2021 Investment Climate Statements: Bulgaria

Policies Towards Foreign Direct 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 http://www.investbg.government.bg 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.

Limits on Foreign Control and Right to Private Ownership and Establishment

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) banned for business by 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 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. Since the full adoption of the EU investment screening regulation in October 2020, Bulgaria has fulfilled the preliminary requirements of the EU mechanism for cooperation in prescreening new FDI.

Other Investment Policy Reviews

There have been no recent Investment Policy Reviews of Bulgaria by multilateral economic organizations.  In 2019, Organization for Economic Cooperation and Development (OECD) published reviews of Bulgaria’s healthcare sector and state-owned enterprises.  As part of Bulgaria’s Action Plan for deeper cooperation, in January 2021 OECD published an Economic Assessment of Bulgaria 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 aging and rapidly shrinking population. In February 2021 OECD published a study of Bulgarian municipalities that acknowledged solid progress in local governance standards but also noted insufficient progress in bridging regional disparities.

Business Facilitation

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.

Bulgaria dropped two places to 61st (out of 190 surveyed economies worldwide) in the World Bank’s 2020 Doing Business (DB) report, scoring lowest in the Getting Electricity category, in 151st place, and in the Starting a New Business category, in 113th place.  The relatively large number of administrative procedures for a business to complete either of these actions, along with the associated delays, contributed to the low scores in both categories.  It took an average of 23 days to start a limited liability company in Bulgaria in 2020, compared to the OECD (high income) average of 9.2 days and peer average of 11.9 days.

Outward Investment

There is no government agency for outward investment promotion, and no restrictions exist for local businesses 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 an annex side letter on protections for intellectual property rights. With Bulgaria’s accession to 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 2019, 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 (terminated), Indonesia (terminated), Iran, Israel, Italy (terminated), Jordan, Kazakhstan, Kuwait, Latvia, Lebanon, Libya, Lithuania, Luxembourg, Northern Macedonia, Malta, Moldova, Mongolia (not in force), Montenegro, Morocco, Nigeria (not in force), North Korea (not in force), Oman, Pakistan (not in force), Poland, Portugal, Qatar (not in force), 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 2019, 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, Northern 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.  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 Ministry of Finance.

International Regulatory Considerations

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, 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 one of the least trusted institutions in the country, with widespread allegations of nepotism, corruption, and undue political and business influence.  Despite some recent improvements, the busiest courts in Sofia continue to suffer from serious backlogs, limited resources, and inefficient procedures that hamper the swift and fair administration of justice. Trials often take years to complete because of the inefficient procedures laid out in the criminal procedure code.

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 and High Level Corruption) 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 15,375), excluding alimony, labor disputes, and financial audit discrepancies, or in property cases where the property’s value exceeds BGN 50,000 (USD 30,750). 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’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.

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, knowledge intensive services, 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 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 and up to 25 years for other types of concession. The term of the concession may be extended by a maximum of one third of the original term.

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.

Competition and Antitrust 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. 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.

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 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.

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.  There are more than 20 arbitration institutions in Bulgaria, the Arbitration Court of the Bulgarian Chamber of Commerce and Industry (BCCI) is the oldest.

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 and then execute the award according to the general framework for execution of judgments. Foreclosure proceedings may also be initiated.

Bulgarian law instructs courts to act on civil litigation cases within three months after a claim is filed. In practice, however, dispute settlement can take years.

Bankruptcy Regulations

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, par. 1 of the Law on Credit Institutions.

Bulgaria ranks 61 out of 190 economies in the Resolving Insolvency category of the World Bank’s Doing Business 2020 Report.

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, high technology, education, and human resource development via a range of incentives, which include: helping investors purchase municipal or state-owned land without tender, providing state financing for basic infrastructure and for training new staff, and reimbursing the employer’s portion of social security payments.  The law also provides tax incentives and fast-track administrative procedures for public-private partnerships.  Priority investors may receive incentives such as below-market prices when acquiring property rights (full or limited) from the central or municipal government, government grants for research and development (R&D) and education projects, and institutional support for establishing PPPs.  The government policy for investment promotion excludes a number of sectors classified as strategic.

Additional investment incentives include a two-year valued-added tax (VAT) exemption on equipment imports for 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 for manufacturing projects, with no minimum investment requirement, that are implemented in high unemployment areas (25 percent higher than average nationwide unemployment) and create at least 10 jobs, of which at least fifty percent are created in productive sector.

The government does not have a practice of issuing guarantees or jointly financing foreign direct investment projects.

