HomeReportsBureau of Economic and Business Affairs2023 Investment Climate Statements…Bulgaria

# 					2023 Investment Climate Statements: Bulgaria			

 In this section										/

													EXECUTIVE SUMMARY											

                -  EXECUTIVE SUMMARY 
                -  1. Openness To, and Restrictions Upon, Foreign Investment                    -  Policies Towards Foreign Direct Investment 
                  -  Limits on Foreign Control and Right to Private Ownership and Establishment 
                  -  Other Investment Policy Reviews 
                  -  Business Facilitation 
                  -  Outward Investment 
                -  2. Bilateral Investment and Taxation Treaties 
                -  3. Legal Regime                    -  Transparency of the Regulatory System 
                  -  International Regulatory Considerations 
                  -  Legal System and Judicial Independence 
                  -  Laws and Regulations on Foreign Direct Investment 
                  -  Competition and Antitrust Laws 
                  -  Expropriation and Compensation 
                  -  Dispute Settlement                      -  ICSID Convention and New York Convention 
                    -  Investor-State Dispute Settlement 
                    -  International Commercial Arbitration and Foreign Courts 
                  -  Bankruptcy Regulations 
                -  4. Industrial Policies                    -  Investment Incentives 
                  -  Performance and Data Localization Requirements 
                  -  Foreign Trade Zones/Free Ports/Trade Facilitation 
                -  5. Protection of Property Rights                    -  Real Property 
                  -  Intellectual Property Rights 
                -  6. Financial Sector                    -  Capital Markets and Portfolio Investment 
                  -  Money and Banking System 
                  -  Foreign Exchange and Remittances                      -  Foreign Exchange 
                    -  Remittance Policies 
                  -  Sovereign Wealth Funds 
                -  7. State-Owned Enterprises                    -  Privatization Program 
                -  8. Responsible Business Conduct 
                -  Additional Resources                    -  Climate Issues 
                -  9. Corruption                    -  Resources to Report Corruption 
                -  10. Political and Security Environment 
                -  11. Labor Policies and Practices 
                -  12. U.S. International Development Finance Corporation (DFC), and Other Investment Insurance or Development Finance Programs 
                -  13. Foreign Direct Investment Statistics 
                -  14. Contact for More Information 

## EXECUTIVE SUMMARY

Bulgaria is seen by some investors as an attractive low-cost investment destination, with government incentives for new investment. The country offers some of the least expensive labor in the European Union (EU) and low and flat corporate and income taxes. Labor shortages and inflationary pressures, however, have increased wages and domestic prices. Bulgaria has the lowest labor productivity rate in EU, and wage increases exceed growth in labor productivity. In the medium term, productivity is at risk due to a shrinking population and low investment in innovation.

Bulgaria has received EUR 1.4 billion of a total of 6.2 billion to be spent over a six-year period (2021-2026) from the EU’s post-COVID recovery grant funds through the National Recovery and Resilience Plan (NRRP), which is intended to spur improvements in green energy, digitalization, and private sector development. In order to receive future tranches of funds, Bulgaria must adopt key pieces of legislation, including in its energy and judicial sectors. The Bulgarian government is in the process of renegotiating with the EU parts of the NRRP energy plan. In December 2022, public discussions were launched about the grant provision for the construction of individual use photovoltaic and energy storage facilities. The NRRP aims to add 4,000 MW of RE capacity by 2026.

In February the government announced it would postpone seeking entry into the Eurozone, which it had targeted joining in 2024, following its joining the European Exchange Rate Mechanism (ERM II) in July 2020 and the EU’s Banking Union in October 2020. The next Eurozone entry date depends on whether the government is able to curb inflation and adopt necessary legislative amendments. The Bulgarian currency has been pegged to the euro since 1999. The adoption of the euro will eliminate currency risk and help reduce transaction costs with some of the country’s key European trading and investment partners.

In January 2022 the Organization for Economic Cooperation and Development (OECD) opened accession discussions with Bulgaria, which should help drive additional economic reforms in the coming years.

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, technical support, and business process outsourcing. The Information Technology (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. The automotive sector has also attracted U.S. and foreign investors in recent years.

