Bulgaria flag Bulgaria: Investing in Bulgaria

Foreign direct investment (FDI) in Bulgaria

FDI in Figures

FDI inflows to Bulgaria maintained a steady course in the early 2000s and reached an all-time high in 2007, at USD 12.4 billion (UNCTAD). According to UNCTAD's 2021 World Investment Report, FDI inflows increased in 2020, reaching USD 2.4 billion, up from USD 1.7 billion in 2019, despite the global economic crisis triggered by the Covid-19 pandemic. The total stock of FDI stood at USD 59.7 billion at the end of 2020. According to the Central Bank of Bulgaria, the net inflow of foreign direct investment into Bulgaria declined by 63.7% on the year to EUR 630.4 million in the first seven months of 2021 The largest net FDI inflow into Bulgaria in the same period originated in Luxembourg (EUR 457.9 million), followed by the Netherlands with 253.8 million and Germany with 120.4 million. In terms of stock, the main investing countries are Austria, Germany, Switzerland, the Netherlands and Italy. FDIs are directed chiefly to the real estate, manufacturing and financial and insurance activities sectors.

With one of the lowest corporate tax rates in the area (10%) and its low labour costs, the country is relatively well-placed for foreign investments, which are not subject to screening from the government. There are no legal limits on foreign ownership or control of firms, and foreign entities are formally granted the same treatment as national companies. However, according to the Offshore Company Act, firms with foreign participation of more than 10% cannot do business in 28 specific sectors (including government procurement, exploitation of the natural resource, banking and insurance services, though there are certain exemptions). The Invest Bulgaria Agency (IBA) is the government’s FDIs coordinating body which provides information, administrative services and incentive assessments to potential foreign investors. The revival of foreign investment depends nonetheless on the improvement of the economic situation in other EU countries, particularly that of Bulgaria's closest neighbours. Among the challenges investors have to face there is a shortage of skilled labour, corruption, the unpredictability of the regulatory and legislative framework which is often amended, and concerns about the rule of law. Furthermore, the judicial system is slow and intellectual property rights are not always enforced. Bulgaria ranked 61st out of 190 economies in the latest World Bank's Doing Business report, losing two positions compared to the previous edition.

 
Foreign Direct Investment 201920202021
FDI Inward Flow (million USD) 1,8353,4231,496
FDI Stock (million USD) 51,74160,06857,651
Number of Greenfield Investments* 1103650
Value of Greenfield Investments (million USD) 2,2207501,042

Source: UNCTAD, Latest available data

Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.

 
Country Comparison For the Protection of Investors Bulgaria Eastern Europe & Central Asia United States Germany
Index of Transaction Transparency* 10.0 7.5 7.0 5.0
Index of Manager’s Responsibility** 2.0 5.0 9.0 5.0
Index of Shareholders’ Power*** 8.0 6.8 9.0 5.0

Source: Doing Business, Latest available data

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.

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What to consider if you invest in Bulgaria

Strong Points

Bulgaria's strong points are:

  • An advantageous taxation system for investors
  • A sizeable workforce that is skilled and low-cost
  • Very low cost of living
  • Membership in the European Union, guaranteeing regular reform cycles
  • Strong and robust defence against external economic shocks
  • Strong political stability
  • A positive reputation for the country's prudent tax regulations
  • A budget surplus since 2013
  • Strategic location enabling easy transportation of cargo (Danube River, 5 Pan-European corridors, 4 key airports) and providing direct access to major markets (CIS, North Africa, Middle East and European Union)
Weak Points

Even though the country has become attractive to investors and especially since its membership in the European Union, Bulgaria still has to tackle a number of challenges:

  • Slow progress in the fight against corruption and reforms of the judicial system, despite pressure from the European Union
  • Ineffective bureaucracy
  • Non-enforcement of intellectual property rights
  • A significant portion of the population has limited income (one of the poorest in the region)
  • High external debt
  • Banking sector particularly vulnerable to Eurozone banking crises
  • Poor infrastructure
Government Measures to Motivate or Restrict FDI
The Bulgarian government has established a very advantageous taxation system in order to attract investors, and the costs of starting a company have also been lowered. The government has undertaken the privatisation of a number of companies. Amongst the most attractive measures put in place are:

  • Fixed company taxation rate of 10%
  • Competitive labour costs
  • Skilled active population
  • Foreign investors, who are citizens of countries outside the EU, EEA, and Switzerland, are eligible for a Bulgarian permanent residence permit valid for an unlimited period of time if they invest over BGN 1,000,000 (approximately €511,292)
  • Foreign entities' investments are not restricted

Finally, the Agency for Investment in Bulgaria (IBA), is at the disposal of investors for their prospection as well as their implantation, and the 2004 law for the Promotion of Investment guarantees the equal treatment of domestic and foreign investments. The industrial production and high-tech sectors have been identified as a priority by the government, which has established a series of incentives for FDI in these sectors: for example, many public-private partnership opportunities exist for land acquisition, infrastructure construction and human resource training.

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Latest Update: July 2022