Three Ways to Increase Your Company's Capital — Cash, Apport, and Profit Capitalization (2026)

Why increase your company's capital

The nominal capital of an OOD or EOOD is public in the Commercial Registry and matters far beyond the formal minimum of EUR 1. A capital increase serves several practical purposes:

• Raising investment — an incoming member (angel, VC, strategic investor) contributes funds against newly issued shares.
• Financing expansion without debt — equity replaces a bank loan and improves leverage ratios.
• Counterparty and bank confidence — higher capital weighs positively in credit scoring and public procurement.
• Regulatory requirements — a joint-stock company (AD) requires minimum capital of EUR 25,565; regulated activities (payment institutions, tour operators) have their own thresholds.
• Preparation for IPO or trade sale — aligning the capital structure with investor expectations.
• Tax planning — capitalizing retained earnings defers the dividend tax.

Regardless of the trigger, the procedure is the same — only the contribution method differs.

Legal framework — Arts. 147-149 of the Commerce Act

Three separate provisions of the Bulgarian Commerce Act (CA) govern capital increase in an OOD:

• Art. 147 CA — competent body: the General Meeting of members in an OOD or the sole owner of capital in an EOOD.
• Art. 148 CA — the three methods: new contributions, increase of the existing shares through capitalization, or admission of new members.
• Art. 149 CA — rules on contributions, with a cross-reference to Arts. 72 and 73 CA on in-kind contributions (general apport regime).

Additional applicable provisions:

• Art. 137(1)(4) CA — amendments to the articles of association fall within the exclusive competence of the General Meeting.
• Art. 137(3) CA — amendments to the articles of association and the admission or expulsion of a member require unanimity of all members.
• Art. 119(1)(5) CA — upon incorporation and upon every increase, at least 70 % of the contributions must be paid in before the Commercial Registry filing.
• Art. 115(4) CA — capital and its changes are subject to registration; the registration is constitutive — the increase takes effect from the date of registration, not from the date of the decision.

On the tax side, Council Directive 2008/7/EC of 12 February 2008 on indirect taxes on the raising of capital is relevant. It prohibits Member States from charging indirect taxes (capital duty, ad valorem fees) on contributions to capital. Bulgaria has aligned its domestic law — neither VAT nor corporate nor income tax is due on the mere act of contributing capital.

Method 1: Cash contribution

The most common and technically simplest method. Funds land in the company's bank account and are booked to capital.

Three variants

• Pro-rata contribution by existing members — each member contributes in proportion to their shareholding. Ownership ratios remain unchanged.
• Non-pro-rata contribution by existing members — one member contributes more than their share, and their shareholding grows accordingly. This requires unanimous consent (Art. 137(3) CA — unanimity for amending the articles of association).
• Admission of a new member — an outside person contributes cash and receives newly issued shares. The General Meeting unanimously admits the new member and revises the articles.

Procedure

1. Decision of the sole owner (EOOD) or minutes of the General Meeting (OOD) by unanimity.
2. Notarial certification of signature and content (a single operation since 2018).
3. New version of the articles of association reflecting the new capital and share allocation.
4. Payment into a subscription or operational bank account; at least 70 % before filing (Art. 119 CA).
5. Filing of Application A4 with annexes — decision, articles, bank certificate, declarations under Art. 13 CR Act.
6. After registration — new certificate of good standing.

Timeline: 1-3 weeks (statutory response up to 3 business days). Registry fee: EUR 15.34 electronic, EUR 30.68 paper. Notary: EUR 25-100 depending on material interest.

Tax consequences

• No tax on the contribution itself (Directive 2008/7/EC).
• No profit for CITA purposes — contributing capital is neither income nor expense.
• No VAT — a cash contribution is not a supply of goods or services.
• For an individual investor — not a taxable event. Tax arises only on later sale of the shares or upon liquidation.

Method 2: In-kind contribution (apport) of assets

Instead of cash, the contribution consists of assets — real estate, equipment, receivables, intellectual property, shares in other companies. Apport is legally and accounting-wise more complex than a cash contribution but is the only way to capitalize illiquid assets.

For a full walk-through of apport — procedure, documents, risks — see our detailed guide: In-kind contribution to company capital — procedure.

Key features

• Mandatory valuation by three independent experts appointed by the Commercial Registry officer (Art. 72 CA). The valuation is at market value and represents the maximum amount at which the asset can be booked to capital.
• No VAT — Art. 10(1)(1) of the VAT Act excludes apport from the scope of taxable supplies.
• Timeline: 2-3 months on average (valuation process, and real estate transfer requires a notarial deed).
• Cost: EUR 500-3,000+ depending on the number and complexity of the assets (expert fees, notary, transfer fees).

