Bulgaria is seen by many investors as an attractive low-cost investment destination, with government incentives for new investment. The country offers some of the least expensive labor in the European Union (EU) and low and flat corporate and income taxes. However, Bulgaria has the lowest labor productivity rate in the EU, and a rapidly shrinking population could exacerbate the trend.
In 2021 Bulgaria continued to suffer from the COVID-19 pandemic and related shutdowns, although the impact on the economy was less severe than in many other European countries. In 2021 the government updated the budget to include more public funding of COVID-related measures, such as increased pensions. Tourism, logistics, the service industries, and the automotive sector were particularly hard hit by the pandemic. The Bulgarian economy declined 4.4 percent in 2020, rebounded to 4.2 percent growth in 2021, and is projected to grow by 4.8 percent in 2022. This recovery is being driven by higher consumption and public investment funds. The war in Ukraine and rising energy and food prices, however, threaten these growth expectations.
Bulgaria is expected to receive EUR 6.2 billion over a six-year period (2021-2026) from the EU’s post-COVID recovery grant funds to improve its economy in areas such as green energy, digitalization, and private sector development.
The government expects to adopt the Euro in early 2024, after having joined the European Exchange Rate Mechanism (ERM II) in July 2020 and the EU’s Banking Union in October 2020. The adoption of the euro will eliminate currency risk and help reduce transaction costs with some of the country’s key European trading partners.
There are no legal limits on foreign ownership or control of firms. With some exceptions, foreign entities are given the same treatment as national firms and their investments are not screened or otherwise restricted. There is strong growth in software development, technical support, and business process outsourcing. The Information Technology (IT) and back-office outsourcing sectors have attracted a number of U.S. and European companies to Bulgaria, and many have established global and regional service centers in the country. The automotive sector has also attracted U.S. and foreign investors in recent years.
Foreign investors remain concerned about rule of law in Bulgaria. Along with endemic corruption, investors cite other problems impeding investment including difficulty obtaining needed permits, unpredictability due to frequent regulatory and legislative changes, sporadic attempts to negate long-term government contracts, and an inefficient judicial system. The new government coalition which came to power in December 2021 cited rule of law reform as its highest priority.
|TI Corruption Perceptions Index||2021||78 of 180||http://www.transparency.org/research/cpi/overview|
|Global Innovation Index||2021||35 of 132||https://www.globalinnovationindex.org/analysis-indicator|
|U.S. FDI in partner country ($M USD, historical stock positions)||2021||USD 608||https://apps.bea.gov/international/factsheet/|
|World Bank GNI per capita||2020||USD 9,630||https://data.worldbank.org/indicator/NY.GNP.PCAP.CD|
1. Openness To, and Restrictions Upon, Foreign Investment
There are no legal limits on foreign ownership or control of firms. With some exceptions, foreign entities are given the same treatment as national firms and their investments are not screened or otherwise restricted.
The Invest Bulgaria Agency (IBA), the government’s investment attraction body, provides information, administrative services, and incentive assessments to prospective foreign investors. Its website (www.investbg.government.bg/en) contains general information for foreign investors. IBA serves as a one-stop shop for foreign investors and certifies proposed investments for eligibility for administrative services.
There are no limits to foreign and domestic private entities establishing and owning businesses in Bulgaria. The Offshore Company Act lists 28 activities (including government procurement, natural resource exploitation, national park management, banking, insurance) in which companies registered in offshore jurisdictions with more than 10 percent foreign participation are banned from participating. The law, however, allows those companies to do business if the physical owners of the parent company are Bulgarian citizens and known to the public, if the parent company’s stock is publicly traded, or if the parent company is registered in a jurisdiction with which Bulgaria enjoys a bilateral tax treaty for the avoidance of double taxation (including the United States).
Bulgaria has no specific law or coordinated mechanism in place for screening individual foreign investments. A potential foreign investment can be scrutinized on the grounds of its potential national security risk or through the Law on the Measures against Money Laundering. As each ministry is responsible for screening investments within its purview, interagency coordination is lacking, and there are no common standards. As of April 2022, Bulgaria has not publicly reported any initiative on the introduction of a national investment screening mechanism.
