Investment Climate Statements for 2019 - Bulgaria

2019 Investment Climate Statements: Bulgaria

Executive Summary

Bulgaria is still seen by many investors as an attractive investment destination with government incentives for new investment. Bulgaria continues to offer some of the least expensive labor in EU, with 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 European companies to Bulgaria, and many have established global and regional service centers in the country. U.S. and foreign investors have also been attracted to the automotive sector in recent years, and USD 120 million was invested in the sector overall in 2018. 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 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 and a slow judicial system. As of early 2019, 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.

Foreign Direct Investment (FDI) has continued to decline, remaining far below peak levels in the wake of Bulgaria’s entry into the EU in 2007. Structural funds from the European Union have helped sustained growth, filling in the gaps left by the declining FDI.

Bulgaria’s economy grew by 3.1 percent in 2018, driven mainly by domestic consumption, government procurement, EU funds and, to a lesser extent, exports. Official unemployment dropped to 5.2 percent in 2018, 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, putting pressure on Bulgaria’s competitiveness. The wage gains have driven inflation up to 2.8 percent in 2018, putting an end to a three-year deflationary period between 2015 and 2017.

Table 1: Key Metrics and Rankings

Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2018 77 of 180
World Bank’s Doing Business Report 2019 59 of 190
Global Innovation Index 2018 37 of 126
U.S. FDI in partner country ($M USD, stock positions) 2017 $848
World Bank GNI per capita 2017 $7,860

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

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

Limits on Foreign Control and Right to Private Ownership and Establishment

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

Other Investment Policy Reviews

Reviews of Bulgaria’s investment climate by the Organization for Economic Cooperation and Development (OECD) can be found at this website:

The United Nations Conference on Trade and Development (UNCTAD) has this report:

Business Facilitation

Bulgaria typically supports small and medium business creation and development in conjunction with EU-funded innovation and competitiveness programs and with a special emphasis on export promotion and small- and medium-sized enterprise (SME) development. Typically, a new business is expected to register an account with the state social security agency and, in some cases, with the local municipality as well. Electronic company registration is available at: . Women receive equitable treatment to men, and the Bulgarian law protects minorities from discrimination.

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

Outward Investment

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

2. Bilateral Investment Agreements and Taxation Treaties

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 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, 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, 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.

3. Legal Regime

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 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 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 relevant agency’s website, and interested parties are given 30 days to submit their opinions. The government maintains a web platform,, 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 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. Bulgarian government licenses exports of dual-use goods and bans the export all goods under international trade sanctions lists. The Bulgarian government’s budget is assessed as transparent and in accordance with international standards and principles. Data on government debt is publicly available but data on the debt accrued by state-owned companies is not.

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 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 14,500), excluding alimony, labor disputes, and financial audit discrepancies, or in property cases where the property’s value exceeds BGN 50,000 (USD 29,000). 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 that 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 by 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 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 PPPs are in the form of 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.

InvestBulgaria’s official web site is a useful source of information on Bulgaria’s economy, investment law, and statistics for prospective foreign investors.

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. Monopolies can only be established in enumerated categories of strategic industries. The law forbids restrictive trade practices, abuse of market power, and certain forms of unfair competition. In practice, the Competition Law has been applied inconsistently, and the Competition Commission has been seen as lacking impartiality.

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 by the Council of Ministers or by regional authorities can be appealed at a local administrative court. The U.S.-Bulgaria Bilateral Investment Treaty (BIT) commits both parties to prompt, adequate, and effective compensation in the event of expropriation.

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 of the World Bank-based International Centre for the Settlement of Investment Disputes (ICSID).

Investor-State Dispute Settlement

Bulgaria accepts binding international arbitration in disputes with foreign investors. 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.

International Commercial Arbitration and Foreign Courts

There are more than 20 arbitration institutions in Bulgaria, with the Arbitration Court of the Bulgarian Chamber of Commerce and Industry (BCCI) being the oldest. 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 several months and up to a few 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). 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 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.

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. In the World Bank’s 2019 Doing Business Report, Bulgaria ranked 59th for ease of “resolving insolvency,” ahead of three EU peers (Luxembourg, Greece, and Malta).

