Investment opportunities in Bulgaria

1. General notes

Practice shows that when assessing actual investment opportunities, investors take into account the specific conditions they find or are provided within a given country.


Investment opportunities correspond directly to existing general legal frameworks and to the level of enforcement of the rule of law, to the existence of investment zones supported by the State (such as industrial parks and duty-free zones), as well as to the existence and successful implementation of legislation directly supporting investment.


Of course, as in other countries, there are already prioritised areas of investment in Bulgaria which have been recognised in recent years.


2. General legal frameworks

Over the past 15 years Bulgaria has certainly harmonised its legal framework almost completely with that of the leading EU Member States.


Progressive laws were adopted, such as the Commerce Act (which is close to the German one), including modern bankruptcy, public procurement and concession legislation.


A unified transparent electronic company register was created, thus eliminating the cumbersome, unpredictable registration in court.


Commercial companies are now registered easily, quickly and under the same conditions.


Foreign individuals and legal entities are practically on the same footing as local entities, including in the purchase of land (with the exception of agricultural land which can only be acquired by individuals).


The banking system (except for the Bulgarian Development Bank – BDB) is entirely private and banks operate in accordance with European criteria and standards and assist their customers as much as possible.


There is an accelerated bankruptcy procedure, as well as an efficient asset liquidation system. There are strict requirements for the work of receivers in bankruptcy, as well as for protection against unscrupulous creditors.


The Protection of Competition Act comprehensively regulates the rights and obligations of the Commission for Protection of Competition (CPC) so that it can fight effectively against vertical and horizontal cartel agreements, as well as against the abuse of a monopoly or dominant position. For this purpose, the CPC has extraordinary powers and, after obtaining permission from the court, it can conduct its own investigations and collect evidence; in doing so, it can search premises and/or vehicles, as well as seize documents.


The completely liberalised telecommunications system, the unobstructed switching between mobile operators and the possibility to use the infrastructure, as well as the excellent Internet coverage throughout the country which is surprising for most investors, further facilitate business.


The flat tax in the amount of 10 % introduced in 2005 continues to create comparative advantages for investment, and also dramatically reduced the “shadow” economy from about 60 % to now below 25 %, which rapidly increased the government revenues.


Now the state refunds tax credits relatively quickly, but still the unsuitable regulations prevail, according to which conscientious taxpayers are “responsible” for the offenders and are not receiving refunds of their tax credits through no fault of their own.


Therefore, investors should carefully evaluate and select their partners and suppliers.


The introduction of a transparent central public procurement register, the electronic conduct of procedures and the full transparency of correspondence with participants, of contracts and their implementation, are a strong tool against bad practices.


However, the “lowest price” criterion which is used instead of “the most economically advantageous terms” often results in serious bidders not participating, while at the same time providing conditions for inequality by allowing the successful candidate to increase the price by up to 20 % in direct negotiations.


The method of direct negotiations and assessment of “the most economically advantageous terms” is much fairer and more profitable for the state; it will not result in authoritative participants refraining from participation, and will improve the final result of the public procurement.


The liberalised currency regime and the clear conditions for concluding employment contracts additionally bring the required stability.


It is absolutely clear that the excellent conditions created for investment and business can be evaluated and bring about positive results only if and to the extent that there are guarantees for the rule of law.


After the 1991 Constitution was passed, the constitutional principle of separation of powers which is fundamental to any democratic system was adopted. Unfortunately, however, sufficient guarantees for the independence of all branches of government were not created then.


It was only in 2015 that the conditions for actual independence were put in place.


Like in other European countries, the Prosecutor’s Office is an integral part of the judiciary.


The Supreme Judicial Council (SJC) with a single plenum, as well as independent judicial and prosecutorial colleges, were established, and the functions of the Inspectorate which performs checks of the integrity of judges and prosecutors, as well as for possible existence of conflicts of interest, were enhanced.


Indeed, to a very large extent, the goal – fast, professional, fair and predictable court decisions and sentences free of external interference – was achieved.


Most importantly, this process is now irreversible.


This creates certainty, security and confidence for investors.


New amendments to the constitution are forthcoming, according to which, on the one hand, the independence of the court will be strengthened, and, on the other hand, effective methods of accountability and control of the Prosecutor General and the Prosecutor’s Office will be provided, thus creating the sought-after balance between the court and the Prosecutor’s Office which jointly constitute the judicary. This is in full harmony with the recommendations of the Venice Commission.


However, the other changes in the constitution that are being discussed must be very well thought through, given their great impact on society, and they should not be implemented without a serious rationale and reason.


The successful implementation of the GDPR, AML, Whistleblowing, Cybersecurity, ESG & Greenwashing compliance regimes are particularly challenging now, because it does not work well for the country to literally transpose them, or even to foresee a heavier regulation than is required by the directives (to “gold-plate”).


The implementation of the directives must be adapted to the specific opportunities and needs, so as not to affect the competitiveness of entire sectors of the economy. 

The highest standards for the protection of personal data are applied in Bulgaria, and every individual has full control over their personal data.


The law, the specialised commission and the mandatory case law also guarantee this.


Still, there are local specifics regarding some details such as storage periods, limitation periods and specific data processing rules.


With regard to the freedom of expression in the context of literature and journalism, Bulgaria has benefited from the permitted derogations from the GDPR.


In the field of AML, there are specifics with regard to the scope of the obligations to declare the beneficial owner, the rules regarding the origin of the funds, etc.