There have been no recent Investment Policy Reviews of Bulgaria by multilateral economic organizations. An Investment Policy Review by the Organization for Economic Cooperation and Development (OECD) is planned for 2022. In January 2022 the OECD decided to open accession discussions with Bulgaria. A key milestone toward Bulgaria’s overarching OECD Action Plan was its having joined the Nuclear Energy Agency (NEA) in January 2021. In 2019, the OECD published reviews of Bulgaria’s healthcare sector and state-owned enterprises, and in January 2021 the OECD published an Economic Assessment in which it acknowledged the successful integration of Bulgarian manufacturing firms into global production chains and sound macroeconomic policies prior to the pandemic. At the same time the report highlighted as key policy challenges Bulgaria’s high income inequality, relative poverty, and an ageing and rapidly shrinking population. In February 2021 the OECD published a study of Bulgarian municipalities that acknowledged solid progress in local governance standards but also noted insufficient progress in bridging regional disparities.
Bulgaria typically supports small- and medium-sized business creation and development in conjunction with EU-funded innovation and competitiveness programs and with a special emphasis on export capacity. The state-owned Bulgarian Development Bank has committed to supporting small- and medium-sized businesses in Bulgaria, including through the post-COVID-19 recovery period. Typically, a new business is expected to register an account with the state social security agency and, in some cases, with the local municipality as well. Electronic company registration is available at: https:// portal.registryagency.bg/commercial-register . Women receive equitable treatment to men, and the Bulgarian law does not discriminate against minorities doing business.
There is no government agency for outward investment promotion, and no restrictions exist for local businesses to invest abroad.
3. Legal Regime
In general, the regulatory environment in Bulgaria is characterized by complexity, lack of transparency, and arbitrary or weak enforcement. These factors create incentives for public corruption. Public procurement rules are at times tailored to match certain local business interests. Bulgarian law lists 38 operations subject to licensing. The law requires all regulations to be justified by defined need (in terms of national security, environmental protection, or personal and material rights of citizens), and prohibits restrictions merely incidental to the stated purposes of the regulation. The law also requires the regulating authority, or the member of Parliament sponsoring the draft law containing the regulation, to perform a cost-benefit analysis of any proposed regulation. This requirement, however, is often ignored when Parliament reviews draft bills. With few exceptions, all draft bills are made available for public comment, both on the central government website and the respective agency’s website, and interested parties are given 30 days to submit their opinions.
The government maintains a web platform, www.strategy.bg , on which it posts draft legislation. Тhe government posts all its decisions on: pris.government.bg .
In addition, the law eliminates bureaucratic discretion in granting requests for routine economic activities and provides for silent consent (default judgement in favor of the requestor) when the government does not respond to a request in the allotted time. Local companies in which foreign partners have controlling interests may be requested to provide additional information or to meet additional mandatory requirements in order to engage in certain licensed activities, including production and export of arms and ammunition, banking and insurance, and the exploration, development, and exploitation of natural resources. The Bulgarian government licenses the export of dual-use goods and bans the export of all goods under international trade sanctions lists. The Bulgarian government’s budget is assessed as transparent and in accordance with international standards and principles. Central government debt and debt guarantees are published monthly, and debt obligations by individual state-owned enterprises (SOEs) are published every three months on the website of the Agency for Public Enterprises and Control.
The first and only Bulgarian think tank for sustainable finance and energy, the Green Finance & Energy Centre , was launched in March 2021 by the Bulgarian Stock Exchange (BSE) and the Independent Bulgarian Energy Exchange (IBEX), in partnership with the Ministries of Finance and Energy, the Financial Supervision Commission, and the Fund of Funds. The mission of the Green Centre includes raising business awareness and upgrading corporate governance codes with environmental and social responsibility provisions. Major banks and investors increasingly recognize the importance of sustainable finance and investment in supporting economic growth while reducing environmental degradation.
Bulgaria became a member of the World Trade Organization (WTO) in December 1996. Under the provisions of Article 207 of the Treaty on the Functioning of the European Union (Lisbon Treaty), common EU trade policies are exclusively the responsibility of the EU and the European Commission (EC), which coordinates them with the 27 member states. The EC negotiates in the WTO on behalf of the Member States and coordinates issues with them within the Trade Policy Committee of the Council of the EU. The United States supports EU measures to increase digital market competition through the EU’s future Digital Market Act.
