Romanian and Greek companies are moving in droves to Bulgaria lured by less red tape, cheaper labor, lower taxes, political and economic stability, reports say.

“Entrepreneurs are shutting down their companies in Romania after deciding to move to neighboring countries or just change their tax registration, attracted by the better conditions. The transfer of Romanian small and medium-sized enterprises to Bulgaria, Hungary, Croatia and even Moldova is turning into a mass phenomenon,” writes the Romanian Evenimentul Ziley, citing representatives of local companies.

According to the article the recent increase of the value-added-tax from 19% to 24% in Romania just came to further deteriorate the business climate, already strained by unskilled labor force, high social securities, bureaucracy and heavy indirect taxes.

Data of Bulgaria’s National Revenues Agency confirms the reports.

“Thanks to its low taxes Bulgaria is attractive for both companies and citizens from other countries, especially its neighbors,” the agency spokesman Rossen Bachvarov commented.

In Greece, the center-left government imposed the increase in VAT from 21% to 23% earlier this year, the second VAT increase this year, following a hike from 19% in March.

Bulgaria has the lowest personal and corporate income tax in the EU at 10%, which was introduced at the beginning of 2008, replacing the previous system, which combined several different tax rates - between 20 and 24%, depending on income.

Bulgaria also has the lowest social security rates, which coupled with a 10% flat rate, makes it very attractive for physical entities, employers and potential investors.

Bulgaria’s Prime Minister Boyko Borisov recently denied reports that a hike in tax rates may be looming after the government scrapped its plans for a VAT increase this year, which was hoped to plug a budget gap that has thwarted the new EU member's euro efforts.