Cutting costs of Road Haulage business

Did you know that you can benefit of lower administration costs for your Road Haulage business? You can do this by outsourcing your EU international road transport operator's license (Community authorisation) to another EU member state, where the state fees, insurances, accountancy and driver salaries will cost less than what you are paying in the UK. The biggest benefit is the corporation flat rate tax of 10%.

We are offering full one-stop-shop service for outsourcing you EU haulage business to Bulgaria (an EU member state).

We offer the following services:

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  • registration of Bulgarian subsidiary limited company
  • obtaining EU road transport operator licence (Community authorisation haulage permit) from Bulgaria
  • dedicated haulage accountancy
  • Bulgarian transport manager with CPC
  • registration of trucks with Bulgarian plates and vehicle certificates
  • vehicle insurances with competitive rates
  • full legal services to your company

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I. Costs for moving your business under EU international road transport operator's license issued in Bulgaria

The costs for flagging out to Bulgaria depends on various circumstances. Call us or email us so we can provide you an estimate of the total costs for flagging out to Eastern Europe, Bulgaria

II. Obtaining EU international road transport licence from Bulgaria

Bulgarian limited company

As a start first you need to register a Bulgarian limited company. EU international road transport license from Bulgaria is issued only to Bulgarian companies, so this step is needed. We register the company for you.

Financial standing requirement

The company needs to prove that it is financially stable. The easiest way to do this is to obtain an insurance policy from a Bulgarian insurance company. Instead of closing a lump sum of €19,000 for 3 trucks and keep it in bank account, you can buy easily €450 insurance policy which will cover your financial standing for your three trucks. You can see how easy you can put €18,600 back in business.

Transport manager - Certificate for professional competence

As a preliminary requirement, each haulage company needs to employ a person possessing Certificate for professional competence. Our law office can provide such persons - Bulgarian citizens who have obtained valid certificates from the Bulgarian Ministry of Transport and Communication. The person will be employed at 4h employment contract in your company for a monthly salary of 250 euro.

Alternatively if you have already employed such person in your UK company, you can use his Certificate for professional competence issued by a valid UK Transport Manager CPC Awarding Organisation . The EU Council Directive 96/26/EC of 29 April 1996 allows complete recognition of such certificates after legalisation by the Foreign and Commonwealth Office.

Accountancy / Bookkeeping

Your company will be VAT registered in the Bulgarian National Revenue Agency. You will receive a Bulgarian EU VAT number. Depending on the workload of your company, the accountancy fee can vary. Call us or email us for a quote for road transport accounting services.

III. Registration of trucks and trailers in Bulgaria

You will have several options in order to get your truck registered under the Bulgarian community licence:

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  • Transfer some of your existing UK registered trucks to your Bulgarian company
  • Buy new trucks and register them in Bulgaria
  • Buy second hand trucks from a Bulgarian company
  • Get new leased trucks from a Bulgarian leasing company

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Transfer some of your existing UK registered trucks to your Bulgarian company

The trucks need to have a Bulgarian registration plate in order to operate under the EU international road transport license issued from Bulgaria. Therefore the easiest way is to "sell" your UK trucks to the Bulgarian company. This will enable you to get Bulgarian plates from the Bulgarian authorities.

Тachographs

If your trucks already have tachographs, their registration in Bulgaria will cost about €150 per tachograph. Buying new digital tachograph along with installation fee is usually it is about €500-€800.

Annual Vehicle Tax

In Bulgaria, trucks are subject to annual council tax.

The annual vehicle council tax depends on the municipality where the trucks are registered. We work in Varna area. The thresholds depend on how many axis the truck has (2 or 3 axis) and the total revenue weight of the truck and the trailer.

Roughly the vehicle tax would be around €700

If the trucks are "Euro 4" и "Euro 5", the vehicle tax is reduced to 50% of the above figures. If the trucks are "Euro 2", "Euro 3" the vehicle tax is reduced to 40% of the above figures.

The tax shall be paid in two instalments in the year which is due for:

  1. due between 1st March and 30th June and
  2. due between 30th June and 30th October

If the vehicle tax is prepaid in full between 30th March and 30th April a further 5% reduction will be made.

IV. Compulsory Truck Insurances

The average annual Third party liability insurance for a truck costs about €1900 (around £1500). Comprehensive insurances are more expensive. quotes are available if you provide a copy of the truck registration certificate (logbook)

V. Driver wages, Bulgarian National Social Insurance (NI) contributions and health insurance

If you want to benefit of the low minimum thresholds for driver salaries and NI, you can re-employ your drivers in the Bulgarian company. EU nationals can work without work permits and have equal rights with the Bulgarians on the labour market. For 2012 the figures are as follows:

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  • minimum driver monthly salary of €220 per month.
  • minimum monthly NI and health insurance contributions of €104 per month per driver.

