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Executive Summary

Bulgaria’s economy grew by 3.5 percent in 2017, driven by exports and domestic consumption. Official unemployment is below six percent, and the economy is near its full-employment level. The shortage of skilled labor in many sectors has led to wage increases far above gains in labor productivity. The wage gains have led to moderate inflation, putting an end to a deflationary trend. Foreign Direct Investment (FDI) continued to decline, compared to pre-crisis levels and following the initial burst of optimism after Bulgaria’s entry into the EU in 2007. Structural Funds from the European Union have helped sustained growth and fill in the gaps left by the declining FDI.

Bulgaria is still seen by many investors as being an attractive investment destination that provides government incentives for new investment. Bulgaria offers some of the least expensive labor in the European Union (EU) and low and flat corporate and income taxes. 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, business process outsourcing, and building services for technical maintenance. The IT and back office outsourcing sectors have attracted a number of U.S. and foreign companies to Bulgaria, and many have established global and regional service centers in the country. EU multi-year funds support economic growth in the form of grants for selected infrastructure projects.

There are, however, emerging challenges. A shortage of skilled labor, due to out-migration and an aging population, is becoming more pronounced and driving labor cost increases in selected sectors. Foreign investors remain concerned about the rule of law in Bulgaria. Corruption is endemic, particularly on large infrastructure projects and in the energy sector. Investors cite other problems impeding investment, such as unpredictability due to frequent regulatory and legislative changes, slow judicial system processes, and limited enforcement of intellectual property rights (IPR). As of early 2018, there are questions as to the government’s commitment to upholding its contracts, including with major U.S. investors. In another example, a U.S. company has faced extended regulatory obstacles in its attempts to enter the energy market. Political stability has been an issue, with multiple out-of-cycle elections in the last several years. The current coalition government, the third for Prime Minister Boyko Borissov, took office in May 2017.

Table 1

Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2017 71 of 180
World Bank’s Doing Business Report “Ease of Doing Business” 2018 50 of 190
Global Innovation Index 2017 36 of 127
U.S. FDI in partner country (M USD, stock positions) 2016 USD 451
World Bank GNI per capita 2016 USD 7,580

Policies Toward 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. Companies with more than 10 percent foreign participation are banned from doing business in Bulgaria across 28 specific activities, including in government procurement, natural resource exploitation, national park management, banking, and insurance, but certain exemptions are available.

While Bulgaria generally affords national treatment to foreign investors, there are reports of discrimination against U.S. investors by government officials. Investors more often cite general problems with corruption, rule of law, frequently changing legislation, and weak law enforcement. Transparency International’s (TI) Corruption Perception Index for 2017 ranked Bulgaria 71st out of 180 countries surveyed – the lowest-ranked EU member state. As of early 2018, the government has been openly discussing the possibility of abrogating its long-term contracts with two major U.S. investors, citing the need to adhere to EU regulatory policies. In another case, a U.S. company has been facing major regulatory, and possibly political, obstacles in its efforts to compete with an entrenched foreign incumbent in the energy market.

Limits on Foreign Control and Right to Private Ownership and Establishment

Generally, there are no existing limits for foreign and domestic private entities to establish and own a business in Bulgaria. The Offshore Company Act lists 28 activities banned for business by companies registered in offshore jurisdictions with more than 10 percent offshore 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 (such as the United States).

Other Investment Policy Reviews

There have been no recent Investment Policy Reviews of Bulgaria by multilateral economic organizations.

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 in the government social security institute and, in some cases, with the local municipality as well. Electronic company registration is available at: . Women receive equitable treatment to men, and generally Bulgarian law does not discriminate against minorities doing business.

Bulgaria ranked overall 50th (out of 190 surveyed economies worldwide) in the World Bank’s 2018 Doing Business report, ranked 95th in Starting a New Business, and had its worst ranking in the Getting Electricity category (141st place).

The Invest Bulgaria Agency (IBA), the government’s investment coordinating body, provides information, administrative services, and incentive assessments to prospective foreign investors. Its website  contains relevant information for foreign investors.

Outward Investment

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

Bulgaria has a Bilateral Investment Treaty (BIT) with the United States, which obligates the parties to uphold national treatment and includes provisions for investor-State dispute settlement through international arbitral bodies. The BIT also includes a side letter on protections for intellectual property rights. Upon Bulgaria’s joining the EU, Bulgaria and the United States exchanged notes in 2003 to make Bulgaria’s obligations under the BIT compatible with its EU obligations, and finalized the process in January 2007.