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.  Industrial zones or technology parks with the necessary technical infrastructure to attract new investment can be designated as nationally significant projects by a Council of Ministers decision on a proposal made by the Minister of Economy.  A 2021 Industrial Parks Act defines an ‘industrial park’ as an area located in one or more municipalities with favorable conditions. The government’s industrial park policy is conducted by the Council of Ministers, the Minister of Economy, and local municipalities. The Ministry of Economy keeps an electronic registry of all industrial parks.

The Trakia Economic Zone in south-central Bulgaria is one of the largest industrial area in Southeast Europe, attracting over EUR 2 billion in investment and sustaining over 30,000 jobs.  In addition, the state-owned National Industrial Zones Company (NIZC) currently operates fully functioning industrial zones in Sofia, Burgas, Vidin, Ruse, Svilengrad, Stara Zagora and Varna.  Under construction are future industrial zones in Suvorovo (Varna), Telish (Pleven), Kardzhali and Karlovo. Investors in these economic zones benefit from established infrastructure, location, and transport logistics. The common thread among all these economic zones is that they are either located in regions with sufficient available labor, in poor regions where the government provides special investment incentives, or at important cross-border junctures. Sofia Tech Park has partnered with the Bulgarian Academy of Sciences, several local universities, and several local groups in what is expected to become the largest R&D center and high-tech incubator 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 obtaining work permits for their non-Bulgarian, non-EU employees.  Recently adopted changes in the Law on Labor Migration and Labor Mobility no longer mandate Bulgarian employers to have canvassed the local labor market before hiring non-EU labor. Non-EU workers with long-term residence permits cannot exceed 35 percent of the total workforce in Bulgarian small- and medium-sized companies, or 20 percent in large firms.  In 2017 the government simplified procedures and reduced issuance time for work visas for non-EU workers.  Furthermore, it is possible for non-EU students who have completed their education in Bulgaria to continue working in the country without having to reenter the country.

Some government ministries have mandated that for the purchase of new software that the winning bidder should submit the source code as well. U.S. companies have found this requirement to be unreasonable and discriminatory.

Real Property

Bulgaria assigned the rights of land use back to its original owners in early 1990s.  Restrictions still exist on ownership of agricultural land by non-EU citizens.  Companies whose shareholders are registered offshore are banned from acquiring or owning Bulgarian agricultural land.

Mortgages are recorded centrally with the Bulgarian Registry Agency, at registryagency.bg .

In the World Bank’s 2020 Doing Business report, Bulgaria climbed one place to 66th, out of 190 countries, in the category of registering property.

Intellectual Property Rights

The 1993 Copyright Act defines copyrightable work as any work of literature, art and science that 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 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 rightsholders to form organizations for the collective management of rights. The law does not require registration for copyrighted works.

Bulgarian patent law has been harmonized with EU law for patents and utility model patent protection.  However, in patent procedures there have been reports of conflicts of interest and delays in decision-making and informing patent holders.  These issues, coupled with a lack of accountability of the Bulgarian Patent Office, have weakened patent protection in the country.

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. Patent holders can also file for a supplementary protection certificate (SPC) to extend the protection duration. Innovations can also be protected as utility models (small inventions), which are registered without verification of novelty or industrial applicability. Validity of a utility model registration is four years, which can be extended for two more three-year periods.

Under Bulgarian law, new and original industrial designs can be granted certificates from the Patent Office and entered into the state register, with no required verification by the Patent office for novelty or originality.  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 to enter the market despite a valid patent — may be ordered under certain conditions, including failure to use. 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 protecting 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.  Bulgaria enforces EU legislation for protecting geographical indications (GIs) and Traditional Specialties Guaranteed (TSG).

A new Law on Marks and Geographical Indications took effect in December 2019, updating procedures for trademark registration.  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 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 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.

In April 2019 a new law on trade secret protection was adopted.  The law 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 2020, customs received a total of 1,442 rightsholder complaints of suspected copyright infringement, acting on 1,020 of these, a 57 percent increase over 2019. Customs reported seized counterfeit goods mainly originated from Turkey, China, Hong Kong, and the United Arab Emirates.

In 2018, Bulgaria was removed from USTR’s Special 301 Watch List after demonstrating improvement in its enforcement of IPR law.  Online and broadcast piracy, however, remain a copyright enforcement issue in Bulgaria. While cyber police are generally responsive to reports of online copyright infringements, investigation of computer-based IPR crimes is slow, and very few have resulted in criminal convictions.

