The automotive industry is one of the fastest growing in Bulgaria. In 2002, there were 10 companies; at present there are more than 40 automotive manufacturers employing around 15,000 people with the expectation that the number of employees will double within 5 years. The majority of the companies in this industry are Bulgarian subsidiaries of tier 1 producers of automotive components and foreign car manufacturers.

Bulgaria is attractive for automotive manufacturers due to its strategic geographic position, EU membership and harmonised legislation, stable currency fixed to the euro, macroeconomic stability, the lowest labour costs in the EU and favourable tax regime. 

The key focus for most automotive manufacturers in Bulgaria is successful establishment of production facilities and subsequent management in terms of human resources, inventory management, logistics, and quality standards compliance. A growing number of companies are expanding their activities through acquiring and improving premises, investing in new equipment and production lines, and hiring and training their workforce. 

The automotive company would typically be contracted by one or a few clients, usually from the corporate group, while the production is dispatched to various destinations for assembly at the plants of car manufacturers. This often involves a complex purchase order process and requires vigorous production planning and logistics organisation. 

Bulgarian companies would normally work under contract manufacturing arrangement, where the prices of the components are fixed globally between the group client and the car manufacturer. Due to changes in the specifications of the components of the car manufacturers, equipment would have a short life cycle and frequent readjustments of production lines would become necessary. Suppliers would often be group companies and inventory management may need to be aligned globally. 

A major challenge for the automotive industry is finding and retaining quality workforce at middle management level and qualified engineers, which would often make necessary seconding people from other group companies abroad. 

Based on our extensive experience in the automotive industries, KPMG can help in the following: 

People 

• Search, selection and training of personnel 
• Legal and tax assistance to secondees  
• Payroll outsourcing 

Supplier and client relations 

• Transfer pricing analysis and localization of global transfer pricing file 
• Review and advice on resolving indirect tax issues with complex chain transactions 
• VAT compliance for global procurement companies having to obtain and use a Bulgarian VAT number 
• Contract compliance reviews for identification of areas for improvement 

Fixed assets 

• Implementing asset management solutions 
• Unification of reporting for local and group purposes 
• Legal, tax and accounting advice in respect of acquisitions or rentals of immovable property and equipment 

Finances 

• Audit 
• Full or limited scope tax review 
• Tax litigation and assistance in tax audits 

New entrants and expansions 

• Transactions & Restructuring services 
• Feasibility studies 
• Location search