As of 2015, Bulgaria also has bilateral investment treaties signed with the following countries: Albania, Algeria, Argentina, Armenia, Austria, Azerbaijan (not in force), Bahrain (not in force), Belarus, Belgium, China, Croatia, Cuba, Cyprus, Czech Republic, Denmark, Egypt, Finland, France, Georgia, Germany, Ghana (not in force), Greece, Hungary, India, Indonesia (terminated), Iran, Israel, Italy (terminated), Jordan, Kazakhstan, Kuwait, Latvia, Lebanon, Libya, Lithuania, Luxembourg, Macedonia, Malta, Moldova, Mongolia (not in force), Montenegro, Morocco, Nigeria (not in force), North Korea (not in force), Oman (not in force), Pakistan (not in force), Poland, Portugal, Qatar, Romania, Russia, San Marino, Serbia, Singapore, Slovakia, Slovenia, South Korea, Spain, Sudan (not in force), Sweden, Switzerland, Syria, Thailand, The Netherlands, Tunisia, Turkey, Ukraine, United Kingdom and Northern Ireland, Uzbekistan, Vietnam, and Yemen.

Bulgaria has a bilateral tax treaty with the United States.

As of 2017, Bulgaria has signed bilateral double taxation treaties with the United States and the following countries: Albania, Algeria, Armenia, Austria, Azerbaijan, Bahrain Belarus, Belgium, Canada, China, Croatia, Cyprus, Czech Republic, Denmark, Egypt, Estonia, Finland, France, Georgia, Germany, Greece, Hungary, India, Indonesia, Iran, Ireland, Israel, Italy, Japan, Jordan, Kazakhstan, Kuwait, Latvia, Lebanon, Lithuania, Luxembourg, Macedonia, Malta, Moldova, Mongolia, Montenegro, Morocco, North Korea, Norway, Poland, Portugal, Qatar, Romania, Russia, Serbia, Singapore, Slovakia, Slovenia, South Africa, South Korea, Spain, Sweden, Switzerland, Syria, Thailand, The Netherlands Turkey, Ukraine, United Arab Emirates, United Kingdom and Northern Ireland, Uzbekistan, Vietnam, and Zimbabwe.

Transparency of the Regulatory System

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. Bulgarian law defines 38 operations that must be licensed. 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 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, at  on which it posts draft legislation. In addition, the law eliminates bureaucratic discretion in granting requests for routine economic activities, and provides for silent consent 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 meet 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. Bulgarian government licenses exports of dual-use goods and bans the export all goods under international trade sanctions lists.

International Regulatory Considerations

Bulgaria became a member of the World Trade Organization 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 competence of the EU and the European Commission, which coordinates them with the 27 member states.

Legal System and Judicial Independence

The 1991 Constitution serves as the foundation of the legal system and creates an independent judicial branch comprised of judges, prosecutors, and investigators. The judiciary continues to be the least trusted institution in the country, with widespread allegations of corruption and undue political and business influence. The busiest courts in Sofia suffer from serious backlogs, limited resources, and inefficient procedures that hamper the swift and fair administration of justice.

There are three levels of courts. Bulgaria’s 113 regional courts exercise jurisdiction over civil and criminal cases. Above them, 29 district courts (including the Sofia City Court and the Specialized Court for Organized Crime) 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 15,720), excluding alimony, labor disputes, and financial audit discrepancies, or in property cases where the property’s value exceeds BGN 50,000 (USD 31,440). Six 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 has adequate means of enforcing property and contractual rights under local legislation. In practice, however, the government’s handling of investment disputes has been slow, and intervention at the highest level is often required. Investors sometimes perceive that jurisprudence is inconsistent, and that national legislation is used to deter competition from foreign investors.

Laws and Regulations on Foreign Direct Investment

The 2004 Investment Promotion Act stipulates equal treatment of foreign and domestic investors. The law encourages investment in manufacturing and high technology, as well as in education and human resource development. It creates investment incentives by helping investors purchase land, providing state financing for basic infrastructure and training new staff, and facilitating tax incentives and opportunities for public-private partnerships (PPPs) with the central and local government. The most common form of PPPs presently is concessions, which include the lease of government property for private use for up to 35 years.