The 2020 Notorious Markets Report lists an online provider of pirated content which is reportedly hosted in Bulgaria.

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/.

Capital Markets and Portfolio Investment

The Bulgarian Stock Exchange (BSE), the only securities-trading venue in Bulgaria, operates under a license from the Financial Supervision Commission and is majority-owned by the Ministry of Finance. The 1999 Law on Public Offering of Securities regulates the issuance of securities, securities transactions, stock exchanges, and investment intermediaries.   The law is aimed at providing investor protection and at developing a transparent local capital market. In 2004 BSE performed its first IPO transaction. In 2018 BSE acquired 100 percent of the Independent Bulgarian Energy Exchange (IBEX), Bulgaria’s first independent electricity platform trader.

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 a full member of the Federation of European Stock Exchanges (FESE) and operates under the Deutsche Boerse’s trading platform Xetra.  The BSE’s total market capitalization comprised 25 percent of Bulgaria’s GDP in 2020, up slightly from 2019.

Bulgarian companies strongly prefer to obtain financing from local banks instead of drawing from the local financial markets. At the end of 2018, the Financial Supervision Commission approved the ‘SME beam market,’ a special market that provides small and medium-sized businesses the opportunity to more easily raise new capital.

Foreign investors can access credit on the local market.

Money and Banking System

The Bulgarian bank system is well capitalized and liquid. As of the end of September 2020, the total capital adequacy ratio was 22.9 percent, above the EU average and adequately shielding domestic banks against potential macroeconomic risks. In 2020 the Bulgarian National Bank imposed a temporary payment deferral of existing loans as an anti-COVID-19 measure. As of September 2020, there were 24 banks (including 6 branches), with total assets of BGN 119.2 billion (USD 73.9 billion), equivalent to 100.4 percent of GDP. The market share of EU-owned banks amounted to 74.9 percent, the share of local banks was 22.1 percent, and the share of non-EU banks was 3.1 percent. The top five banks’ weight in the banking system was 66.2 percent in September 2020. Non-performing loans were equal to 8.6 percent of the total loan portfolio of the banking system.

The Bulgarian government has raised funds by issuing both Euro-denominated and Leva- denominated bonds.  Commercial banks and private pension funds and insurance companies are the primary purchasers of these instruments. EU-based banks are eligible to be primary dealers of Bulgarian government bonds.

Foreign Exchange and Remittances

Foreign Exchange

Bulgaria operates a Currency Board Arrangement (CBA) whereby the lev (BGN) is fixed to Euro, exchanging EUR 1 for BGN 1.95583. This CBA prohibits the central bank from bailing out insolvent domestic banks or paying for the government’s deficit spending. 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 18,750) 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).  When there is evidence for existing debt obligations of over BGN 5,000 (USD 3,125), customs authorities will prevent the transfer of funds.

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. Parliament ratified the agreement in 2015.

Bulgaria joined the Eurozone’s precursor mechanism ERM II in July 2020 and the EU Banking Union in October 2020.

Remittance Policies

There is no official policy regarding remittances. Remittances are an increasingly important source of funding for Bulgarian families with relatives overseas. Over the last several years, remittances have exceeded the new flow of FDI in the country. In 2020, due to COVID-19, that trend reversed, with Bulgarians working in other countries remitting only EUR 340 million, compared with EUR 2.1 billion in new FDI. According to Bulgarian National Bank data, this remittances sum marked a 72 percent decline compared to EUR 880 million in 2019.

Sovereign Wealth Funds

Bulgaria does not have a sovereign wealth fund.  The government maintains a multiannual fiscal savings reserve, a farmer subsidy fund, and an electricity price premium fund. Their annual budgeting is compliant with the government’s budget plans.

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, however, such as railways and the postal service.  SOEs also predominate in the healthcare, infrastructure, and energy sectors; many of these are collectively managed by the same holding company (also an SOE).  Some of the SOEs receive annual government subsidies for current and capital expenditures, regardless of their actual performance.  SOEs’ budgets and audit reports are posted on the Ministry of Finance website. The list of all SOEs can be found on:  http://www.minfin.bg/bg/page/948 .  According to the Bulgarian National Statistical Institute (NSI), there is a sizeable state-owned sector consisting of approximately 350 SOEs held by the central government and 580 by subnational governments.  In 2019, the government participation in the overall economy equalled 9.3 percent.

In 2019 Parliament approved the State Enterprise Act, introducing updated corporate standards and management practices.  The law lists timeline and criteria for SOE senior management approval.  SOEs are typically run by government elected boards.

