Bulgaria, located in Southeast Europe on the Balkan Peninsula, holds a strategic position connecting Europe and Asia, making it a favorable country for foreign investments. The commercial benefits of Bulgaria, which will be detailed further in this article, position it as an attractive investment destination across a wide range of industries. This article provides a general overview of the business environment and activity in Bulgaria.
Bulgaria’s Economic Prospects and Investor Guidance
Currently, Bulgaria is experiencing significant growth in software development, technical support, and business process outsourcing and as an EU member, Bulgaria allows free exports of goods and products to all other member states.
Additionally, the country has over 40 trade agreements with more than 80 countries. For instance, Bulgaria and the United States of America have signed the Agreement on Trade Relations, and through this agreement both Countries aim to adopt mutually advantageous and fair rules governing their trade and ensure a predictable commercial environment.
Moreover, Bulgaria has Free Trade Agreements with: China, Turkey, North Macedonia, Israel, Albania, Serbia and other countries. These agreements help Bulgaria to improve production efficiency and innovation, while supporting economic development and overall driving economic growth.
Furthermore, Bulgaria is considered an appealing option for investors seeking low-cost opportunities, thanks to governmental incentives for new investments, such as:
- Extra incentives for investors undertaking large projects with significant social and economic impact. These projects often need special support to ensure they comply with the law and meet deadlines.
- Additionally, specific incentives include: forming public-private partnerships with relevant government bodies and academic institutions to secure skilled labor; exemptions from local taxes and fees for changes in land use; and cash grants of up to 25% or 50% (depending on the region) for investments in manufacturing, and up to 50% for education and research projects.
Worth noting, Bulgaria provides financial assistance for the construction of essential physical infrastructure components necessary for project complexity and completeness. Usually, this includes the funding of new or repaired roads owned by municipalities or other public bodies. Once approved, these funds are disbursed directly to the infrastructure owner. Furthermore, the country boasts some of the most affordable labor costs in the European Union (EU) and maintains low, consistent corporate and income tax rates.
Investment Advantages and Trade Policies in Bulgaria
The Constitution of Bulgaria ensures that both foreign and local individuals and entities have equal rights when conducting economic activities. Foreign investors can establish or join companies in Bulgaria, while same rights and responsibilities as local investors. Furthermore, Bulgaria’s 2004 Investment Promotion Act guarantees equal treatment for national and foreign citizens or entities.
Investors interested in investing in industrial and service projects can apply for an ‘Investment Project Certificate’ from the Ministry of Economy in Bulgaria. This certificate provides investors administrative and financial benefits, such as partial reimbursement of social and health insurance contributions, expedited administrative services, and financial support for technical and professional development.
The Investment Promotion Act and its implementation guidelines outline the process for obtaining certification and identifying priority sectors for the country. Certificates are awarded based on objective criteria related to the type of investment and sector priority, without consideration of investor nationality, ensuring fair allocation of investment preferences.
Other Tax incentives include
- Partial reduction of corporate income tax for engaging in agricultural activities;
- Extra tax deductions for employing long-term unemployed, disabled, or elderly individuals;
- Reimbursement of up to 100% of the corporate income tax for investments in areas with high unemployment;
- Lowest Corporate and personal income tax rates both at 10 %;
- 0% capital gains tax for investments in 152 municipalities with high unemployment;
- Dividends and liquidation shares have a 5% tax rate, except for EU companies which are exempt;
- Additionally, equipment imports for projects over 5 million EUR, creating 50 or more jobs, are VAT exempt for two years.
Bulgaria has signed around 70 (seventy) Double Tax Treaties with other nations. Bulgaria, with its competitive salary levels among the lowest in Europe, presents an opportunity for firms seeking to lower labor costs. Moreover, its workforce is highly skilled, motivated, and bilingual, making Bulgaria a more cost-effective location for businesses, enabling them to hire skilled staff while paying lower rates. Overall, Bulgaria’s low business costs, including rent, utilities, and labor, enhance local profitability and appeal to foreign investors.
It is important for individuals and companies, before proceeding with investment, to be aware of the legal and financial procedures. Our firm specializes in international taxation, and our team is ready to assist with any related matters. If needed, we can connect you with top professionals to support your business activities in Bulgaria. Please feel free to contact us.