Foreign investors must comply with the 1991 Commercial Code, which regulates commercial and company law, and the 1951 Law on Obligations and Contracts, which regulates civil transactions.

Competition and Anti-Trust Laws

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 and consumer protection. 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 the Competition Commission has been seen as subject to influence and as having overstepped its mandate.

Expropriation and Compensation

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, the Council of Ministers or a regional governor may expropriate land provided that the owner is compensated at fair market value. Expropriation actions of the Council of Ministers can be appealed directly to the Supreme Administrative Court on the legality of the action itself, the property appraisal, or the amount of compensation. A regional governor’s expropriation can be appealed in the appropriate local administrative court. In the Bilateral Investment Treaty (BIT) with the United States, Bulgaria committed to international arbitration in the event of expropriation and other investment disputes.

An investment dispute with two major U.S. investors emerged in early 2018, in which the government is threatening to abrogate its long-term contracts with the companies. While the government is citing pressure emanating from EU regulatory policy, the companies view the compensation offers made by the government to date as woefully inadequate.

Dispute Settlement

ICSID Convention and New York Convention

Bulgaria is a signatory to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York convention) and the 1961 European Convention on International Commercial Arbitration. Bulgaria is a member state to the International Centre for the Settlement of Investment Disputes (ICSID).

Investor-State Dispute Settlement

Bulgaria accepts binding international arbitration in disputes with foreign investors. The most experienced arbitration institution in Bulgaria is the Arbitration Court (AC) of the Bulgarian Chamber of Commerce and Industry (BCCI). Established more than 110 years ago, the Arbitration Court hears civil disputes between legal persons, one of whom must be located outside Bulgaria. It began to act as a voluntary arbitration court between natural and/or legal persons domiciled in Bulgaria in 1989.

International Commercial Arbitration and Foreign Courts

Arbitral awards, both foreign and domestic, are enforced through the judicial system. The party must petition the Sofia City Court for a writ of execution. Having obtained a writ, however, the creditor must then execute the award using the general framework for execution of judgments in the country. Foreclosure proceedings may also be initiated.

Bulgarian law instructs courts to act on civil litigation cases within three months after the case is filed. However, in practice, dispute settlement can take several months and up to a few years. Courts in Sofia are typically slower than those outside the capital city and may rule on a case several years after the case has been filed. In courts outside of Sofia, it takes anywhere from several months up to a year for a case to be completed. Bankruptcy cases are the most complicated and resolution may take years.

Bankruptcy Regulations

The 1994 Commercial Code 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) established by a special law. The 2005 Insurance Code regulates insurance company failures while bank failures are regulated under the 2002 Bank Insolvency Act and 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 ensuring that bank assets are adequately recovered and preserved during bankruptcy proceedings. In 2016, Parliament approved legislative amendments intended to allow bank trustees to better manage assets while at the same time increasing their accountability.

Non-performance of a monetary 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 Code, 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.

In the World Bank’s 2018 Doing Business Report, Bulgaria ranked 50 for ease of “resolving insolvency,” ahead of three other EU peers, Romania, Greece and Croatia.

Investment Incentives

The 2004 Investment Promotion Act (revised in 2018) stipulates equal treatment of foreign and domestic investors. The law encourages investment in manufacturing, services, and high-technology, as well as in education and human resource development. It creates investment incentives by helping investors purchase municipal or state owned land without tender, provides state financing for basic infrastructure and for training new staff as well as reimbursement of employer’s part of social security payments. It also provides tax incentives and opportunities for public-private partnerships with the central and local governments and fast-track administrative procedures. The government policy for investment promotion excludes a number of sectors classified as strategic.

Investment projects that are particularly important for the economy and meet the legal requirement for a minimum investment commitment in the amount of EUR 10 to 50 million and for creating 50 to 150 new jobs are classified as priority projects. The exact amount of the required investment depends on the economic activity expected to be generated. Such projects can be implemented in all sectors of the economy. In addition to a range of standard incentives, priority investors can acquire property rights (full or limited) on central or municipal government property at prices below the market ones, receive government grants for research and development (R&D) and education projects, and institutional support for establishing PPPs.