Following systemic government-controlled prosecutions during Bulgaria’s communist era, the 1991 Constitution created an independent judicial branch comprised of judges, prosecutors, and magistrate-investigators. The system is governed by a 25-member Supreme Judicial Council (SJC), which is responsible for the selection and disciplining of magistrates; however, according to local and international observers its decisions have been opaque and politically influenced. Eleven of the SJC members are appointed by a supermajority in Parliament, a process often leading to behind-the-scenes distribution of seats to politically convenient candidates. All 1,500 prosecutors are administratively subordinate through their chiefs to the Prosecutor General, who is also a voting member of the SJC and as such has significant decision-making power over judicial selections. Numerous well documented media and civil society investigations in recent years have alleged nepotism, corruption, and undue political and business influence over prosecutions, including with the purpose to take over lucrative businesses. Prosecutors’ decisions to dismiss cases are not subject to review by a judge, and trials, especially in criminal cases, often take years to complete because of the inefficient procedures laid out in the criminal procedure code. Polls show a consistent lack of public confidence in the Prosecutor General and the courts.
There are three levels of courts. Bulgaria’s 113 regional courts exercise jurisdiction over civil and criminal cases. Above them, 28 district courts, including the Sofia City Court, serve as courts of appellate review for regional court decisions and have trial-level (first-instance) jurisdiction in serious criminal cases and in civil cases where claims exceed BGN 25,000 (USD 14,320), excluding alimony, labor disputes, and financial audit discrepancies, or in property cases where the property’s value exceeds BGN 50,000 (USD 28,640). Five appellate courts review the first-instance decisions of the district courts. The Supreme Court of Cassation is the court of last resort for criminal and civil appeals. There is a separate system of 28 specialized administrative courts which rule on the legality of local and national government decisions, with the Supreme Administrative Court serving as the court of final instance. The Constitutional Court, which is separate from the rest of the judiciary, issues final rulings on the compliance of laws with the Constitution.
Bulgaria’s legislation has been largely aligned with EU directives to provide adequate means of enforcing property and contractual rights. In practice, however, investors regularly complain about regulatory impediments, prosecutorial intervention in administrative cases, and inconsistent jurisprudence. Overall, the government’s handling of investment disputes has been slow, interagency coordination is poor, and intervention at the highest political level is often required.
The 2004 Investment Promotion Act stipulates equal treatment of foreign and domestic investors. The law encourages investment in manufacturing and high technology, knowledge intensive services, education, and human resource development. It creates investment incentives by helping investors purchase land, providing state financing for basic infrastructure, training new staff, and facilitating tax incentives and opportunities for public-private partnerships (PPPs) with the central and local governments. The most common form of PPPs are concessions, which include the lease of government property for private use for up to 35 years for a construction and service concession. The term of the concession may be extended by a maximum of one-third of the original term. In 2021, defense and security were excluded from concession-eligible sectors.
Foreign investors must comply with the 1991 Commercial Law, which regulates commercial and company enterprise law, and the 1951 Law on Obligations and Contracts, which regulates civil transactions.
The Invest Bulgaria Agency (IBA) is the government’s investment attraction body and serves as a one-stop-shop for foreign investors. It provides information, administrative services, and incentive assessments to prospective foreign investors.
The Commission for Protection of Competition (the “Commission”) oversees market competition and enforces the Law on the Protection of Competition (the “Competition Law”). The Competition Law, enacted in 2008, is intended to implement EU rules that promote competition. The law forbids monopolies, restrictive trade practices, abuse of market power, and certain forms of unfair competition. Monopolies can only be legally established in enumerated categories of strategic industries. In practice, the Competition Law has been applied inconsistently, and some of the Commission’s decisions are questionable and appear subject to political influence.
Private real property rights are legally protected by the Bulgarian Constitution. Only in the case where a public need cannot be met by other means may the Council of Ministers or a regional governor expropriate land, in which case the owner is compensated at fair market value. Expropriation actions by the Council of Ministers, by regional authorities, or by municipal mayor can be appealed at a local administrative court. In its Bilateral Investment Treaty (BIT) with the United States, Bulgaria committed to international arbitration to judge expropriation claims and other investment disputes.