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Transport market in Western Europe is getting harder every week. If you want to be competitive and increase your profit margin, call us now and we'll get your EU operator's licence within a couple of weeks.

Appealing Road Traffic Offences in Bulgaria

Being stopped by the Bulgarian Traffic Police or by Vehicle Inspectors from "Automobile Administration" agency can be a frustrating experience. It's not because of their bad reputation of asking for bribes, but rather of their inability to speak English. Often the traffic police officers cannot explain what the road traffic offence is. Sometimes they speak broken English and manage to give partial explanations.

The main thing each foreigner needs to know that almost every traffic offence penalty can be discharged. It's not because the offender didn't do it, but because of formal legal defaults of the establishment of the road traffic offence.

Each offence notice has to fulfil several statutory requirements e.g. certain information about the offender, the traffic police officer, the facts of the offence etc. - all that have to be written down in the notice. If not done properly, the penalty imposed can be subject to judicial review and can be quashed by the court. In that case it won't matter if the driver has actually committed the offence or not. I need to mention that if the road traffic offence is serious i.e. considered as a crime, the judicial review is not allowed and the aforesaid legal grounds for quashing won't be effective. The case will be tried in a criminal court.

The same strategy can be used for other road traffic offences like in case of stopping a truck/bus by Vehicle Inspectors from the Executive Agency "Automobile Administration" (the Bulgarian equivalent of UK VOSA) or in case of minor Customs offences.

The good thing is that when appealed in the judicial review procedure, about 80% of the penalties are discharged. This rate is high because of the relatively low qualification of the traffic police officers and vehicle inspectors from the "Automobile Administration" agency.

Maritime transport in Bulgaria

Transportation of passengers and goods by water is regulated by Order No. 82 of 15 July 2002, Ordinance No. 4 of 9 January 2004 on Recognition of Organizations for Surveys of Ships and Ship Owners, Order No. 87 in accordance with article 362, paragraph 1, section 3 from the Merchant Sea Shipping Code. The domestic regulation of transportation services can be found in Merchant Sea Shipping Code and Maritime Spaces and Inland Waterways and Ports Act of the Republic of Bulgaria. Sea shipping transport in Bulgaria is coordinated and controlled by Executive Agency “Maritime Administration”.

The carriage of cargo on inland waterways is carried out by licensed carriers who have fulfilled the requirements for professional competence, financial stability and good reputation. The Minister of transport and information technology grants the licence to carriers that fulfil the requirements described above.

Law of the flag

The grounds and the limits of the liability of the shipowner is regulated by the law of the country flag depending on where the ship is registered (law of the flag). Bulgarian legislation is applicable in cases of damages and loss as a result of tort committed by ships (or ship crew in the course of their work) in the internal sea waters, the territorial sea or the inland waterways of the Republic of Bulgaria. A ship can be registered under the flag of the Republic of Bulgaria in case it is :

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  • possessed by the state,
  • possessed by a Bulgarian natural person or Bulgarian company,
  • more than half of the shares are possessed by a Bulgarian natural person or a Bulgarian company
  • possessed by a natural person or by a company registered in a European Union member state and has fulfilled all technical, administrative and other requirements of Bulgarian legislation
  • rented in a bareboat charter contract by the state, by a Bulgarian natural person or a Bulgarian company or a natural person or company registered in a European Union member state for the term of the contract.

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Each ship registered under the Bulgarian flag must be registered in the Ships Registry Books in one of the Bulgarian ports. The Registry Books are kept by the regional offices of the Executive Agency "Maritime Administration".

Contracts in merchant sea shipping

The main types of merchant shipping contracts which the Bulgarian legislation recognises are:

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  •     Contract for transportation of cargo
  •     Contract for transportation of passengers and luggage
  •     Bareboat charter contracts

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Contract for transportation of cargo

According to the Contract for transportation of cargo the carrier provides paid sea cargo transportation service to a particular port (location), which has been defined by the consignor and to deliver the cargo to the consignee or a person authorized by him. Usually the terms of the Contract for transportation of cargo are provided in charters, bills of landing and other written evidence. The contractor is liable for partial or total loss of the cargo or damaging the cargo as from the moment of receipt to the moment of delivery to the consignee.