Additional incentives are a two-year valued-added tax (VAT) exemption on equipment imports which applies to investment projects over EUR 2.5 million, provided the project will be implemented within a two-year period and create at least 20 new jobs. Corporate income tax exemption can also be granted in case of manufacturing projects with no minimum investment requirement, which are implemented in high unemployment areas and create at least 10 jobs. The project must be fulfilled within four years.

Foreign Trade Zones/Free Ports/Trade Facilitation

The role of Free Trade Zones vastly diminished following Bulgaria’s full integration into the EU single market in 2007. At the same time, EU integration encouraged local authorities to seek partnerships with the private sector and provide resources (i.e., land, infrastructure, etc.) for the development of industrial zones and technological parks. Located favorably on one of the main highways, the Trakia economic zone just outside of Plovdiv has marked a great success attracting more than 140 companies and a total investment of over EUR 1.5 billion to date. The government National Industrial Zones Company has been established to support the creation of such zones and parks and enable a stable FDI inflow. The company presently operates a fully functioning industrial zone in Vidin, which is in the northwest region concentrating the highest level of unemployment in the country. The two other fully-functioning industrial zones are those in Ruse and Svilengrad. The industrial zones in Bozhurishte (outside Sofia) and Burgas (Southern Black Sea coast) offer building space and infrastructure for interested investors. The common thread among all these economic zones is that they are either located in regions with plenty of available labor, in poor regions where the government provides special investment incentives, or are at important cross border points. The high-technology Sofia Tech Park has joined efforts with the Bulgarian Academy of Sciences, several local universities, and several clusters in what is expected to become the largest center for high-level R&D center and incubator for high technology international and local business in Bulgaria.

Performance and Data Localization Requirements

Bulgaria does not impose export performance or local content requirements as a condition for establishing, maintaining, or expanding an investment. Employment visas and work permits are required for most expatriate personnel from non-EU countries. Many U.S. companies have experienced difficulties in the past obtaining work permits for their non-Bulgarian, non-EU employees. Private companies cannot exceed a 1:10 ratio of non-EU residents to Bulgarian employees. In 2017 the government shortened the time needed for issuing work visas for non-EU workers and the amount of paperwork necessary.

There are no requirements for foreign IT providers to turn over source code or provide access to surveillance, nor are there mechanisms used to enforce any rules on maintaining a certain amount of data storage within Bulgaria.

Real Property

Bulgaria assigned the rights of land back to its original owners in early 1990s. Restrictions still exist on ownership of agricultural land by non-citizens. Mortgages are recorded centrally with the Bulgarian Registry Agency. The 2003 Law on Special Purpose Investment Companies (SPIC) allows for public investment companies in real estate and receivables, essentially real estate investment trusts (REITs). Since a SPIC is considered a pass-through structure for corporate income tax purposes, at least 90 percent of its net income must be distributed to shareholders as taxable dividends. A SPIC must apply for an operational license from the Financial Supervision Commission within six months of registration.

In the World Bank’s 2018 Doing Business report, Bulgaria outpaces some of its peers in the category of issuing construction permits but does less well in the category of registering property.

Intellectual Property Rights

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. Bulgarian patent law has been harmonized with EU law for patents and utility patent protection. However, high levels of online piracy continue to exist and IP enforcement and prosecution efforts continue to be areas of concern. Bulgaria is listed as the host country for the cyberlocker “Dopefile” in the 2017 USTR’s Notorious Markets report.

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 grants the right to exclusive use of inventions for 20 years from the date of patent application, subject to payment of annual fees, which range from BGN 50 (USD 31) to BGN 1,700 (USD 1,069), depending on the time remaining before the patent expires. Supplementary protection certificate (SPC) is also an available protection option. Innovations can also be protected as utility models (small inventions). They are registered without novelty examination. The term of validity of a utility model registration is four years from the date of filing with the Patent Office. It may be extended by two consecutive three-year periods, but the total term of validity may not exceed 10 years. There is no accessible database for the registered and valid patent and utility models in Bulgaria.

Under Bulgarian law, new and original industrial designs can be granted certificates from the Patent Office and entered in the state register. The term of protection is 10 years, renewable for up to 25 years. Bulgaria is a contracting state of the Hague Agreement Concerning the International Deposit of Industrial Designs.

Compulsory licensing (allowing competitors in the market despite a valid patent) may be ordered under certain conditions, including failure to use a patent. Disputes arising from the creation, protection, or use of inventions and utility models can be settled under administrative, civil, or arbitration procedures.

