Civil Partnership (DZZD) in Bulgaria — Formation, Tax & Management (2026)

What is a DZZD

The civil partnership is regulated in Art. 357–364 of the Obligations and Contracts Act (OCA). Under the partnership agreement, two or more persons combine their activities to achieve a common economic objective (Art. 357 OCA).

Key characteristics:

• DZZD is not a legal entity (unincorporated partnership).
• It can be formed by individuals and/or legal entities.
• Assets and liabilities do not become the property/debts of the DZZD — they belong to the partners (Art. 358 OCA).
• Transactions with third parties are concluded by the partners, not the partnership.
• DZZD is not registered in the Commercial Register — only in BULSTAT.

Formation — step by step

Step 1. Conclusion of a partnership agreement (for joint activity) in written form (Art. 357 OCA).

Step 2. Determination of shares, rights, obligations, management, and the method for distributing profits and losses.

Step 3. Registration in BULSTAT within 7 days of signing the agreement. The fee is BGN 10 (EUR 5.11).

Step 4. Opening a bank account (optional, but practically necessary for business activity).

Step 5. VAT registration — mandatory when turnover exceeds BGN 100,000 (EUR 51,130) over 12 consecutive months; or voluntary.

Step 6. Organising accounting — the DZZD is required to maintain separate accounts as it is deemed equivalent to a legal entity.

Step 7. Issuing a power of attorney for the representing partner (notarisation recommended).

For comparison, registering a company is a more complex and expensive procedure, but offers limited liability.

Partnership agreement — content

The agreement is the sole constitutive document of a DZZD. It should include:

• Parties — full details of the partners (individuals and/or legal entities)
• Objective — the common economic purpose
• Shares — size of contributions (monetary and/or non-monetary)
• Management and representation — who manages and represents
• Distribution of profits and losses — proportions (by default, proportional to shares)
• Term — fixed or indefinite
• Conditions for termination and for a partner’s exit
• Dispute resolution mechanism

Important: A clause that excludes a partner from participation in losses or profits is void (Art. 361 OCA) — the so-called leonina societas.

Management and decision-making

Under Art. 360 OCA, decisions in a DZZD are made with the consent of all partners, unless the agreement provides for majority voting.

Each partner has one vote, regardless of the size of their share (Art. 360 OCA).

Regarding management and representation:

• Each partner may manage and represent the partnership before third parties.
• The partners may choose one of them or a third party as manager.
• It is advisable to clearly specify in the agreement who represents the partnership.

Ownership and assets

The ownership regime in a DZZD is specific:

• Contributed money, fungible things, and things destroyed by use become joint property of the partners (Art. 358 OCA).
• Real estate and vehicles remain the property of the contributing partner — the partnership receives only the right to use.
• Everything acquired as a result of the joint activity is joint property of the partners (Art. 359 OCA).

Partners’ liability is unlimited and joint for obligations assumed in the course of joint activity. This is the fundamental difference from an LLC, where liability is limited to the value of the shares.

Tax treatment under CITA

DZZD is a taxable person

Under Art. 2(2) of CITA (Corporate Income Tax Act), unincorporated partnerships (such as DZZD) are deemed legal entities for tax purposes. This means:

• DZZD pays 10 % corporate tax on its taxable profit.
• DZZD files an annual tax return (ATR) under Art. 92 CITA.
• DZZD maintains separate accounts as a legal entity.

Taxation upon profit distribution

Effective tax burden for individual partners

The effective tax burden when distributing profits from DZZD to an individual:

• 10 % corporate tax (at DZZD level)
• 5 % withholding tax (upon distribution)
• Total: approx. 14.5 % effective rate (100 x 10 % = 10; 90 x 5 % = 4.5; total 14.5 out of 100)

VAT registration

DZZD is subject to mandatory VAT registration when turnover exceeds BGN 100,000 (EUR 51,130) over 12 consecutive months. This threshold has been effective since 1 April 2025 (previously it was BGN 166,000).

DZZD may also register for VAT voluntarily — for example, if it expects significant purchases with VAT or when participating in public procurement.

Social security of partners

Individual partners in a DZZD are insured as self-insured persons under Art. 4(3)(2) of the Social Insurance Code (SIC) — persons exercising labour activity as members of unincorporated partnerships.

They owe:

• Social insurance contributions for the “Pensions” and “General Sickness and Maternity” funds (the latter is optional)
• Health insurance contributions
• Contributions on a chosen insurable income (between the minimum and maximum thresholds)

Accounting and annual financial statements

For accounting purposes, DZZD is deemed equivalent to a legal entity under the Accountancy Act. This means:

• DZZD maintains separate accounts.
• It prepares and publishes annual financial statements (AFS).
• A DZZD with no activity publishes a declaration under Art. 38(9)(2) of the Accountancy Act.

Advantages and disadvantages of DZZD

Advantages

• Fast formation. Agreement + BULSTAT registration in a few days, without a notary or Commercial Register.
• Low costs. Only BGN 10 (EUR 5.11) for BULSTAT registration.
• Flexibility. No requirements for minimum capital, articles of association, General Meeting, or formal managing bodies.
• Suitable for public procurement. DZZD is the most common legal form for consortia in public procurement.
• Tax efficiency. The effective tax burden of approx. 14.5 % (10 % corporate + 5 % dividend) is competitive.

Disadvantages

• Unlimited liability. Each partner is liable with all personal assets.
• Limited creditworthiness. Banks and counterparties typically prefer legal entities (LLC, sole-owner LLC) over DZZD.
• Management difficulties. Decisions require unanimity by default — with more than two partners, this may block operations.
• Lack of legal personality. DZZD cannot acquire property in its own name or be an employer under employment contracts.

DZZD vs. LLC — comparison

The key difference is in liability: in a DZZD, partners are liable with all their personal assets, while in an LLC, liability is limited to the shares. For long-term activity, an LLC or sole-owner LLC is usually more suitable.

Frequently asked questions

Conclusion

The DZZD is a flexible and cost-effective form for short-term projects, public procurement consortia, and joint ventures. However, unlimited personal liability is a serious risk that must be carefully weighed against the benefits.

If you need assistance with forming a DZZD or choosing the appropriate legal form, the team at Innovires Legal can advise you on the best structure for your specific situation.

This article is for informational purposes only and does not constitute legal advice. For a specific legal question, please consult a qualified lawyer.