Contract for transportation of passengers and luggage

According to the Contract for transportation of passengers and luggage, the carrier provides paid sea transport services to passengers and their personal luggage to a specified location. The individual or group passenger ticket and a proof of payment validate the terms and conditions of the carriage contract. The period, during which the carrier is liable for the passengers and their luggage, starts from the moment of the passenger boarding the ship or the vehicle for carriage from the coast to the ship, if such carriage is included in the carriage price.

Bareboat charter contracts

The Bareboat Charter Contract is a contract for rental of a ship for a certain period of time. The lessee receives full rights of possession and control of the ship, including the right to appoint a captain and crew of the ship for the entire term of the charter. The bareboat charter contract contains information for the contractual parties, the name of the ship, its class, the flag, the technical and exploitation specifications of the ship, the fuel consumption, the region of sailing, the purpose for chartering the ship, the location and time of delivering and receiving the ship, the rental price and the term of chartering the ship. The bareboat charter contract can stipulate a clause for transferring the ownership of the ship from the lessor, only in case the latter is also the shipowner, the lessee has fulfilled all his obligations pursuant to the bareboat charter contract and has paid the last instalment.

Railroad operation certificate in Bulgaria

Transportation of passengers and goods by railway

The transportation of passengers and goods by railway is regulated by the Convention concerning International Carriage by Rail(COTIF) from 9 May 1980, Regulation (ЕО) № 1371/2Transportation of passengers and goods by railway007 REGULATION no. 41 of 27 JUNE 2001 and REGULATION № 54 from 2 June 2003 accordingly. The domestic regulation of transportation services can be found in the Railway Transport Act. In Bulgaria Railway transport activities are coordinated and controlled by Executive Agency Railway Administration (EARA). The railway infrastructure elements and the land on which these elements are built is public property of the state. Those elements can be used by the National Railway Infrastructure Company (NRIC) or by traders to whom a concession has been granted.

Licensed railway transport operators

Railway infrastructure can be used only by licensed railway transport operators to whom a safety certificate has been granted. The relations between infrastructure operators and transport operators in respect of the access and use of railway infrastructure are regulated by a contract. The contract shall be concluded within six months after the date of the licence is granted to the transport operator. In case the licence is withdrawn or its term has expired, the contract is terminated. The transport operator may sign a new contract with the railway infrastructure operator within six months after the date of termination of the original contract.

In order to gain access to and use railway infrastructure, transport operators pay charges levied by the railway operator.

Licensed Transport Operator

Licences for transportation of passengers and goods by railway are issued by the Minister of Transport, Information Technology and Communication to an already licensed railway transport operator. The licence is individual and can't be transferred to another transport operator. The license is granted for an indefinite period of time, but is reviewed every five years. It is also reviewed in the case of restructuring the entity to which the licence has been granted or as a result of a change in the ownership of that entity. The license is considered valid until the end of the review procedure. Should it be established that the transport operator does not fulfil the requirements for granting a licence during the process of licence reviewing, the Minister of Transport, Information Technology and Communication shall issue mandatory guidelines and define a timeframe for correction of irregularities. In case of failure to fulfil the mandatory guidelines within the stipulated timeframe, the license shall be terminated.

The act determines two types of licences:

  1. Licences for transportation of passengers;
  2. Licences for transportation of goods;

Licence for transportation of passengers and goods by railway is granted to an applicant with good reputation, satisfies the requirements for financial stability, satisfies the requirements for professional competence and is willing to conclude insurance contracts that cover the applicant's liability in respect of passengers, luggage, cargoes, mail and third parties in accordance with the provisions defined by law. The applicant must also satisfy the following requirements:

  1. To operate as an undertaking whose main business is the rail transport of passengers and/or goods in or outside the territory of the Republic of Bulgaria;
  2. To possess the required equipment and facilities necessary for the purpose of providing rail transport services;
  3. To operate engine car traction units, including an engine car and an electric multiple unit (EMU) and to employ staff members with the necessary qualifications to drive and operate those units.

The conditions for termination of the license are described in the Railway Transport Act. It can be terminated with a decision of the licensing body, upon an application of the license holder or in case the license holder decides to terminate company's activity.

Rail transport operator with a licence issued by another country

Rail transport operators with a licence to perform rail transport services, issued by a country Member of the European Union may also perform these services on the territory of the Republic of Bulgaria and  have access to the railway infrastructure. Access to the railway infrastructure for the purpose of providing rail transport services can also be granted to transport operators licensed by foreign railway administrations, but solely when those services are described in the International agreement signed by the Republic of Bulgaria.

The companies operating under a railway transport licence in Bulgaria are less than a dozen.   Most of these companies are state-owned or the state is a shareholder in them. Only two of the companies have a Transport licence issued by the Ministry of transport, Information Technology and Communication. Most of them work under licences issued by another country Member of the European Union. The only company that is licensed for transportation of passengers is “Bulgarian State Railway – Passengers Transportation” LTD.