Foreign investors remain concerned about rule of law in Bulgaria. Investors cite as major challenges Bulgaria’s endemic corruption, difficulty obtaining needed permits, unpredictability due to frequent regulatory and legislative changes, sporadic attempts to negate long-term government contracts, an inefficient judicial system, and problems executing judicial judgments.

In 2023 the government continued granting partial subsidies to businesses for rising energy costs. Tourism, logistics, the service industries, and the automotive sector were particularly hard hit by the COVID pandemic. The Bulgarian economy grew by 7.6 percent in 2021 but in 2022 growth slowed to 3.4 percent due to reduced investment and declining net exports. The war in Ukraine, which has led to higher raw material and energy prices, and the slow recovery of the Eurozone, Bulgaria’s major export market, undercut growth opportunities in 2023. As a result, economic growth in 2023 is expected to slow to under two percent. The war in Ukraine disrupted supply chains, contributed to domestic inflation, and made investors more caution, but it also creates opportunities in Bulgaria to effectively consolidate supply chains through nearshoring.

							1. Openness To, and Restrictions Upon, Foreign Investment					

### Policies Towards Foreign Direct Investment

There are generally no legal limits on foreign ownership or control of firms. However, Bulgaria does restrict non-EU foreign ownership in agriculture and legal services and applies a few sector-specific restrictions on non-EU business activities in air, maritime and rail transportation, the electricity market, mining, and financial services. Apart from these exceptions, foreign entities are generally treated like national firms and their investments are not restricted.

The Invest Bulgaria Agency (IBA), the government’s investment promotion agency, provides information, administrative services, and incentive assessments to prospective foreign investors. Its website (www.investbg.government.bg/en ) contains general information; IBA serves as a one-stop shop for foreign investors and certifies proposed investments for eligibility for administrative services.

### Limits on Foreign Control and Right to Private Ownership and Establishment

There are no limits to foreign and domestic private entities establishing and owning businesses in Bulgaria. However, 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 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 bilateral tax treaty for the avoidance of double taxation (including the United States).

Bulgaria has no specific law or coordinated mechanism in place to screen high-risk foreign investments for national security concerns, althougha potential foreign investment can be scrutinized on an ad hoc basis, or through the Law on the Measures against Money Laundering. Bulgaria is in the early stages of developing an investment screening mechanism in line with the EU’s FDI Screening Regulation. Currently, foreign investments with a national security nexus are screened by the respective ministries and interagency coordination is lacking.

### Other Investment Policy Reviews

An April 2023 OECD Economic Survey (https://www.oecd.org/economy/bulgaria-economic-snapshot/) stated economic growth is constrained by low levels of investment and unfavorable demographic trends. It noted that while public debt is low, increases in social spending in several areas, including education, could strengthen growth and social outcomes. A 2022 Investment Policy Review by the OECD acknowledged that Bulgaria has taken significant steps to provide adequate levels of investment protection and Bulgarian legislation included the principle of non-discrimination against foreign investment.

Bulgaria’s low score in several international rankings and low levels of trust in the judiciary remain a concern for investors.  In January 2021 the OECD published an Economic Assessment in which it acknowledged the successful integration of Bulgarian manufacturing firms into global production chains and sound macroeconomic policies prior to the pandemic. At the same time the report highlighted as key policy challenges Bulgaria’s high income inequality, relative poverty, and an ageing and rapidly shrinking population.

### Business Facilitation

Bulgaria typically supports small- and medium-sized business creation and development in conjunction with EU-funded innovation and competitiveness programs and with a special emphasis on export capacity. Commercial banks as well as the state-owned Bulgarian Development Bank support small- and medium-sized businesses in Bulgaria, including through the post-COVID-19 recovery period. 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. An electronic commercial registry of traders is available at: https:// ЕПЗЕУ (registryagency.bg). Women receive equitable treatment to men, and the Bulgarian law does not discriminate against minorities doing business.

### Outward Investment

There is no government agency for outward investment promotion, and no restrictions exist for local businesses to invest abroad.