The 1994 Commercial Law Chapter on Bankruptcy provides for reorganization or rehabilitation of a legal entity, maximizes asset recovery, and provides for fair and equal distribution among all creditors. The law applies to all commercial entities, except public monopolies or state-owned enterprises (SOEs). The 2015 Insurance Code regulates insurance company failures, while bank failures are regulated under the 2002 Bank Insolvency Act and the 2006 Credit Institutions Act. The 2014 bankruptcy of the country’s fourth-largest bank, Corporate Commercial Bank, was a test case that showed serious deficiencies in the process of recovery and preservation of bank assets during bankruptcy proceedings.
Non-performance of a financial obligation must be adjudicated before the bankruptcy court can determine whether the debtor is insolvent. There is a presumption of insolvency when the debtor is unable to perform an executable obligation under a commercial transaction or public debt or related commercial activities, has suspended all payments, or is able to pay only the claims of certain creditors. The debtor is deemed over-indebted if its assets are insufficient to cover its short-term monetary obligations.
Bankruptcy proceedings may be initiated on two grounds: the debtor’s insolvency, or the debtor’s excessive indebtedness. Under Part IV of the Commercial Law, debtors or creditors, including state authorities such as the National Revenue Agency, can initiate bankruptcy proceedings. The debtor must declare bankruptcy within 30 days of becoming insolvent or over-indebted. Bankruptcy proceedings supersede other court proceedings initiated against the debtor except for labor cases, enforcement proceedings, and cases related to receivables securitized by third parties’ property. Such cases may be initiated even after bankruptcy proceedings begin.
Creditors must declare to the trustee all debts owed to them within one month of the start of bankruptcy proceedings. The trustee then has seven days to compile a list of debts. A rehabilitation plan must be proposed within one month after publication of the list of debts in the Commercial Register. After creditors’ approval, the court endorses the rehabilitation plan, terminates the bankruptcy proceeding, and appoints a supervisory body for overseeing the implementation of the rehabilitation plan. The court must endorse the plan within seven days and put it forward to the creditors for approval. The creditors must convene to discuss the plan within a period of 45 days. The court may renew the bankruptcy proceedings if the debtor does not fulfill its obligations under the rehabilitation plan.
The Bulgarian National Bank may revoke the operating license of an insolvent bank when the bank’s own capital is negative, and the bank has not been restructured according to the procedure defined in Article 51 in the Law on the Recovery and Resolution of Credit Institutions and Investment Firms. The license of a bank may be withdrawn under the conditions set out in Article 36 of the Law on Credit Institutions.
5. Protection of Property Rights
Restrictions still exist on the ownership of agricultural land by non-EU citizens. Companies whose shareholders are registered offshore are banned from acquiring or owning Bulgarian agricultural land. Non-EU citizens who have resided in Bulgaria for at least five years or their Bulgaria-registered companies can acquire Bulgarian agricultural land.
Mortgages are recorded centrally with the Bulgarian Registry Agency, at registryagency.bg .
Bulgaria was taken off the USTR’s Special 301 Watch List in 2018, following passage of amendments to the Copyright Law, improvements in royalty collection, and government procurement of licensed software. However, high levels of online piracy continue to exist, and IP enforcement and prosecution efforts continue to be areas of concern.
The 2021 Notorious Markets Report lists two online providers of pirated content which operate from Bulgaria.
Bulgaria is a member of the Convention on Granting of European Patents (European Patent Convention) and a contracting state of the European Patent Office (EPO). Bulgaria has also signed the London agreement for facilitating the validation process but has yet to amend its own law accordingly. Bulgaria is also part of the Patent Cooperation Treaty (PCT).
Bulgaria is a member of the Lisbon Agreement for the Protection of Appellations of Origin and their International Registration. Bulgaria enforces EU legislation for protecting geographical indications (GIs) and Traditional Specialties Guaranteed (TSG). A 2019 Law on Marks and Geographical Indications updated procedures for trademark registration. The law introduced response deadlines as short as three days.
Trademarks and service marks are protected via registration with the Bulgarian Patent Office, or registration as a European Union Trademark, or an international registration under the Madrid Agreement and the Madrid Protocol that designates Bulgaria. A trademark is normally granted within ten months of application filing. Pending applications are published to allow for objections. Rejections can be appealed to the Patent Office’s Disputes Department. Decisions of this department can be appealed to the Sofia Administrative Court within three months.
