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By Travis Kliever
Updated March 7, 2024

Doing Business in Bulgaria

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Bulgaria is a country in southeastern Europe known for its rich history and cultural heritage. The country has become an attractive destination for foreign investors looking to do business in the region in recent years. The Bulgarian government has implemented several initiatives to make investing in the country more accessible for foreign companies. It has created a favorable business environment for entrepreneurs and investors alike. Bulgaria’s favorable tax policies and low labor costs make it an attractive destination for companies looking to reduce operating costs while maintaining high productivity.

Key Takeaways

Bulgaria offers a favorable business environment for entrepreneurs and investors alike, with a highly skilled workforce and favorable tax policies.
The country’s strategic location provides easy access to major markets in Europe, Asia, and the Middle East, making it an attractive destination for companies looking to expand their operations in the region.
Bulgaria has a strong presence in a number of key industry sectors, including IT, manufacturing, and tourism, making it an attractive destination for companies looking to reduce their operating costs while maintaining high levels of productivity.

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In terms of industry sectors, Bulgaria has a strong presence in a number of key areas, including IT, manufacturing, and tourism. The country’s IT sector is particularly strong, with a highly skilled workforce and a growing number of startups and innovative companies. Overall, doing business in Bulgaria can be a highly rewarding experience for companies looking to expand their operations in the region.

Business Environment

Political and Economic Environment

Bulgaria has a market-oriented economy and is a member of the European Union (EU), the World Trade Organization (WTO), and the Organization for Economic Cooperation and Development (OECD). The country’s economic growth has been steady, with a GDP growth rate of 3.8% in 2020. Bulgaria’s economy is driven by the service sector, which contributes to over 60% of the GDP. The industrial sector and the agriculture sector also play an important role in the country’s economy.

Rule of Law and Transparency

Bulgaria has made significant progress in improving its legal and regulatory framework to create a more transparent and predictable business environment. The country has implemented reforms to streamline business registration, reduce the time and cost of obtaining permits, and improve access to credit. The government has also taken steps to strengthen the protection of property rights and enforce contracts.

Corruption

Bulgaria has made some progress in addressing corruption, but it remains a significant challenge for businesses operating in the country. The government has implemented a number of reforms to improve transparency and accountability, including the establishment of an independent anti-corruption commission and the adoption of new anti-corruption legislation. However, corruption continues to be a major issue in Bulgaria, particularly in the public sector.

Overall, the business environment in Bulgaria is improving, but there are still challenges that businesses need to be aware of. The World Bank Group ranks Bulgaria 59th out of 190 countries in its “Doing Business” report for 2021, indicating that the country has made progress in creating a more business-friendly environment. However, there is still work to be done to improve the regulatory environment, reduce corruption, and strengthen the rule of law.

Starting a Business

Starting a business in Bulgaria is a relatively straightforward process. According to the Doing Business in Bulgaria guide by EY, Bulgaria ranks 113th out of 190 countries in the Starting a Business category. This means that the country has some room for improvement in this area, but it is still a relatively easy place to start a business.

Registration Process

To register a business in Bulgaria, the first step is to choose a unique name for the company and reserve it with the Bulgarian Commercial Register. Once the name has been reserved, the next step is to prepare the necessary documents and file them with the Commercial Register. The required documents include the company’s articles of association, a declaration of consent to act as a director, and proof of payment of the registration fee.

Construction Permits

If the business requires a physical location, it may be necessary to obtain a construction permit. According to the Doing Business in Bulgaria guide by EY, Bulgaria ranks 43rd out of 190 countries in the Dealing with Construction Permits category. This means that obtaining a construction permit in Bulgaria is a relatively straightforward process.

Getting Electricity

To get electricity for a business in Bulgaria, the first step is to apply for a connection with the local electricity distribution company. The company will then provide an estimate of the cost and time required to connect the business to the electricity grid. According to the Doing Business in Bulgaria guide by EY, Bulgaria ranks 7th out of 190 countries in the Getting Electricity category. This means that getting electricity for a business in Bulgaria is a relatively easy and efficient process.

Registering Property

If the business requires ownership or use of property, it may be necessary to register the property with the Bulgarian Property Register. The required documents include a notarized deed of ownership or lease agreement, proof of payment of the registration fee, and a certificate of occupancy.

Overall, starting a business in Bulgaria is a relatively easy process. The country has room for improvement in the Starting a Business category, but it ranks relatively high in the Dealing with Construction Permits and Getting Electricity categories.

Financial Aspects

Bulgaria has a stable financial system, with a well-regulated banking sector. The country’s currency is the Bulgarian Lev (BGN), which is pegged to the euro. Bulgaria’s government debt levels are low compared to other European countries, which contributes to the country’s overall financial stability.

