Three out of four Greek firms in Bulgaria are ‘ghost companies’

Thousands of companies in Bulgaria that exist only on paper appear to have been launched by Greeks in recent years for tax-evasion purposes, as a survey by the University of Bristol has shown that of the 14,000 Greek-owned enterprises in the neighboring country only 3,000 are actually active.

The exodus began a few years before the outbreak of the crisis in 2008 and reached its peak after Greece’s entry in the bailout mechanism.

In the 1990s, the penetration of the Bulgarian market by Greek banks and construction companies constituted expansion and investment in a growing economy. Today, however, the flight of local firms across the country’s northern border is seen as “economic outflow.”

The decision to relocate to Bulgaria has apparently vindicated those who made it out in time, as they managed to escape the impact of the recession and the problems of liquidity, particularly after the imposition of capital controls in June 2015. In fact, many of those entrepreneurs are even today dodging the consequences of controls on cash flow, as they are allowed to withdraw as much money as they wish from Greek cash machines using their Bulgarian cards.

Figures suggest that there are many more companies set up by Greeks in Bulgaria in order to dodge taxes in Greece and not just to benefit from the lower corporate rate imposed by Sofia. For instance, a vehicle registered with a company in Bulgaria can circulate in Greece without paying road tax here.

The University of Bristol survey, published by the University of Thessaly in central Greece, showed that Greek-owned firms in Bulgaria have soared to 14,000 from just 1,000 in 2006. However only a quarter, or just over 3,000, are actually in operation.

Most (67 percent) Greek businessmen who do operate in Bulgaria say that their main incentive to relocate was survival, followed by a desire to improve the performance of their business. “I shut down my family car tyre business in Thessaloniki as it could not work with checks only, it had large debts and demand was unsatisfactory. In 2012 I opened a retail business of Petrich, Bulgaria,” says one Greek businessman.

Another adds that in Greece “more than 800 small or large tax laws have been passed in recent years. The state has neither supported nor protected my enterprise.”