The Bulgarian law on patents and utility model registrations is harmonized with EU law. The latest amendments in the law provide for new electronic state registers on patents and utility models and services. The state registers are public and available on the website of the Patent Office.
Trademark infringement is a significant problem in Bulgaria for U.S. cigarette and apparel producers, and smaller-scale infringement affects other U.S. products. Bulgarian legislation provides for criminal, civil, and administrative remedies against trademark violation. Bulgaria has implemented simplified border control procedures for the destruction of seized fake goods without civil or criminal trial. In addition to civil penalties prescribed by the Trademarks and Geographical Indications Act (TGIA), the Criminal Code prohibits the use of a third person’s trademark without the proprietor’s consent. In practice, criminal convictions for trademark and copyright infringement are rare and sentencing tends to be lenient. Legal entities cannot be held liable under the Criminal Code.
A 2019 law on trade secret protection allows for civil action for trade secret infringement. There is no special court for cases related to trade secrets.
Bulgarian customs maintain a section on its official web site customs.bg instructing rightsholders of the procedure for filing IPR infringement cases. In 2021, the main countries of origin of counterfeit goods were Turkey, China, and Hong Kong. The most frequently confiscated goods were clothing, perfumes and cosmetics, shoes, toys, bags, and wallets.
Online and broadcast piracy remain an enforcement issue in Bulgaria. While the cybercrime unit at the General Directorate for Combating Organized Crime (GDBOP) is generally responsive to reports of online copyright infringements, investigation of other computer-based IPR crimes is slow, and few result in criminal convictions.
For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at: www.wipo.int/directory/en .
8. Responsible Business Conduct
In 2007 the government adopted a National Corporate Governance Code to encourage companies to adhere to the principles of responsible business conduct (RBC). In 2019, the government approved a Corporate Social Responsibility Strategy for the period until 2023. The non-governmental Bulgarian Network for Social and Corporate Responsibility (CSR – csr.bg) promotes CSR among Bulgarian companies and highlights good business practices.
There is a growing awareness of RBC standards and business’ obligation to proactively conduct due diligence to ensure they are doing no harm, with larger international firms generally further along than smaller domestic companies. Bulgarian companies are more frequently building RBC awareness through events organized in partnership with employer associations.
Bulgarian NGOs continued to report the exploitation of children in certain industries, particularly small family-owned shops, textile production, restaurants, construction businesses, and periodical sales. Children living in vulnerable situations, particularly Roma children, were exposed to harmful and exploitative work in the informal economy, mainly in agriculture, construction, and the service sector.
Bulgaria is not a member of either the OECD or the Extractive Industries Transparency Initiative.
Department of State
- Country Reports on Human Rights Practices;
- Trafficking in Persons Report;
- Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;
- U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
- Xinjiang Supply Chain Business Advisory
Department of the Treasury
Department of Labor
Bulgaria’s Integrated Energy and Climate Plan sets out the country’s key objectives of encouraging low-carbon economic development, developing a competitive and secure energy sector, and reducing dependence on fuel and energy imports. EU Green Transition goals are reflected in Bulgaria’s National Recovery and Resilience Plan (NRRP), which anticipates EUR 3.7 billion to fund green transition initiatives, including EUR 1.7 billion in grants to decarbonize the energy sector. These opportunities are attracting private investment interest in renewable energy, especially large-scale solar and geo-thermal projects buttressed by battery storage. The NRRP includes projects such as: pilot projects for the production of green hydrogen and biogas; infrastructure for hydrogen transport; and a program to finance ad hoc renewable energy measures in buildings not connected to heat or gas transmission networks.
Bulgaria will need to improve efficiency and coordination if it is to meet the EU target of net-zero carbon emissions by 2050. To aid in implementation the green transition, the government is considering regulatory incentives. However, the current system of subsidies oftentimes benefits a small group of businesses and oligarchs associated with corruption or opposed to diversification away from traditional dominant suppliers. The government will need to overcome this resistance in order to finalize viable projects within the required timeframe, or Bulgaria could lose a percentage of its EU funds allocation, threatening fulfillment of national and international goals.