Getting Credit

According to the Doing Business in Bulgaria report, getting credit in Bulgaria is relatively easy. The country ranks 68th out of 190 countries in this category. Banks and other financial institutions offer a range of financing options, including loans, overdrafts, and credit lines. However, the report notes that the legal framework for secured transactions could be improved.

Paying Taxes

Bulgaria’s tax regime is generally considered to be business-friendly. The country has a flat tax rate of 10% for both individuals and corporations. The value-added tax (VAT) rate is 20%, which is in line with other European countries. According to the World Bank, Bulgaria ranks 41st out of 190 countries for ease of paying taxes. The country has simplified tax procedures and offers electronic filing options.

Resolving Insolvency

Bulgaria has a well-established legal framework for resolving insolvency. According to the Doing Business in Bulgaria report, the country ranks 34th out of 190 countries in this category. The country has a relatively short bankruptcy process, which takes an average of 1.5 years to complete. However, the report notes that the recovery rate for creditors is relatively low, at 28.6 cents on the dollar.

In conclusion, Bulgaria’s financial system is stable and offers a range of financing options for businesses. The country’s tax regime is business-friendly, with a flat tax rate and simplified tax procedures. Bulgaria also has a well-established legal framework for resolving insolvency, although the recovery rate for creditors could be improved.

Trading and Investment

Trading Across Borders

Bulgaria is a member of the European Union, which means that its customs procedures are largely harmonized with those of the other EU member states. The country has been ranked 64th out of 190 countries in the World Bank’s 2020 Doing Business report for Trading Across Borders. This ranking reflects the efficiency of the country’s customs procedures, as well as the ease of exporting and importing goods.

Exporting goods from Bulgaria requires the submission of certain documents, including a commercial invoice, a packing list, and a bill of lading. The country has a relatively low tariff rate, with the average applied tariff rate being 1.6 percent.

Foreign Direct Investment

Bulgaria is an attractive investment destination due to its low tax rates, skilled workforce, and strategic location. The country has a well-developed infrastructure and a stable political environment, making it an ideal location for foreign direct investment.

Foreign investors are generally treated the same as domestic investors in Bulgaria, and there are no significant restrictions on foreign investment. The country 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.

Protecting Minority Investors

Bulgaria has a strong legal framework for protecting minority investors. The country has been ranked 29th out of 190 countries in the World Bank’s 2020 Doing Business report for Protecting Minority Investors. The ranking reflects the country’s strong legal framework for shareholder rights and the ease of shareholder suits.

Investors in Bulgaria have access to a range of legal remedies, including the ability to sue for damages and to seek injunctions. The country’s legal system is generally efficient and transparent, which helps to ensure that investors are able to enforce their rights effectively.

Overall, Bulgaria is a promising investment destination with a well-developed infrastructure, low tax rates, and a stable political environment. The country’s customs procedures are efficient, and its legal framework provides strong protections for minority investors.

For more information on doing business in Bulgaria, consult the Bulgaria Country Commercial Guide and Lex Mundi’s Doing Business in Bulgaria Guide.

Labor and Employment

Labor Laws

Bulgaria has a well-defined labor law framework that outlines the rights and responsibilities of both employers and employees. The Bulgarian Labor Code regulates the employment relationship and sets out the minimum requirements for working conditions, working hours, and salaries.

Employment contracts must be in writing and must specify the terms and conditions of employment. Employers must provide employees with a copy of the contract and keep a copy for their own records. The Labor Code also requires employers to provide employees with a safe working environment, including appropriate safety equipment and training.

Social Security

Contributions
Employers and employees are required to make social security contributions in Bulgaria. The most common aggregate social security rate for 2022 is 32.7%, distributed between the employer and the employee in a proportion of 60:40. The social security contributions due by the employee are withheld by the employer from each employee’s remuneration and remitted to the National Revenue Agency.

Wages

The minimum wage in Bulgaria is set by the government and is currently 650 BGN per month. Employers are required to pay their employees at least the minimum wage, although many employers pay more than this. The Labor Code also sets out the rules for overtime pay, which must be at least 150% of the regular hourly rate.

Layoffs

Employers in Bulgaria may lay off employees for a variety of reasons, including economic difficulties, restructuring, or technological changes. However, the Labor Code sets out specific procedures that employers must follow when laying off employees.

Employers must provide employees with written notice of the termination of their employment, and the notice period must be at least one month for employees with less than two years of service and two months for employees with more than two years of service. Employers must also pay severance pay to employees who have been laid off, which is calculated based on the employee’s length of service and salary.

Overall, it is important for employers to be familiar with Bulgarian labor laws and regulations to ensure compliance and avoid potential legal issues.

Industry Sectors

Bulgaria’s economy is diverse with a mix of traditional and modern industries. The country’s strategic location at the crossroads of Europe, Asia, and Africa has made it a hub for trade and commerce. According to Doing Business in Bulgaria, the country’s top industry sectors include services, tourism, and logistics.