Tax consequences for a corporate contributor

When a legal entity contributes, if the value of the shares received exceeds the book value of the asset, the difference is profit for CITA purposes. Related-party pricing rules apply (Art. 16 CITA) — the market valuation must be defensible. We recommend advance consultation for apport of assets with a significant gap between book value and market value.

Tax consequences for an individual contributor

For a Bulgarian tax-liable individual (resident), the apport itself is not a taxable event — no taxable income is realized at the moment of contribution. Tax arises on subsequent disposal of the shares received (Art. 33 PITA — the taxable base is the difference between the sale price and the documented acquisition cost, which in an apport equals the experts' valuation).

Method 3: Capitalization of profits or reserves

Capitalization is an increase from internal sources — no new cash flow, no external investor. Retained earnings or reserves are transferred to capital.

How it works

• Members decide not to distribute the dividend for the year (or for prior years' retained earnings).
• Instead — a resolution transfers the amount to share capital.
• Either the nominal value of existing shares increases, or new shares are issued pro rata to existing holdings.

Advantages

• Fast and simple — no banks, no experts, no new investors.
• Raises capital without draining members' liquidity.
• Signals stability to counterparties and lenders.
• Improves equity-to-debt ratio.

Worked example

• An EOOD has accumulated EUR 100,000 in retained earnings (post corporate income tax).
• The sole owner resolves to increase capital by EUR 100,000 at the expense of reserves.
• No 5 % dividend tax is paid at the point of capitalization.
• The balance sheet shows capital of EUR 100,001 (instead of the minimum EUR 1), improving creditworthiness.
• If the owner later withdraws the amount (e.g. upon liquidation), 5 % dividend tax of EUR 5,000 is due then.

Capitalization is attractive when profits can remain long-term in the company — for example ahead of a fundraising round, when applying for EU grants, or in preparation for taking on new commitments.

Step-by-step procedure

Regardless of method, the procedure follows six stages:

1. Decision preparation — written decision of the sole owner (EOOD) or a General Meeting under Arts. 138-139 CA (OOD). Unanimity is required (Art. 137(3) CA).
2. Notarial certification — signature and content in a single operation (Art. 137(4) CA). Fee: EUR 25-100.
3. Payment of contributions — cash: bank transfer plus certificate. Apport: valuation by three experts and asset transfer (notarial deed for real estate, assignment for receivables). Capitalization: resolution and accounting entry. At least 70 % before filing.
4. Amendment of the articles — new version drafted; signatures notarized.
5. Commercial Registry filing — Application A4, fee EUR 15.34 (electronic) or EUR 30.68 (paper). Response up to 3 business days.
6. Update — new certificate of good standing; banks and counterparties notified.

Comparison of the three methods

Capitalization of profits versus dividend distribution

Capitalization is an alternative to paying out a dividend directly. The two approaches carry an identical effective tax burden but different timing.

Scenario: EOOD with EUR 100,000 of retained earnings (post CIT)

Option A: Dividend distribution

• Resolution to distribute EUR 100,000 as a dividend.
• 5 % dividend tax withheld: EUR 5,000.
• The owner receives EUR 95,000 net in their personal account.
• Total tax burden (including the 10 % CIT already paid): 15 % effective.

Option B: Capitalization

• Resolution to transfer EUR 100,000 to capital.
• No 5 % tax on the transfer (Art. 13(1)(4) PITA).
• Capital grows by EUR 100,000; the owner receives no liquidity.
• On future distribution (liquidation, capital reduction, share sale) — 5 % on the surplus.
• Total effective burden on ultimate withdrawal: 15 % (identical to Option A).

The takeaway: capitalization does not save tax — it defers it. It makes sense when:

• The funds will be reinvested in the company (expansion, asset purchase).
• Financing is on the horizon and a higher capital improves the bank's scorecard.
• The company is applying for grant schemes with equity requirements.
• The owner is tax-liable in a jurisdiction where a received dividend is taxed further (and deferral is more efficient).

Shareholder loan — an alternative to a capital increase

Not every injection of funds into the company requires a capital increase. A shareholder loan (or a loan from a related party) is a fast alternative that in some cases is more appropriate.

Advantages and limits

• Fast and flexible — no Registry procedure, no notary, no experts. Repayment of principal is tax-free. Interest is deductible within Art. 43 CITA limits.
• Market-rate interest — with related parties (Art. 16 CITA), an interest-free loan may be recharacterized.
• Thin capitalization — Art. 43 CITA caps deductible interest where debt exceeds three times equity.
• Disclosure — loans from individuals above EUR 5,113 are declared in the annual tax return (Art. 50(1)(5) PITA).
• Withholding — 10 % on interest to a foreign person (Art. 195 CITA), subject to any lower DTT rate.

When capital, when loan

• Long-term need, reinvestment, investor expectations → capital.
• Short-term liquidity bridge (6-18 months) → loan.
• High leverage, need to improve D/E → capital.
• Need for a deductible interest expense → loan.

Frequently asked questions