While the Bulgarian Procurement Act technically requires that public procurement comply with environmental and climate protection requirements, these requirements are not easily understood or enforced; nor is the process of procurement generally transparent or effective in supporting climate protection. For this reason, the NRRP seeks to drive public procurement reforms.
Bulgaria is developing pollution standards based on EU standard policies for pollution prevention and control. National level eco-labelling practices also follow EU directives. New EU legislation will grant offset opportunities and tradable permits for forests, agricultural land carbon capture, and other carbon minimization efforts.
Corruption remains a significant issue in Bulgaria. Bulgaria ranks 78th out of 180 countries in Transparency International’s Corruption Perception Index for 2021, the worst in the EU. Human trafficking, and narcotics and contraband smuggling all contribute to corruption. With the gradual introduction of technologies in public administration, including e-filing and the electronic issuance of certificates, some progress has been made in addressing petty corruption. However, high-level corruption, particularly in public procurement, remains a serious concern. The high-profile prosecutions that do take place are often seen as selective or politically motivated and typically end in acquittals after a lengthy judicial process. The lack of serious convictions against senior officials and the need for reforms in the criminal justice sector remained high on the public agenda throughout 2021 when it took three elections to finally form a government. While the new governing coalition has demonstrated political will to undertake serious reforms, including to reorganize the Anti-Corruption Commission and increase its powers, it is yet to pass new laws and build capacity to secure final convictions for public corruption.
The Anti-Corruption Commission, established in 2018 on the foundations of several previously independent bodies for asset recovery and conflict of interest prevention, has been marred by leadership scandals and an insignificant anti-corruption record. The Anti-Corruption Fund (acf.bg), a civic organization created in 2017, conducts its own investigation of cases suspected either of corruption or conflict of interest among Bulgarian senior politicians and policy makers.
Bulgaria has ratified the Anti-Bribery Convention and is a participating member of the OECD Working Group on Bribery. Bulgaria has also ratified the Council of Europe’s Convention on Laundering, Search, Seizure, and Confiscation of Proceeds of Crime (1994) and Civil Convention on Corruption (1999). Bulgaria has signed and ratified the UN Convention against Corruption (2003); the Additional Protocol to the Council of Europe’s Criminal Law Convention on Corruption; and the UN Convention against Transnational Organized Crime. In 2018, the Bulgarian Parliament adopted the Anti-Money Laundering Act, which transposes the 2015 EU Directive on the prevention of the use of the financial system for the purposes of money laundering and terrorist financing. The new law required registered business groups to declare by May 2019 their beneficial owners. Some companies continue to avoid ownership publication by registering shell entities in tax heavens and offshore zones. Local capacity to detect suspicious and potentially illicit money flows remains low as evidenced by a 2019 case involving millions in money transfers from a Venezuelan state-run oil company through the Bulgarian banking system.
Conflict of interest is legally defined in the Law on Combatting Corruption and Illegal Asset Forfeiture, Article 52: “Conflict of interest exists when the contracting authority, its employees or employees outside its structure who are involved in the preparation or award of the contract or who may influence the outcome of the contract have an interest, which may lead to a benefit and which could be considered to affect their impartiality and independence in connection with the award of the public contract.” Article 81 also defines conflict of interest as “receiving a material benefit” by senior public officials and related persons. In 2021 authorities levied fines on individuals in 22 conflict of interest cases.
Bribery is a criminal act under Bulgarian law both for the giver and for the receiver. Individuals who mediate and facilitate a bribe are also held accountable, but according to observers, enforcement of this provision has been arbitrary as prosecutors have de facto discretion not to charge individuals who opt to cooperate as witnesses.
Government agencies responsible for combating corruption:
Commission on Corruption Prevention and Illegal Assets Forfeiture
6, Sveta Nedelya Sq. Sofia, 1000
Mr. Boyko Stankushev
Director and Member of the Managing Board
Mr. Joeri Buhrer Tavanier
Chairman of the Managing Board
71, Knyaz Boris Str., Office 2
Mr. Ognyan Minchev
Transparency International Bulgaria
PO Box 72, Sofia
10. Political and Security Environment
Daily anti-government protests that took place throughout the summer of 2020 in Sofia generated sporadic reports of excessive force by protestors and police, but otherwise there has been no significant political violence in recent years.