							2. Bilateral Investment and Taxation Treaties					

Bulgaria is a member of the OECD Inclusive Framework on Base Erosion and Profit Shifting and joined the October 2021 Statement on a Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalization of the Economy. Bulgaria has a relatively large tax treaty network with 70 tax treaties and has signed and ratified the EU Arbitration Convention.

Bulgaria has a Bilateral Investment Treaty (BIT) with the United States, which obligates the parties to uphold national treatment and includes provisions to enforce commitments through investor-state dispute settlement. The BIT also includes an annex side letter on protections for intellectual property rights. With Bulgaria’s accession to the EU, Bulgaria and the United States exchanged notes in 2003 to make Bulgaria’s obligations under the BIT compatible with its EU obligations.

As of March 2023, Bulgaria also has bilateral investment treaties signed with the countries listed at this link: https://investmentpolicy.unctad.org/international-investment-agreements/countries/30/bulgaria.

							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. Public procurement rules are at times tailored to match certain local business interests. 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, or the member of Parliament sponsoring the draft law containing the regulation, 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 respective agency’s website, and interested parties are given 30 days to submit their opinions.

The government maintains a web platform, www.strategy.bg, on which it posts draft legislation. The government posts all its decisions on pris.government.bg. In addition, the law eliminates bureaucratic discretion in granting requests for routine economic activities and provides for silent consent (default judgement in favor of the requestor) 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. The Bulgarian government licenses the export of dual-use goods and bans the export of all goods under international trade sanctions lists. The Bulgarian government’s budget is assessed as transparent and in accordance with international standards and principles. Central government debt and debt guarantees are published monthly, and debt obligations by individual state-owned enterprises (SOEs) are published every three months on the website of the Agency for Public Enterprises and Control.

*The first and only Bulgarian think tank for sustainable finance and energy, the Green Finance & Energy Centre, was launched in March 2021 by the Bulgarian Stock Exchange (BSE) and the Independent Bulgarian Energy Exchange (IBEX), in partnership with the Ministries of Finance and Energy, the Financial Supervision Commission, and the Fund of Funds. The mission of the Green Centre includes raising business awareness and upgrading corporate governance codes with environmental and social responsibility provisions. Major banks and investors increasingly recognize the importance of *sustainable finance and investment in supporting economic growth while reducing environmental degradation.**

### International Regulatory Considerations

Bulgaria became a member of the World Trade Organization (WTO) 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 responsibility of the EU and the European Commission (EC), which coordinates them with the 27 member states. The EC negotiates in the WTO on behalf of the Member States and coordinates issues with them within the Trade Policy Committee of the Council of the EU.

### Legal System and Judicial Independence

Following systemic government-controlled prosecutions during Bulgaria’s communist era, the 1991 Constitution created an independent judicial branch comprised of judges, prosecutors, and magistrate-investigators.  The system is governed by a 25-member Supreme Judicial Council (SJC), which is responsible for the selection and disciplining of magistrates; however, according to local and international observers, its decisions have been opaque and politically influenced, in large part due to the manner in which its members are appointed for a five-year term in office.  Eleven of the SJC members are appointed by a supermajority in Parliament, a process often leading to behind-the-scenes distribution of seats among political parties.  The five rounds of elections held in Bulgaria in the past two years and the related political instability have impeded Parliament’s selection of new SJC members to replace the incumbents, who continue to serve beyond their term. Similarly, Parliament is three years late on replacing the members of the SJC Inspectorate, the body responsible for investigating corruption and conflict of interest complaints against magistrates.

All 1,500 prosecutors are administratively subordinate to the Prosecutor General, who is also a voting member of the SJC and as such has significant decision-making power over judicial selections.  The Prosecutor General is appointed by a majority of the SJC members for a 7-year term. The Council of Europe and the European Commission have criticized the lack of an independent mechanism to hold the Prosecutor General accountable. Numerous media and civil society investigations in recent years have alleged nepotism, corruption, and undue political and business influence over prosecutions, including with the purpose to take over lucrative businesses.  Prosecutors’ decisions to dismiss cases are not subject to review by a judge, and trials, especially in criminal cases, often take years to complete because of the inefficient procedures laid out in the criminal procedure code.  According to NGOs, information on ongoing and dismissed investigations is publicized selectively, further limiting opportunities for independent monitoring.  As of April 2023, there has been no significant progress on high-profile corruption investigations, nor on investigations related to individuals sanctioned in 2021 and 2023 by the U.S. Department of the Treasury under the Global Magnitsky Act.

