Policies Towards Foreign Direct Investment

At present, there are no general limits on foreign ownership or control of firms, nor is there screening or restricting of foreign investment in Bulgaria.  However, while Bulgaria generally affords national treatment to foreign investors, there are reports of discrimination against U.S. investors by government officials.  Two major U.S. investors in Bulgaria have been subjected to open criticism by government officials as “American” companies responsible for high energy costs in Bulgaria.  The government continues to threaten to have the companies’ long-term contracts abrogated. In another case, a U.S. company has faced bureaucratic hurdles in its efforts to compete in the energy sector with a monopolistic state-owned Russian incumbent.  More often, investors cite general problems with corruption, rule of law, frequently changing legislation, and uneven law enforcement. Transparency International’s (TI) Corruption Perception Index for 2018 ranked Bulgaria 77th out of 180 surveyed countries, down six places from last year’s 71st, and scoring 42 on a 100-point scale, well below the EU average of 66.  The Invest Bulgaria Agency (IBA), the government’s investment promotion body, provides information, administrative services, and incentive assessments to prospective foreign investors. Its website http://www.investbg.government.bg/en   contains general information for foreign investors.

Limits on Foreign Control and Right to Private Ownership and Establishment

With a few exceptions, there are no limits for foreign and domestic private entities to establish and own a business in Bulgaria. The Offshore Company Act lists 28 activities (including government procurement, natural resource exploitation, national park management, banking, insurance) banned for companies registered in offshore jurisdictions, with more than 10 percent foreign participation. 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 treaty for the avoidance of double taxation (including the United States).  Despite the EU creation of a national security investment review framework, Bulgaria currently has no specific law or established mechanism in place for screening individual foreign investments for potential national security risks. Nonetheless, investments can be scrutinized on an ad hoc basis or through the Law on the Measures against Money Laundering.

Other Investment Policy Reviews

Reviews of Bulgaria’s investment climate by the Organization for Economic Cooperation and Development (OECD) can be found at this website: https://www.oecd.org/development/bulgaria-strengthens-its-co-operation-with-the-oecd-via-an-action-plan.htm   

The United Nations Conference on Trade and Development (UNCTAD) has this report: https://unctadstat.unctad.org/CountryProfile/GeneralProfile/en-GB/100/index.html   

Business Facilitation

Bulgaria typically supports small and medium business creation and development in conjunction with EU-funded innovation and competitiveness programs and with a special emphasis on export promotion and small- and medium-sized enterprise (SME) development. 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://public.brra.bg/Internal/Registration.ra?0   . Women receive equitable treatment to men, and the Bulgarian law protects minorities from discrimination.

Bulgaria ranked overall 59th (out of 190 surveyed economies worldwide) in the World Bank’s 2019 Doing Business report; 99th in Starting a New Business, and 147th place in the ‘Getting Electricity’ category. 

Outward Investment

There is no government agency for outward investment promotion; no restrictions exist for any local business to invest abroad.

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

* Source for Host Country Data: Bulgarian National Bank (BNB). For comparative purposes, data inside the table draws from the U.S./international source provided in the last column.

Table 3: Sources and Destination of FDI

The official FDI data in 2018 is broadly consistent with the IMF dollar-adjusted data.  The data for the Netherlands are heavily influenced by investment by non-Dutch companies (particularly Russian) incorporated in the country.  Distortions such as this substantially overstate the actual role of some countries as sources of FDI and understate that of the United States.  A recent study, based on beneficial owner analysis, placed the United States as historically the sixth-largest source country for FDI in Bulgaria, significantly above its nominal ranking at #13.  According to the same analysis, the United States is historically the largest non-EU source of FDI in Bulgaria.

Table 4: Sources of Portfolio Investment

Bulgarian companies’ tendency to seek tax advantages by using offshore entities impacts the data below, particularly in the case of Luxembourg