Public and private sector companies are equally treated vis-à-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

No major privatizations are currently planned in Bulgaria. Parliament must approve government proposals to privatize any company with over 50 percent government ownership.  All majority or minority state-owned properties are eligible for privatization, with the exception of those included in a specific list, including water management companies, state hospitals, and state sports facilities. The sale of specific parts of such companies follows a Council of Ministers decision or a decision of the Agency for Public Enterprises and Control, after a proposal made by the government-owned majority holder of the company. 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.

The 2010 Privatization and Post-Privatization Act created a single Privatization and Post-Privatization Agency responsible for privatization oversight.  The new State Enterprise Act in 2019 reshuffled and renamed the agency into the Agency for Public Enterprises and Control (www.appk.government.bg/bg/17).

Foreign investors can participate in privatization programs.

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) (https://csr.bg/) promotes CSR among Bulgarian companies and reports 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 OECD or the Extractive Industries Transparency Initiative.

Additional Resources 

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 and;
• North Korea Sanctions & Enforcement Actions Advisory

Department of Labor

• Findings on the Worst Forms of Child Labor Report;
• List of Goods Produced by Child Labor or Forced Labor.
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World and;
• Comply Chain.

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 practice conflict of interest allegations are rarely prosecuted and sanctioned by law.

Bulgaria has laws, regulations, and specialized institutions to combat corruption, including an Anti-Corruption Commission with a broad mandate to investigate conflict of interest and seek asset recovery. 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.  With the gradual introduction of technologies in public administration, including e-filing and electronic issuance of certificates, some progress has been made in addressing petty corruption.  

However, high-level corruption, particularly in public procurement and use of EU funds, remains a serious concern.  Political will and investigative capacity remain limited, and Bulgaria has yet to secure a final conviction of a senior official for corruption.  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.  Bulgaria ranks 69th out of 180 countries in Transparency International’s Corruption Perception Index for 2020, the worst showing in the EU.   Human trafficking, narcotics, and contraband smuggling all contribute to corruption.

In 2018, the government established the Commission on Corruption Prevention and Illegal Assets Forfeiture, commonly referred to as the Anti-Corruption Commission, incorporating previously independent bodies combating corruption.   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.

Resources to Report Corruption

Mr. Sotir Tsatsarov, Chairman
Commission on Corruption Prevention and Illegal Assets Forfeiture
6, Sveta Nedelya Sq. Sofia, 1000  ca
ciaf@caciaf.bg

Mr. Boyko Stankushev
Director and Member of the Managing Board
Mr. Philip Gunev
Chairman of the Managing Board
Anticorruption Fund
71, Knyaz Boris Str., Office 2
acf@acf.bg

Mr. Ognyan Minchev, Board President
Transparency International Bulgaria
PO Box 72, Sofia
mbox@transparency.bg 

Daily anti-government protests that took place throughout the summer in Sofia generated sporadic reports of excessive force by protestors and police, but there has been no significant political violence in recent years.

Bulgarians average 11.4 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 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 21.5 percent in 2020.

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.

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 2021 is BGN 650 (USD 406) 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.

Bulgaria is looking to develop projects for DFC investment, particularly in the energy sector. Bulgaria also seeks to develop energy, infrastructure, and digital projects for investment via the Three Seas Initiative, for which Bulgaria has the Presidency in 2021.

In 1991, DFC’s predecessor, 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, in solar energy, small business development, and education.

* Source for Host Country Data:  Bulgarian National Bank

Bulgaria’s FDI flows for 2020 were USD 2.6 billion (EUR 2.1 billion), or 3.5 percent of 2020 GDP, compared to USD 1.4 billion, or 1.9 percent of GDP, in 2019.

Note: For inward investment, the Netherlands holds the top place largely because various companies, most notably Russia’s Lukoil, channel investments to Bulgaria through Dutch subsidiaries.  While official data routinely lists the United States as the 13th largest source of FDI into Bulgaria, a 2018 study by AmCham and the Institute for Market Economics, which accounted for investment flows via European subsidiaries of U.S. companies, put the United States in sixth place.  Marshall Islands is popular tax haven for Bulgarian oligarchs.

Bulgarian owners often use Luxembourg to incorporate companies.   An independent international media investigation in February 2021 revealed some BGN 1 billion (USD 617 million) in assets by Bulgarian-owned companies in Luxembourg.

Liam Sullivan
Deputy Political/Economic Section Chief
Embassy Sofia
sullivanll@state.gov