Services

The services sector is the largest contributor to Bulgaria’s GDP, accounting for over 60% of the country’s economic output. The sector includes a wide range of industries such as finance, IT, telecommunications, and real estate. Bulgaria has a well-educated and skilled workforce, which has helped the country become a popular outsourcing destination for many international companies. The country’s low labor costs and favorable tax regime have also made it an attractive destination for foreign investors.

Tourism

Tourism is another important industry sector in Bulgaria, contributing to over 15% of the country’s GDP. The country’s beautiful coastline along the Black Sea, historic landmarks, and natural attractions make it a popular tourist destination. The sector has also benefited from the country’s membership in the European Union, which has made it easier for tourists from other EU countries to visit Bulgaria. The Bulgarian government has been actively promoting the country’s tourism industry and has implemented various measures to attract more foreign tourists.

Logistics

Bulgaria’s strategic location at the crossroads of Europe, Asia, and Africa has made it an important hub for logistics and transportation. The country has a well-developed transportation infrastructure, including highways, railways, airports, and ports. The country’s proximity to major markets in Europe and the Middle East has made it an attractive destination for logistics companies. The Bulgarian government has implemented various measures to improve the country’s logistics infrastructure and attract more foreign investment in the sector.

In conclusion, Bulgaria’s diverse economy offers many opportunities for foreign investors. The country’s top industry sectors include services, tourism, and logistics, which have all benefited from the country’s strategic location, favorable tax regime, and skilled workforce.

Legal Considerations

When doing business in Bulgaria, there are several legal considerations that one should be aware of. In this section, we will discuss some of the most important ones.

Visa Requirements

Foreign nationals who wish to conduct business in Bulgaria are required to obtain a visa. The type of visa required depends on the purpose of the visit. For example, if the purpose of the visit is to attend a conference or a business meeting, a short-term visa is required. On the other hand, if the purpose of the visit is to establish a business in Bulgaria, a long-term visa is required.

Business Dress Code

Bulgarians value professionalism and appearance, and therefore, it is important to dress appropriately when conducting business in the country. Business attire is generally conservative, with men wearing suits and ties and women wearing dresses or suits. It is also important to note that Bulgarians prefer to use formal titles when addressing business associates, such as “Mr.” or “Ms.” followed by the person’s last name.

State-Owned Enterprises

Bulgaria has a number of state-owned enterprises (SOEs) that operate in various sectors of the economy. These enterprises are subject to specific regulations and are often subject to political influence. When doing business with SOEs, it is important to be aware of the regulations that govern them and to be prepared to navigate the political landscape.

Money Laundering

Bulgaria has strict laws and regulations related to money laundering. Businesses operating in the country are required to comply with these regulations and to implement anti-money laundering (AML) policies and procedures. This includes conducting due diligence on customers and suppliers, monitoring transactions, and reporting suspicious activity to the appropriate authorities.

In conclusion, when doing business in Bulgaria, it is important to be aware of the country’s legal considerations, such as visa requirements, business dress code, state-owned enterprises, and money laundering regulations. By understanding and complying with these regulations, businesses can operate effectively and successfully in the country.

Resources

Here are some resources that can help businesses looking to invest in Bulgaria:

Invest Bulgaria Agency

The Invest Bulgaria Agency is a government agency that provides support and assistance to foreign companies looking to invest in Bulgaria. The agency offers a range of services, including help with finding suitable locations for business operations, assistance with legal and regulatory issues, and advice on tax and financial matters. The agency also provides information on investment opportunities in various sectors of the Bulgarian economy, including manufacturing, IT, and tourism.

Country Commercial Guide

The Country Commercial Guide is a publication produced by the U.S. Department of Commerce that provides information on doing business in Bulgaria. The guide offers a comprehensive overview of the Bulgarian business environment, including information on legal and regulatory issues, market entry strategies, and cultural considerations. The guide also includes detailed information on specific sectors of the Bulgarian economy, such as energy, healthcare, and transportation.

Trade Statistics

Trade statistics can provide valuable insights into the Bulgarian market, including information on import and export trends, market size, and potential growth opportunities. The U.S. Census Bureau and the International Trade Administration both offer comprehensive trade statistics for Bulgaria, including data on U.S. exports to Bulgaria and Bulgarian imports to the U.S. Businesses can use this information to identify potential opportunities for growth and expansion in the Bulgarian market.

Overall, these resources can provide valuable assistance to businesses looking to invest in Bulgaria. By leveraging the expertise and knowledge of these organizations, businesses can navigate the Bulgarian business environment with greater confidence and clarity.

Frequently Asked Questions

Article By

Travis is a global business development advisor. He has spent the last 14 years supporting business establishment and development in North America, Southeast Asia, and throughout the world. With multiple degrees from the University of Oregon, Travis currently splits his time between the US, and Bali, Indonesia. At RemotePad, Travis writes about remote work, hiring internationally and PEO/EOR business models.