Therefore, it is always advisable to involve local professionals as well.


Given the historical burden, the regulation of Whistleblowing also has its specifics.


The further successful implementation of the public-private partnerships can be a powerful driver of development, with the initiative of the private sector being harnessed to the maximum extent.


This possibility is still underestimated in Bulgaria, but the fact that discussions on this issue have started is encouraging, and the desired results can be expected soon.


3. Industrial parks and duty-free zones


In parallel with the development of the necessary legal framework in Bulgaria, industrial parks and duty-free zones have been very successful in the country. Through them, the business environment is significantly improved: they provide the opportunity to concentrate seamlessly financial, production and human resources in the modern infrastructure developed, as well as the opportunity to use all the facilities related to planning, permits, technical and organisational conditions.


According to the law, parks must have an area of at least 300 ha, and when investing in them administrative procedures are significantly shorter. Also, the state helps with elements of the necessary technical infrastructure, reimburses part of the cost of social security contributions for some of the staff and facilitates the purchase or lease of land (without auction or competition) at tax assessment prices that are much lower than the market ones.


To date, 18 industrial parks have been built and are operating.


In addition, 6 duty-free zones have been built in Bulgaria and they are located not only near border crossing points (Dragoman, Svilengrad) but also in large cities such as Plovdiv, Burgas and Ruse.


In the territory of the duty-free zones, no taxes and duties are charged when carrying out business activities (production, trade, services, warehousing, loading and transport processing of uncustomed goods, banking and insurance activities, etc.), while at the same time investors are supported with everything they need, including finding manpower.


4. Priority sectors for investment

4.1. Computer technology

Given the large concentration of IT specialists in Bulgaria (30 % of all IT specialists in Europe), the opportunities for the country to become a centre for the development of Industry 4.0 when the Artificial Intelligence Act is transposed are enormous.


The development of information and telecommunication technologies, the full digitalisation and the correct use of artificial intelligence provide a huge potential for the development not only of sectors such as mechanical engineering, electronics and electrical engineering, but also of light industry and agriculture, which are also well-represented in Bulgaria.


About 35,000 specialists now work in this sector in over 3,000 companies which are mainly concentrated in Sofia, Plovdiv, Varna, Burgas and Ruse.


4.2. Energy

Given that over the next 10 years more than 5,000 MW of coal-fired power generation in Bulgaria must be replaced with RES, green hydrogen and other alternative low-carbon sources of electricity, around 30 billion euros of new investments will be needed.


This is not only a challenge, but also a huge chance for foreign investors to get involved with their experience and capabilities in this field.

4.3. Agriculture and food processing industry


The sectors of agriculture and food processing that were previously traditional for Bulgaria are now gaining importance again in view of the growing interest in sustainable and ecological agriculture and food production. 


4.4. Mechanical engineering and transport equipment


Other priority areas for investment are transport equipment and mechanical engineering, and the production of spare parts for cars, the production of electric cars, electric engines and electric bicycles turned out to be particularly suitable in view of the experience and availability of personnel.

4.5. Transport, logistics, healthcare and pharmaceuticals 

Transport and logistics should not be overlooked either, as well as healthcare and pharmaceuticals, which have also shown steady growth in recent years.


Bulgaria’s excellent conditions for balneology and the existence of numerous mineral springs significantly support this trend.


As a result of these legislative reforms, including the successful tax reform and the successful privatisation (now over 70 % of the economic activity is in private hands), GDP in 2022 increased by 300 % compared to 2007, growing over this period from BGN 56 billion to BGN 168 billion, and in 2023 it is expected to reach BGN 200 billion.


This dynamics in itself is evidence that Bulgaria is a reliable investment destination.

5. State support


In accordance with the Investment Promotion Act, the Minister for Economy issues Class A and Class B certificates, as well as certificates of a “priority investment project”, depending on the size of the investment.


The volume of state assistance depends on the type of certificate.


In any event, however, the state provides administrative services within shorter time periods, individual administrative services, easier acquisition of property, financial support for infrastructure and training, as well as partial reimbursement of the social security contributions paid by the employer in respect of workers and employees.


Along with the already mentioned facilities which the state provides in the industrial parks themselves, it allocates a lot of funds to create in advance the best conditions for possible future investors.


The electronic register of industrial parks helps investors to become better oriented in this area.


6. Concluding remarks

Bulgaria is often described by some observers as a country on the periphery of Europe, which can inevitably inspire less interest among investors.


Increasing numbers of entrepreneurs from Europe and the world realise that, because Turkey, Ukraine and Moldova are of increasing economic interest for the European Union, and Serbia and North Macedonia also act as a centre of attraction, Bulgaria, especially considering its membership in the European Union, is at the very centre of events, neighbouring on other Member States of the European Union – Romania and Greece.


The proactive role of the state in financing the construction of industrial parks and duty-free zones, including with funds from the Recovery and Resilience Plan and additional support from European structural and investment funds, is highlighted as positive.


Investors are increasingly taking this into account when looking for the most suitable location.


Therefore, the favourable legal conditions, the consolidation of the rule of law and the proactive support from the state through various facilities convince more and more entrepreneurs and investors that Bulgaria, although often underestimated, is an excellent place to invest.

Vladimir Penkov

"Published in ZASA • Zeitschrift für das Recht der Außenwirtschaft, Sanktionen und Auslandsinvestitionen; 7/2023; 18.12.2023"

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