Pursuant to the 1996 Protection of New Plant Varieties and Animal Breeds Act, the Patent Office can issue a certificate which protects new plant varieties and animal breeds for between 25 and 30 years. Responding to long-standing industry concerns, the Bulgarian government included in its Drug Law a provision to provide data exclusivity (i.e., protection of confidential data submitted to the government to obtain approval to market pharmaceutical products).

Bulgaria is a member of the Lisbon Agreement for the Protection of Appellations of Origin and their International Registration. Trademarks, service marks, and rights to geographic indications are only protected pursuant to registration with the Bulgarian Patent Office or an international registration (under the Madrid Agreement and the Madrid protocol) designating Bulgaria; protection does not arise merely from use in commerce. A trademark is normally granted within eighteen months of filing a complete application. Refusals can be appealed to the Disputes Department of the Patent Office. Decisions of this department can be appealed to the Sofia Administrative Court within three months of the decision. The right of exclusive use of a trademark is granted for ten years from the date of submitting the application. Extension requests must be filed during the final year of validity and can be renewed up to six months after its expiration. Protection may be terminated at third party request if a trademark is not used for a five-year period. 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 procedure 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 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.

The 1993 Copyright Act defines copyright work as any work of literature, art and science, which is the result of creative activity, including: literary works, publications and computer programs; musical works; stage productions; films and other audiovisual works; fine arts, including applied art, design and folk artistic crafts; architectural works and spatial development plans; photographic works; and works created in a manner similar to photographic works. Under the Bulgarian law, translations and reprocessing of existing works and folklore works, periodicals, encyclopedias, collections, anthologies, bibliographies, databases that include two or more works or materials, are also eligible for copyright protection. The law allows rights holders to form organizations for collective management of rights in order to ensure they receive adequate payment for use their works by others.

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at .

Capital Markets and Portfolio Investment

Since 1997, the Bulgarian Stock Exchange (BSE) has operated under a license from the Securities and Stock Exchange Commission (SSEC). The 1999 Law on Public Offering of Securities regulates the issuance of securities, securities transactions, stock exchanges, and investment intermediaries.

Since its 2007 entry in the EU, Bulgaria has aligned its regulation of securities markets with EU standards under the Markets in Financial Instruments Directive (MiFID). The BSE is the only securities-trading venue in Bulgaria. Its infrastructure has substantially improved in recent years, including the establishment of an official index (SOFIX), an Internet-based trading system, and a growing number of brokers. The BSE allows trading of stocks, government bonds, corporate bonds, Bulgarian Depositary Receipts, municipal bonds, and mortgage-backed securities. Three other indices have appeared in addition to the official SOFIX: BG40, BG TR30, and BGREIT. Capital gains from securities transactions are not subject to withholding tax; the tax on dividends and liquidation proceeds is five percent. The BSE’s total market capitalization, although still small, more than doubled in 2017, reaching 24 percent of Bulgaria’s GDP, as companies issued more stock. The Ministry of Finance holds a majority stake of 50.05 percent in the BSE, with the remaining shareholders – local and international institutional investors and private persons – each controlling less than five percent of the capital.

Money and Banking System

In 2017, there were 27 commercial banks (22 subsidiaries and 5 branches), with total assets of BGN 95.1 billion (USD 59.8 billion), 96.4 percent of GDP. Approximately 73 percent of the banking system is owned by foreign banking groups, mostly EU, including UniCredito Italiano SpA (UCI), BNP PARIBAS, KBC, Societe Generale, Raiffeisen International, OTP Group, and Citibank. The top five bank concentration rate in 2017 was 56.3 percent. Part of Bulgarian banking system is currently going through asset consolidation. Some of the smaller actors in the banking sector have recently been offered for sale.

The Bulgarian government finances some of its expenditures by issuing bonds (generally Euro-denominated) in capital markets. Commercial banks and private pension funds are the primary purchasers of these instruments. EU-based banks are eligible to be primary dealers of Bulgarian government bonds. In order to acquire Bulgarian government bonds, a foreign bank must register with the Ministry of Finance and open a “custody account” in Bulgarian leva. The Investment Promotion Act defines securities, including treasury bills, with maturities over six months as investments. Repatriation of profits is possible after presenting documentation that taxes have been paid.