4. Industrial Policies

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, 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. The government policy for investment promotion excludes a number of sectors classified as ‘strategic’ for national security purposes.

Investment projects deemed 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 level of economic activity expected to be generated. Priority investors may receive incentives such as below-market prices when acquiring property rights (full or limited) on central or municipal government property, government grants for research and development (R&D) and education projects, and institutional support for establishing PPPs.

Additional 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 and create at least 10 jobs.

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. Located favorably on one of the main highways, the Trakia Economic Zone just outside of Plovdiv, the largest in Bulgaria, consists of two industrial parks, two industrial zones, one high tech park and one agribusiness park. In addition, the state-owned National Industrial Zones Company currently operates fully functioning industrial zones in Sofia, Burgas, Vidin, Ruse, Svilengrad and Varna. The NIZC assists investors in these economic zones with established infrastructure, location, and transport logistics. The common thread among all these economic zones is that they are either located in regions with plenty of available labor, in economically disadvantaged 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 and several local universities to create innovation clusters expected to become the largest R&D center and high-tech incubator in Bulgaria.

Performance and Data Localization Requirements

Bulgaria generally does not impose export performance or local content requirements as a condition for establishing, maintaining, or expanding an investment. However, non-EU workers cannot exceed 35 percent of the total workforce to be considered Bulgarian small- and medium-sized enterprises, or 20 percent in firms classified as large. 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. In 2017 the government simplified procedures and shortened issuance time for work visas for non-EU workers.

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.

5. Protection of Property Rights

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. In the World Bank’s 2019 Doing Business report, Bulgaria placed 67th out of 190 countries in the category of registering property

Intellectual Property Rights

Bulgarian patent law has been harmonized with EU law for patents and utility model patent protection. However, in patent procedures, there are 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, which range from BGN 50 (USD 29) to BGN 1,700 (USD 987), depending on the time remaining before the patent expires. Supplementary protection certificates (SPCs) are 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 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 registration does not require examination 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 execute the 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 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).

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 ten 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 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 procedures for the destruction of seized fake goods without civil or criminal trial. In addition to civil penalties prescribed by the Trademarks and Geographical Indications Act (TGIA), the Criminal Code prohibits 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 copyrightable work as any work of literature, art, or 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 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 2018, Bulgaria was taken off USTR’s Special 301 Watch List after demonstrating improvement in its IP law enforcement. In 2019 Bulgaria remained off the list for a second consecutive year.

Bulgaria is not formally listed in the 2018 Out-of-Cycle Review of Notorious Markets but is mentioned as a possible location for a popular torrent site allegedly infringing the U.S. content industry’s copyrights. Online and broadcast piracy remains a challenging copyright enforcement issue in Bulgaria.

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

6. Financial Sector

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.

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, although still modest, increased 13.3 percent in 2018, reaching nearly 26 percent of Bulgaria’s GDP. Overall, however, Bulgarian companies strongly prefer obtaining financing from local banks to going to the local financial markets.

Money and Banking System

At the end of 2018, there were 25 commercial banks (20 subsidiaries and 5 branches), with total assets of BGN 105.6 billion (USD 61.8 billion), equivalent to 98 percent of GDP. Approximately 78 percent of the banking system is owned by foreign banking groups, mostly EU-based. In 2018, there was a visible trend toward consolidation; the top five banks’ weight in the banking system was 59.4 percent.

Bulgaria has maintained budget surpluses in recent years but the Government has financed some of its expenditures by issuing bonds (generally Euro-denominated) on the international 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.

Repatriation of profits is possible after presenting documentation that taxes have been paid.

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. 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 17,340) 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, the 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. citizens who hold accounts with Bulgarian financial institutions. The Parliament ratified the agreement in 2015.

Remittance Policies

There is no official policy regarding remittances, which are an increasingly important source of funding for Bulgarian families with relatives overseas.

Sovereign Wealth Funds

Bulgaria does not have a sovereign wealth fund.