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, which has jurisdiction over high-level public corruption cases, 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 13,500), excluding alimony, labor disputes, and financial audit discrepancies, or in property cases where the property’s value exceeds BGN 50,000 (USD 27,500). Five 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 which rule on the legality of local and national government decisions, with the Supreme Administrative Court serving as the court of final instance. Observers note negative trends in the administrative court system, including inconsistent caselaw, limited access to court information, and insufficient enforcement of decisions.  A 12-member Constitutional Court, which is separate from the rest of the judiciary, issues final rulings on the compliance of laws with the Constitution. The court currently operates with only 10 members as Parliament has failed to appoint new judges.

The judiciary continues to be one of the least trusted institutions in the country, with widespread allegations of nepotism, corruption, and undue political and business influence. Despite some improvements, the busiest courts in Sofia continue to suffer from serious backlogs and inefficient procedures, including slow and controversial implementation of electronic services, that hamper the swift and fair administration of justice.Bulgaria’s legislation has been largely aligned with EU directives to provide adequate means of enforcing property and contractual rights. In practice, however, investors complain about regulatory impediments, prosecutorial intervention in administrative cases, and inconsistent jurisprudence. Overall, the government’s handling of investment disputes has been slow, interagency coordination is poor, and intervention at the highest political level is often required. According to observers, regulators, which should be technically independent of the government, have been ineffective in exercising their oversight functions, particularly in enforcing anti-trust and energy regulations.

### 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, knowledge intensive services, education, and human resource development. It creates investment 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 governments. The most common form of PPPs are concessions, which include the lease of government property for private use for up to 35 years for a construction and service concession. The term of the concession may be extended by a maximum of one third of the original term. The majority of concessions are granted for infrastructure, transport services, and mineral water extraction. In 2021, defense and security were excluded from concession-eligible sectors. There are no restrictions for foreign-owned companies to participate in the concession process and be awarded a concession, however, at least one U.S. investor has faced challenges enforcing these concessions in the past.

Foreign investors must comply with the 1991 Commercial Law, which regulates commercial and company enterprise law, and the 1951 Law on Obligations and Contracts, which regulates civil transactions.

### Competition and Antitrust Laws

The Commission for Protection of Competition oversees market competition and enforces the Law on the Protection of Competition. The Competition Law, enacted in 2008, is intended to implement EU rules that promote competition. The law forbids monopolies, restrictive trade practices, abuse of market power, and certain forms of unfair competition. Monopolies can only be legally established in enumerated categories of strategic industries. In practice, the Competition Law has been applied inconsistently, and some of the Commission’s decisions are questionable and appear subject to political influence.

### Expropriation and Compensation

Private real property rights are legally protected by the Bulgarian Constitution. Only in the case where a public priority cannot be met by other means may the Council of Ministers or a regional governor expropriate land, in which case the owner is compensated at fair market value. Expropriation actions by the Council of Ministers, by regional authorities, or by municipal mayor can be appealed at a local administrative court. In its Bilateral Investment Treaty (BIT) with the United States, Bulgaria committed to international arbitration as an option to adjudicate unresolved expropriation claims and other investment disputes.

### 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 International Centre for the Settlement of Investment Disputes (ICSID).

#### Investor-State Dispute Settlement

Bulgaria accepts binding international arbitration in disputes with foreign investors. There are 40 arbitration institutions in Bulgaria; the Arbitration Court of the Bulgarian Chamber of Commerce and Industry (BCCI) is the oldest. In 2023 parliament passed a Law on Mediation that may lead to more disputes being settled.