Foreign Exchange and Remittances

Foreign Exchange Policies

Bulgaria operates a Currency Board Arrangement (CBA) whereby the lev (BGN) is fixed to Euro, exchanging EUR 1 for BGN 1.9558. Foreign exchange is freely accessible. The Foreign Currency Act stipulates that anyone may import or export up to EUR 10,000 or its foreign exchange equivalent without filling out a customs declaration. The import or export of over EUR 10,000 or its equivalent in Bulgarian leva or another currency across the border to or from a non-EU country must be declared to the customs authorities; in the case of an EU country, it must be declared if requested by the customs authorities. Exporting over BGN 30,000 (USD 18,800) in cash requires a declaration about the source of the funds, supported by documents certifying that the exporter does not owe taxes (unless the funds were earlier imported and declared).

In 2014, United States and Bulgaria signed an intergovernmental agreement that implements provisions of the Foreign Account Tax Compliant Act (FATCA), which targets tax non-compliance by U.S. persons who do business with Bulgarian financial institutions. The Parliament ratified the agreement in 2015.

Remittance Policies

There is no official policy regarding remittances. Remittances as personal transfers are an increasingly important source of funding for Bulgarian families with relatives overseas. According to official statistics, foreign remittances amounted to nearly a billion dollars in 2017 (a figure that does not include transfers via informal channels).

Sovereign Wealth Funds

Bulgaria does not have a sovereign wealth fund.

Upon EU accession, Bulgaria was recognized as a market economy, in which the majority of the companies are private. Significant state-owned enterprises (SOEs) remain, such as for railways and for the postal service remain. SOEs also predominate in infrastructure and distribution in both the electricity and gas markets; many of these are managed by the same holding company (also an SOE). SOEs’ budgets and audit reports are posted on the Ministry of Finance website. The list of all SOEs can be found on: .

The law treats equally public and private sector companies vis-a-vis bidding on concessions, taxation, or other government-controlled processes. Bulgaria became party to the WTO’s Government Procurement Agreement (GPA) upon its entry into the EU in 2007.

Privatization Program

All state-owned properties are eligible for privatization, with the exception of a specific list of companies, including water management companies, state hospitals, and state sports facilities. State-owned military manufacturers can be privatized with Parliamentary approval.

Municipally-owned property can be privatized upon decision by a municipal council, or authorized body and upon publication of the municipal privatization list in the national gazette. Foreign companies may participate. The 2010 Privatization and Post-Privatization Act created a single Privatization and Post-Privatization Agency ( ) responsible for privatization oversight.

In 2007 the government adopted a National Corporate Governance Code to encourage companies to adhere to the principles of responsible business conduct (RBC). Since the adoption, 53 publicly traded companies are known to have signed this voluntary document. The Bulgarian government adopted a strategy and an action plan on corporate social responsibility (CSR) in 2009-2013. It has now invited the private sector and the academia to assist in drafting a new strategy. A consultative body under the Minister of Labor is coordinating the process. The non-governmental Bulgarian Network for Social and Corporate Responsibility ( ), promotes CSR among Bulgarian companies and reports good business practices. Bulgaria is not a member of either OECD or Extractive Industries Transparency Initiative.

Bribery is a criminal act under Bulgarian law for both the giver and the receiver. Individuals who mediate and facilitate a bribe are also held accountable. However, widespread corruption continues to be one of the most difficult problems in Bulgaria’s investment climate. Human trafficking, narcotics, and contraband smuggling channels contribute to corruption in Bulgaria. Bulgaria has laws, regulations, and penalties on the books to combat corruption, but its law enforcement capacity remains limited and the authorities opt for easy-to-prove, low-level cases. As a result, Bulgaria has seen little progress on cases of high public interest, involving alleged siphoning of millions from the state coffers or EU funds, and in particular those involving public tenders for large energy and infrastructure projects. Bulgaria ranks 71st out of 180 countries in Transparency International’s Corruption Perception Index for 2017.

In early 2018, the Center for Prevention and Countering Corruption and Organized Crime became the umbrella agency incorporating previously independent bodies combating corruption.

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.