Airports and airfields establishment

Аirports and airfields on the territory of Bulgaria can operate only if they have a certificate for operational worthiness. The Directorate General “Civil Aviation Administration” issues a certificate of operational worthiness of an airport when the following requirements are met:

  1. The technical specifications of the airfield and the facilities, the limitation of obstacles, equipments, visual air navigational systems, airport services and technical infrastructure needs to comply with the secondary Bulgarian geodetic legislation requirements;

  2. Meteorological information systems need to comply with the secondary legislation requirements of Bulgaria;

  3. Flight information services need to comply with Bulgarian legislation;

  4. Emergency, rescue and firefighting services need to comply with the secondary legislation requirements of Bulgaria.

Directorate General “Civil Aviation Administration” issues a certificate of operational worthiness of an airport when the following requirements are met:

  1. the technical specifications of the airfield and the facilities, the limitation of obstacles, equipment, visual air navigation systems, airport services and technical infrastructure need to comply with the secondary legislation requirements of Bulgaria;

  2. Directorate General approves a survey of the pertaining territory, including air access in scale 1:5000 or 1:25000 with marked access to the airfield with other types of transport from the neighbouring populated areas, and a geodetic photography in scale 1:1000 of the airfield, the buildings, the facilities and the underground infrastructure;

  3. the owner or the lessee of the airfield needs to have submitted the airfield project for coordination at Directorate General.

Air Carrier certificate in Bulgaria

Air transportation in Bulgaria is governed simultaneously by EU legislation e.g. Regulation (EC) No 1008/2008 [PDF 113Kb], international aviation law and the domestic legislation, such as the Civil Aviation Act and secondary legislation ordinances. The authority which supervises civil air transport is Directorate General “Civil Aviation Administration”.

How to establish an air carrier in Bulgaria

Air carriage is subject to licensing by the Directorate General “Civil Aviation Administration”. Each company applicant needs to match certain requirement before the license is granted:

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  • the applicant is a company duly registered in Bulgaria and solvent.
  • its main activity is to operate air services in isolation or combined with any other commercial operation of aircraft or the repair and maintenance of aircraft;
  • the applicant must enclose a well grounded business plan for its activity
  • the applicant must possess own capital of minimum 160,000 Bulgarian Levs (or €81806.70)
  • the applicant must possess a certificate for air operator
  • the applicant must enclose a proof for its financial stability. According to the legal definition of the Civil Aviation Act the applicant company is "financially stable" when as a result of an analysis and evaluation of the presented balance sheet, income and expenses report and cash flow report, certified by a registered auditor, it is established that the entity is at good financial status, it is solvent and can provide the necessary funds for ensuring flight safety.
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The license is issued for an indefinite term, but all conditions for its granting are subject to regular and interim checks by Directorate's inspectors. If a condition is no longer met by the air carrier, the license can be revoked.

One of the aforementioned requirements is possession of air operator certificate (AOC). It is a certificate delivered to the company and confirming that the company has the professional and organisational competence to ensure the safety of operations specified in the certificate, as provided in the relevant provisions of Community law and the National law. The Directorate General “Civil Aviation Administration” grants the certificate and applies strict preliminary and ongoing control on all AOC holders.

AOC is issued for an initial period of 12 months. The AOC can be extended up to 3 years, after the initial period expires.

In order for an AOC to be granted, the applicant company shall provide:

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  • a list of the names and addresses of the managing persons, as well as evidence that they have the necessary qualification and professional experience;
  • a list of the names, addresses, licence numbers and other information about all persons related to the operation of the operator's aircraft;
  • an Operations Manual which may be presented later but not more than 60 days before the date of scheduled operations;
  • documents for issuance of a continuing airworthiness management organization approval and approval of organizations and personnel involved in these tasks, or a Maintenance Control Manual;
  • documents for issuance of an aircraft maintenance organization and components service approval to be installed in these aircrafts under Part 145 of Regulation 2042/2003 on the maintenance of airworthiness of aircrafts and aviation products, parts and appliances, and on the approval of organizations and personnel involved in these tasks, or a Maintenance Organization Exposition; or submitted for review and approval technical service agreement with another approved organization for TS;
  • a quality system;
  • an accident prevention and flight safety program which must be comprehensive and effective, with enclosed evidence of available resources;

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Compulsory liquidations delay for unknown reasons

The Commercial Register Act was clear enough "all companies which don't re-register by 01.01.2012 are subject to compulsory liquidation by the state". 1st Jan has passed and there's no sign of the Registry Agency to have initiated any liquidation. There is even no official statement, neither to the public, nor to all the liquidators who are listed with the Agency.