#### International Commercial Arbitration and Foreign Courts

Bulgaria is a signatory to the 1961 European Convention on International Commercial Arbitration. Arbitral awards, both foreign and domestic, are enforced through the judicial system. The party must petition the competent district 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.A dispute settlement proceeding can drag on for years. Legal amendments passed in 2021 allow for the electronic filing and processing of documents in civil litigation cases, which is expected to expedite settlements.

### Bankruptcy Regulations

The 1994 Commercial Law 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.

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 Law, 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. The license of a bank may be withdrawn under the conditions set out in Article 36 of the Law on Credit Institutions.

							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, 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. Priority investors may receive incentives such as below-market prices when acquiring property rights (full or limited) from the central or municipal government, government grants for research and development (R&D) and education projects, and institutional support for establishing PPPs. The government policy for investment promotion excludes a number of sectors classified as strategic.

The share of renewable energy (RE) in the total power mix has doubled in less than ten years due to a generous feed-in tariff that fueled a solar investment boom. As the market evolved, in 2018 feed-in tariff contracts with RE producers with at least 4MW of capacity were terminated, while other RE producers that were receiving feed-in tariffs have been offered feed-in premium contracts. Renewable electricity producers with a capacity below 4MW, new rooftop or facade photovoltaic installations with a maximum installed capacity of 30kW, and certain installations using combined cycle and indirect use of biomass are still eligible for a feed-in tariff. The gradual phase out of subsidized RE production aims at increasing their market share under a fully liberalized energy market.

The government does not have a practice of issuing guarantees or jointly financing foreign direct investment projects.

### Performance and Data Localization Requirements

Bulgaria does not impose export performance or local content requirements as a condition for establishing, maintaining, or expanding an investment. Employment visas and work permits are required for most expatriate personnel from non-EU countries. Many U.S. companies have experienced difficulties obtaining work permits for their non-Bulgarian, non-EU employees. Recently adopted changes in the Law on Labor Migration and Labor Mobility no longer mandate that Bulgarian employers canvass the local labor market before hiring non-EU labor. However, non-EU workers with long-term residence permits cannot exceed 35 percent of the total workforce in Bulgarian small- and medium-sized companies, or 20 percent in large firms. In 2017 the government simplified procedures and reduced issuance time for work visas for non-EU workers. Furthermore, it is possible for non-EU students who have completed their education in Bulgaria to continue working in the country without having to reenter the country.

Bulgarian law mandates that when the government purchases new software it should also have access to the source code. U.S. companies tend to view this requirement as unreasonable and discriminatory.

### 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, which, provided they have the necessary technical infrastructure to attract new investment, can be designated as nationally significant projects by a Council of Ministers decision following a proposal by the Minister of Economy. The government’s industrial park policy is conducted by the Council of Ministers, the Minister of Economy, and local municipalities. The Ministry of Economy keeps an electronic registry of all industrial parks.

The Trakia Economic Zone in south-central Bulgaria is one of the largest industrial areas in Southeast Europe, attracting over EUR 3 billion in investment and sustaining over 50,000 jobs. In addition, the state-owned National Industrial Zones Company (NIZC) currently operates fully functioning industrial zones in Sofia, Burgas, Vidin, Ruse, Pleven, Svilengrad, Stara Zagora and Varna. Under construction are future industrial zones in Suvorovo (Varna), Blagoevgrad, Kardzhali, Karlovo, and another one in Sofia. Investors in these economic zones benefit from established infrastructure, location, and transport logistics. The common thread among all these economic zones is that they are either located in regions with sufficient available labor, in economically disadvantaged regions where the government provides special investment incentives, or at important cross-border junctures. Sofia Tech Park is the first science and technological park in Bulgaria and has partnered with the Bulgarian Academy of Sciences, several local universities, and several local groups. In December 2022, the Ministry of Innovation and Growth disbursed program funds exceeding EUR 100 million under the EU funded National Recovery and Resilience Plan for developing industrial zones and industrial parks in Bulgaria.

							5. Protection of Property Rights					

### Real Property

Restrictions still exist on the ownership of agricultural land by non-EU citizens.  Companies whose shareholders are registered offshore are banned from acquiring or owning Bulgarian agricultural land.  However, non-EU citizens who have resided in Bulgaria for at least five years or their Bulgaria registered companies can acquire Bulgarian agricultural land. Forests remain exclusively government owned, but certain woodlands can be privately owned.

