure for registration and maintenance of CPRS).
Companies that carry out construction activities that do not fall into the categories from the first to the fifth category are not obliged to register with the CSB. This includes minor construction and repair work that does not require a high level of specialization and does not pose a significant risk to public safety. According to art. 137, para. 3 ZUT, these constructions are of the sixth category and include single-storey buildings, outbuildings and other small objects.
Enrollment in the CPRS provides a number of advantages to construction companies. Registered companies receive a certificate of registration, which is necessary for participation in public procurement and other competitions for construction projects. The certificate of registration also serves as proof of the professional competence and reliability of the company in front of clients and partners (Art. 4, para. 1 of the Rules of Procedure for Registration and Maintenance of CPRS).
The Commission for the management of the CPRS carries out control over the registered companies and monitors compliance with the requirements of quality and safety in the implementation of construction activities. The Commission has the power to carry out checks and impose sanctions when infringements are found. In case of serious violations, the Commission may remove the company from the register, which leads to the loss of the right to carry out construction activities of the relevant categories (Art. 17, para. 1 of the Rules of Procedure for registration and maintenance of CPRS).
How is the accounting of a construction company carried out?
The accounting of a construction company is a process that includes several key aspects related to the correct accounting of income and expenses, in accordance with Accounting Standard 11 (SS 11) - Construction Contracts, as well as other relevant regulatory acts.
First, it should be determined what type of construction contracts will be concluded. SS 11 regulates the accounting of construction contracts that cover at least two reporting periods. It is important to distinguish between contracts based on fixed price and contracts based on cost plus. In the case of a fixed price, the developer agrees to a certain contract price or a unit price of the finished construction product, and the contract may contain clauses for renegotiation in the event of an increase in costs (Art. 2, item 3). 2 SS 11).
Contract revenue shall include the initial amount of revenue specified in the contract, as well as the amount for additional work performed as a result of changes in the volume of work contracted. Revenue shall be measured by the fair value of remuneration received or payable (art. 4.1 SS 11). It is possible that the amount of income under the contract may increase or decrease in different periods, for example, when negotiating changes in the volume of works or payment of claims and material incentives beyond those initially agreed (Art. 4.3 SS 11).
The costs of the contract include costs that are directly related to the specific contract: labor costs on the site, including site supervision, costs of materials used in construction, depreciation of machinery and equipment, costs of moving machinery, equipment and materials to and from the site of performance of the contract, costs of renting machinery, equipment and facilities, costs of design and technical assistance that are directly related to the contract, as well as approximate costs for making adjustments and warranty maintenance work (Art. . 5.1 SS 11).
Contract costs also include costs that relate to the contractual activity in general and can be attributed to a specific contract, such as insurance and general construction costs (Art. 5.1, p. “b” of SS 11). Not all costs can be attributed to contractual activities, for example, general administrative expenses that are not provided for in the contract, and development costs, for which payment is also not provided (art. 5.2 SS 11).
Recognition of income and expenses under the contract is carried out by comparing the stage of execution of the contractual activity with the date of drawing up the financial statements. The method “Share of completed construction” is applied to the recognition of income and expenses under the contract, when the result of the contract can be reliably predicted (art. 6.1 SS 11). In cases where the outcome of the contract cannot be reliably predicted, revenue is recognized only to the extent that the expenses incurred are likely to be reimbursed, and expenses are recognized as an expense for the period in which they were incurred (art. 6.9 SS 11).
It is also important to comply with the requirements for the documentary formation of contracts and construction works. Contracts should contain detailed information on the volume of work, prices and deadlines for implementation, as well as sign protocols for completed construction and installation works (CMO). This is essential for the correct accounting of expenses and income under the contract, as well as for establishing the final completion of the construction site.
In the current accounting, it is necessary to use the rules for accounting for advance payments, interim payments and final estimates. Advance payments are accounted for as liabilities, while interim payments and final estimates are recognized as income in accordance with the work performed under the contract (Art. 9.1 - 9.4 SS 11).
What types of construction contracts are there and what is important to know?
The types of construction contracts and the important aspects to know about them are essential for the successful execution of construction projects. Construction contracts are governed by various laws and standards, including the Commercial Act (TC) and Accounting Standard 11 (SS 11) - Construction Contracts. Here is a detailed overview of the main types of construction contracts and the important aspects to consider:
Contracts for construction on the basis of a fixed price:These contracts are characterized by a fixed contract amount or a fixed unit price of the construction product. They may include clauses to renegotiate the price in cases of an expected increase in costs. According to Art. 2, item 2 of SS 11, the revenue under these contracts is measured by the fair value of the remuneration received or to be received. It is important to monitor compliance with agreed prices and costs, as well as changes in the volume of works that may affect the final price.
Cost-based construction contracts plus:In these contracts, the contractor is reimbursed the eligible costs plus a percentage on those costs or a fixed remuneration. According to Art. 2, item 2 of SS 11, these contracts may include various cost components, such as labor costs, materials, depreciation of machinery and equipment, and others. In this type of contract, it is important to ensure precise documentation and accounting of costs in order to avoid disputes about eligible costs.
Combined contractsWhen a contract covers the construction of a set of assets, the construction of each asset may be treated as a separate construction contract. This is valid if separate projects have been submitted for each asset, if each asset has been the subject of separate negotiations and if the costs and revenues for each asset can be determined (Art. 3.1 SS 11). The combination of contracts applies when the contracts are interconnected and are part of a single project with a common profit rate and are executed simultaneously or in continuous sequence (Art. 3.2 SS 11).
Contracts for additional works:The construction of additional assets at the customer's choice or when amending an existing contract is also an important aspect. Such contracts are treated as separate when the asset differs significantly in design, technology or function from the original contract and when the price of the asset is negotiated without reference to the original contract price (art. 3.3 SS 11).
Standard and framework contracts:These contracts are important for determining the general conditions and frameworks of the works. International standard forms of contracts, such as those of FIDIC, are widely used in the construction sector and provide standardized conditions that facilitate the management of construction projects. Standard contracts include clearly defined obligations of the parties, methods of payment and dispute resolution, as well as rules for amendments and additions to the contract.
Subcontracting:Subcontracting is common in construction and is related to the outsourcing of part of the construction work to third parties. These contracts regulate the rights and obligations of the main contractor and the subcontractor, and it is important to ensure synchronization of the terms between the main contract and the subcontracts (art. 5 Handbook of Construction Law).
Management contracts and construction supervision:These contracts include services for the management of the construction process and the implementation of construction supervision. Consultants engaged in project management carry out control over the quality of execution, compliance with schedules and budget, and provide administrative control over the construction process (Art. 168 and Art. 169b of the ZUT).
.webp)
%20(1).webp)