Naturally the Agency don't respond their officially announced phone numbers (more than 10!), nor they reply to official emails. Now that's what I call public service.  That comes with no surprise, having in mind the 6th Feb 2012 Interim Report from the European Commission where EU criticises the Judicial reform as lacking any progress. The Registry Agency is part of the Ministry of Justice so no wonder there is no sign of applying the law..

When initiated (hopefully sooner), the liquidation will create huge mess. The database web servers of the Agency are not prepared for the huge document traffic that will be generated. Resent statements by the Agency confirmed their IT power cannot handle huge network traffic and date processing. That was confirmed in practice yesterday, where the website of the Commercial register stopped functioning for one whole day. Whole business sector just seized to function for one day.

Roadworthiness tests in another EU member state

Today were enquired whether a truck, registered in one EU member state would have a valid roadworthiness test certificate if the test would to be performed in another EU member state. The problem is that the Community haulage permit holder (licensed in Bulgaria) had been stopped by the Bulgarian Traffic Police and after a document inspection they haven't recognized the roadworthiness test certificate of the truck issued in Spain. We have checked thoroughly whether this non-recognition is legal or not. Pursuant Art.4 of 77/143/EEC Council Directive, "roadworthiness tests within the meaning of this Directive shall be carried out by the State or by bodies or establishments designated and directly supervised by the State". Stipulated like that it is still not very clear whether the Traffic Police in our case is right or not.

However, we have researched further on that and we have found that a very similar case have already been tried in European Court of Justice. In its decision on the case Johannes Gerrit Cornelis van Schaik v Hoge Raad der Nederlanden  in Para  21 the Court has ruled that:

...Article 4 of the directive further provides that the roadworthiness tests, within the meaning of the directive, are to be carried out by the State or by bodies or establishments designated and directly supervised by the State. Thus the directive imposes a territorial limitation on periodic testing.
The decision of the European Court of Justice are obligatory for all domestic courts, in terms of interpretation and best application of the European legislation in the member states. Therefore, the Traffic Police decision not to recognise roadworthiness certificate issued in a member state different from the one registered the vehicle is legal.

Liquidation of Bulgarian limited company

The biggest issue with the compulsory liquidation of the Bulgarian limited companies is the communication with the state appointed liquidator. Since the Registry Agency appoints liquidators from their liquidators lists, no one considers whether the company owner is foreigner or does he speaks Bulgarian. Some liquidators are not diligent enough when they see that the company owner is not Bulgarian. Sometimes they will not make efforts to contact the latter. One a separate note, this is difficult because the company owner address is spelled in Cyrillic letters and it is very difficult to restore the right English spelling.

Normally the the newly appointed liquidator will try to contact the capital owner(s) and request all company documentation i.e. contracts, bank account balance, court papers (if any), past years accounting reports etc. These will be needed to find out if the company has any outstanding debts and to repay them. Only then the rest of the company assets will be cashed and distributed among the company capital owners. Upon request of the capital owners and if available, any property left can be transferred to the company owner(s) without being cashed.

The latter is an exemption rather than a normal procedure. Therefore the company owners need explicitly and formally to request this transfer from the liquidator. If this request is not made in a formal way, the liquidator will sell the property on public tender/auction. As solicitors, we ensure that the formal request is submitted to the liquidator on time and no foreigner loses their property just because a formal request hasn't been made to the liquidator.

Having said the above, I strongly encourage all Britons and Irish who still haven't re-registered their companies - you still can keep your properties! The only effort you need to make is contact us with details of your Bulgarian limited company. We will take care of the rest.

Bulgarian courts should accepts/send papers online

This week we have achieved a small victory. We are representatives of a client on a case, heard in Stara Zagora District Court. We have asked the judge to send by email copies of the latest hearing minutes. The judge refused, grounding her decision with "the court doesn't have that practice". We'll that was not quite true. Art. 42 para 4 of the Civil Proceedings Code allows the court to send notices and subpoenas by email. We claimed that the court can use that to send copies of court documents too.

We have lodged an application to the Chairperson of Stara Zagora District Court, requesting the Chairman to "create such practice". The court Chairperson accepted our arguments and ordered the judge to apply directly the aforesaid article. Yesterday we have received the requested documents by email.

I'm writing about this since that a major breakthrough in how the Bulgarian court operates. As I've said before, one of the major reasons of why lawsuits  take so long to be tried is the notice/subpoena problem. Electronic means solve this problem, but the the judges are reluctant to use them. There's no explanation why.