11. Labor Policies and Practices
The Bulgarian Constitution recognizes workers’ rights to join trade unions and to organize. The National Council for Tripartite Cooperation (NCTC) provides a forum for dialogue among the government, employer organizations, and trade unions on issues such as cost-of-living adjustments and social security contributions. Currently, there are five nationally recognized employer organizations, based on membership thresholds. Bulgaria has two large trade union confederations represented at the national level, the Confederation of Independent Trade Unions of Bulgaria (CITUB) and the Confederation of Labor Podkrepa (Support). CITUB, the larger of the two, has an estimated membership of about 300,000. Podkrepa has a large share of unionized labor in education.
There are very few restrictions on trade union activity, but employees in smaller private firms are often not represented. Unionized labor is most commonly seen in the highly subsidized railway and postal sectors. Under the Bulgarian Labor Code, employer-employee relations are regulated by employment contracts. Collective labor contracts can be concluded at the sectoral level, enterprise level, regional, and municipal levels. The Labor Code addresses worker occupational safety and health issues and mandates a minimum wage (set by the Council of Ministers). The minimum wage in 2022 is BGN 710 (USD 405) per month. The Bulgarian Labor Code provides for benefits for departing employees depending on the reason for termination of the employment contract and on whose initiative the termination was enacted. In cases of forcible termination, the employee is normally entitled to compensation from the employer, generally up to one month of gross salary.
Disputes between labor and management can be referred to the courts, but resolution is often slow. The National Institute for Conciliation and Arbitration (NICA) has developed a framework for collective labor dispute mediation and arbitration. However, NICA-sponsored collective labor dispute resolutions remain few.
The Bulgarian labor market continues to be rigid in classifying different forms of employment (part-time, per-hour, etc.). Driven by business disruption due to the COVID-19 pandemic, in 2020 the Bulgarian Labor Code was amended to allow businesses to reclassify full-time workers as part-time while the state of emergency is in force. The Bulgarian Labor Code limits overtime work to 300 hours per calendar year. Undeclared work is the most common informal labor market practice. The share of the informal economy has decreased from 36.7 percent in 2010 to 22.5 percent in 2020.
An EU “Blue Card” work permit can be obtained by high-skilled foreigners who have a visa or a long-term residence permit in Bulgaria. The long-term residence permit and the “Blue Card” are issued for a period of up to four years. As of March 2022, Ukrainians and members of their families with the right to temporary protection under Art. 1a, para. 3 of the Asylum and Refugees Act have the right to work in Bulgaria without a labor permit. Persons with temporary protection status can register as jobseekers with the Labor Office Directorate at their permanent or current address. Additional information about the procedure for obtaining temporary protection can be found here: (www.aref.government.bg/bg/node/499) . Ukrainian citizens have the right to seasonal work of up to 90 days in agriculture, forestry and fisheries, hotels and restaurants in Bulgaria without interruption for 12 months. For this purpose, registration with the Employment Agency is required based on a declaration submitted by the employer. As of March 2022, Bulgarian business have estimated they have the capacity to employ up to 200,000 new workers, including for eligible Ukrainians, mostly in the IT, textile, and construction sectors.
Bulgarians’ literacy rate (aged 15 and older) is 98.4 percent, have an average 14.4 years of schooling, and have strong backgrounds in engineering, medicine, economics, and the sciences, but there is a shortage of professionals with management skills as well as of skilled workers. Foreign and local investors have also complained of a mismatch between the educational system and the labor market’s demands. Employers have also been slow to offer training. Emigration, particularly among young skilled professionals, has exacerbated the shortages. Bulgaria slipped two places to 56th in the UN Human Development Index for 2020, the lowest score among EU countries.
The Roma community makes up an estimated 10 percent of the total population and a higher percentage of the labor force. These numbers are increasing as a result of demographic trends. The Roma community is subject to discrimination and is socially marginalized, with lower levels of educational attainment. Consequently, Roma are overrepresented among unskilled workers and in the grey economy. Large numbers of Roma also seek unskilled, seasonal employment in other EU member states.
14. Contact for More Information
Liam Sullivan (Senior Economic Officer)