7. State-Owned Enterprises

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 for railways and for the postal service. SOEs also predominate in the healthcare, infrastructure, and energy sectors; many of these are collectively managed by a common holding company (also an SOE). Bulgaria’s roughly 220 SOEs account for about five percent of employment in the country, and their revenues amount to about 13.5 percent of the GDP. 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:

The law treats equally public and private sector companies 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. All majority or minority state-owned properties are eligible for privatization, with the exception of those included in a specific list of public interest 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 in privatization tenders. The 2010 Privatization and Post-Privatization Act created a single Privatization and Post-Privatization Agency responsible for privatization oversight.

8. Responsible Business Conduct

In 2007 the government adopted a National Corporate Governance Code to encourage companies to observe global principles of responsible business conduct (RBC). The non-governmental Bulgarian Network for Social and Corporate Responsibility (CSR) promotes CSR among Bulgarian companies and highlights good business practices. Bulgaria is not currently an adherent of the OECD Guidelines for Multinational Enterprises, and is not a member of the Extractive Industries Transparency Initiative.

9. Corruption

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 mainly prosecute easy-to-prove, low-level cases. As a result, Bulgaria has seen few cases of high public interest, such as instances involving alleged siphoning of millions from the state coffers or EU funds, or involving public tenders for large energy and infrastructure projects. The high-profile prosecutions that do take place are often seen as selective or politically motivated. Bulgaria ranks 77th out of 180 countries in Transparency International’s Corruption Perception Index for 2018, in last place among EU members.

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 OECD 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
    112 Rakovski Blvd, Sofia, 1000
  • Mr. Ognyan Minchev, Board President
    Transparency International Bulgaria
    50 Sandor Petofi Str., Sofia

10. Political and Security Environment

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

11. Labor Policies and Practices

The official adult literacy rate in Bulgaria is 98.4 percent (15 years and older), according to the most recent data from the UN’s Human Development Report, 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 and local 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. Overall, the labor market has grown tighter, with the 2018 unemployment rate reaching a multi-year low of 5.2 percent of the labor force.

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).

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 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 2019 is BGN 560 (USD 325.5) per month.

The Bulgarian Labor Code provides for benefits for outgoing employees depending on the reason for termination of the employment contract and on whose initiative the termination has been enacted. In cases of forcible termination, the employee is normally entitled to compensation from the employer, generally for up to one month of the 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 in number.

12. OPIC and Other Investment Insurance Programs

The U.S. Overseas Private Investment Corporation (OPIC) is active in Bulgaria, as is the World Bank-based Multilateral Investment Guarantee Agency. Both organizations provide political risk insurance. OPIC has funded three projects in Bulgaria: for solar energy, for small business development, and for education:

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

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) 2017 $58,221 2016 $53,241
Foreign Direct Investment Host Country Statistical Source* USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) 2017 $848 2017 $848 BEA data available at
Host country’s FDI in the United States ($M USD, stock positions) 2017 $29 N/A N/A BEA data available at
Total inbound stock of FDI as % host GDP 2017 91.5% 2016 79.4% UNCTAD data available at

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

Table 3: Sources and Destination of FDI

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

Direct Investment From/in Counterpart Economy Data
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
Inward Direct Investment Outward Direct Investment
Total Inward $49,604 100% N/A N/A N/A
Netherlands $8,594 17.3% N/A N/A N/A
Austria $4,756 9.2% N/A N/A N/A
Germany $3,358 6.8% N/A N/A N/A
Italy $2,995 6.0% N/A N/A N/A
United Kingdom $2,730 5.5% N/A N/A N/A
“0” reflects amounts rounded to +/- USD 500,000.

Table 4: Sources of Portfolio Investment

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

Portfolio Investment Assets
Top Five Partners (Millions, US Dollars)
Total Equity Securities Total Debt Securities
All Countries $8,858 100% All Countries $2,247 100% All Countries $6,611 100%
United States $936 10.6% Luxembourg $679 30.2% Romania $865 13.1%
Luxembourg $887 10.0% United States $500 22.2% Hungary $479 7.2%
Romania $872 9.8% Germany $277 12.3% Poland $466 7.0%
Czech Rep $532 6.0% France $223 9.9% Czech Rep $459 6.9%
France $519 5.9% Ireland $164 7.3% United States $436 6.6%

14. Contact for More Information

Samuel Mikhelson
Economic Officer