Resources to Report Corruption

Organizations or agencies responsible for reporting on or combating corruption:

Mr. Plamen Georgiev, Chairman
Commission on Corruption Prevention and Illegal Assets Forfeiture
kovski Blvd, Sofia, 1000

Ms. Eleonora Nikolova, Director
Center for Prevention and Countering Corruption and Organized Crime
6 Sveta Nedelya Sq., Sofia

Mr. Ognyan Minchev, Board President
Transparency International Bulgaria
50 Sandor Petofi Str., Sofia

There have been no incidents in recent years involving politically-motivated crime.

As of December 2017, Bulgaria’s potential workforce officially amounted to 3,167,600 or 52.3 percent of the population. Of this, the number of employed men and women 15 years and older totaled over 3.0 million people, of which men were 53.7 percent and women 46.3 percent.

The number of officially registered unemployed was 5.6 percent of the labor force in December 2017.

The official adult literacy rate in Bulgaria is 98.3 percent (15 years and older), but illiteracy is significantly higher among some minorities. Many Bulgarians 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 investors have also complained of a mismatch between the educational system and the labor market’s demands. Emigration, particularly among young, skilled professionals, has exacerbated the shortages.

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. 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). As of 2015, estimated trade union membership was 276,000 for CITUB, and 80,000 for Podkrepa.

There are very few restrictions on trade union activity, but employees in smaller private firms are often not represented. 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, and municipal level. 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 2018 is BGN 510 (USD 321) per month.

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 are still few in number.

In 1991, the Overseas Private Investment Corporation (OPIC) and the Bulgarian government signed an Investment Incentive Agreement, which governs OPIC’s operations in Bulgaria. Bulgaria is a signatory to the Convention Establishing the Multilateral Investment Guarantee Agency. Since 2011, OPIC has funded three projects in Bulgaria: for solar energy, for small business development, and for education.

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

Host Country Statistical Source USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) (M USD) 2016 USD 50,600 2016 USD 53,238 
Foreign Direct Investment Host Country Statistical Source USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country (M USD, stock positions) 2016 USD 2,100 2016 USD 451 BEA data available at
Host country’s FDI in the United States (M USD, stock positions) 2016 USD 31 2016 n/a BEA data available at
Total inbound stock of FDI as % host GDP N/A 2016 80.1% Source: IMF

Table 3: Sources and Destination of FDI

Direct Investment from/in Counterpart Economy Data
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
Inward Direct Investment Outward Direct Investment N/A
Total Inward USD 41,971 100% Total Outward Amount %
The Netherlands USD 6,890 16.4% N/A
Austria USD 4,347 10.4%
Greece USD 2,755 6.6%
Germany USD 2,622 6.2%
Italy USD 2,452 5.8%
“0” reflects amounts rounded to +/- USD 500,000.

InvestBulgaria Agency for U.S. FDI in Bulgaria in the period 1996-2016

Bulgarian National Bank for Bulgaria FDI in the U.S.

Data from the U.S. Bureau of Economic Analysis show a significantly lower level of U.S. FDI in Bulgaria over the 1996-2016 period. The actual FDI stock with U.S. origin may be significantly higher, as U.S. multinational companies often make investments in Bulgaria through their European subsidiaries.

The Bulgarian National Bank data show a total of EUR 40 billion in overall net FDI stock in Bulgaria in 2016 (broadly consistent with the IMF dollar-adjusted data).

Table 4: Sources of Portfolio Investment

Portfolio Investment Assets
Top Five Partners (Millions, US Dollars)
Total Equity Securities Total Debt Securities
All Countries USD 6,619 100% All Countries USD 2,102 100% All Countries USD 4,517 100%
United States USD 848 12.8% Germany USD 430 20.5% United States USD 452 10.0%
Germany USD 645 9.7% Luxemburg USD 405 19.3% Romania USD 445 9.9%
Luxemburg USD 612 9.2% United States USD 396 18.8% Czech Republic USD 381 8.4%
Romania USD 451 6.8% France USD 230 10.9% Hungary USD 363 8.0%
Czech Republic USD 437 6.6% The Netherlands USD 156 7.4% Poland USD 307 6.8%

Actual portfolio investment with U.S. origin may be significantly higher than official data suggest, as funds often pass through European subsidiaries of U.S. investors.

Samuel Mikhelson, Economic Officer
Embassy of the United States of America
16 Kozyak Str., 1408 Sofia

2018 Investment Climate Statements: Bulgaria
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