Mortgages are recorded centrally with the Bulgarian Registry Agency, at registryagency.bg.

### Intellectual Property Rights

Bulgaria has a poor record on Intellectual Property Rights (IPR) protection and enforcement.  USTR added Bulgaria to the Watch List because it did not sufficiently address deficiencies in its investigation and prosecution of online piracy cases, such as by allowing criminal investigations, expert examinations, and prosecutions to proceed with just a subset of seized infringing works.

IPR cases continue to be ineffectively prosecuted and Bulgarian courts fail to recognize the gravity of IP crimes.  For example, Bulgarian law mandates that when the government purchases new software it should also have access to the source code. U.S. companies tend to view this requirement as unreasonable and discriminatory.

Trademark infringement is a significant problem in Bulgaria for U.S. cigarette and apparel producers, cosmetics manufacturers, and pharmaceutical companie. Smaller-scale infringement affects other U.S. products, such as HP and Apple accessories. Bulgarian legislation provides for criminal, civil, and administrative remedies against trademark violations. Bulgaria has implemented a simplified border control procedure for the destruction of seized fake goods without the requirement of a civil or criminal trial.  In addition to civil penalties prescribed by the Trademarks and Geographical Indications Act (TGIA), the Criminal Code prohibits the use of a third person’s trademark without the holder’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 Bulgarian law on patents and utility model registrations is harmonized with international law, including EU law.  Amendments in 2020 provided for new electronic state registers for patents and utility models and services, removed the requirement for separate filing of a request for examination for Bulgarian patent applications, reduced the time limit for restoration of omitted deadlines, allowed legal practitioners to represent clients before the Bulgarian patent office, recognized “IP representative” as a regulated profession, and allowed pending European appeals as a stay of patent infringement proceedings in Bulgaria.  The Bulgarian Patent Office is one of the few EU Patent Offices that provides substantive examination for patent applications in all technical fields and registration of utility models with assessment of industrial applicability and unity of invention. The Office examines dispute procedures on patents and utility models, including revocation of patents and invalidation of utility models, and decisions can be appealed to the Sofia Administrative court.

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 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).  A 2019 Law on Marks and Geographical Indications updated and accelerated trademark-related procedures, including registration.

Trademarks and service marks are protected via registration with the Bulgarian Patent Office, or registration as a European Union Trademark, or an international registration under the Madrid Agreement and the Madrid Protocol that designates Bulgaria. A trademark is normally granted within seven months of application filing. Pending applications are published to allow for objections. Objections and registration rejections can be appealed to the Patent Office’s Disputes Department. The trademark shall be entered in the State Register of Trademarks and shall be published in the Official Bulletin of the Patent Office within one month from the date of the decision. Decisions can be appealed to the Sofia Administrative Court.

A 2019 law on trade secret protection allows for civil action for trade secret infringement. There is no special court for cases related to trade secrets.

Bulgarian customs maintain a section on its official web site customs.bg instructing rights holders of the procedure for filing IPR infringement cases. In 2022, the main places of origin of counterfeit goods were Turkey and China (including Hong Kong). The most frequently confiscated goods were clothing, perfumes and cosmetics, shoes, toys, bags, and wallets.

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/.

							6. Financial Sector					

### Capital Markets and Portfolio Investment

The Bulgarian Stock Exchange (BSE), the only securities-trading venue in Bulgaria, operates under 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.  The law is aimed at providing investor protection and at developing a transparent local capital market. In 2004 BSE performed its first IPO transaction. In 2018 BSE acquired 100 percent of the Independent Bulgarian Energy Exchange (IBEX), Bulgaria’s first independent electricity platform trader, which is now integrated within EU the “same day” and “day-ahead” electricity markets. In 2022, around 100 traders actively operated on IBEX.

Since its 2007 accession to 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 comprised 19.5 percent of Bulgaria’s GDP in 2022, down from 22 percent in 2021.

Bulgarian companies strongly prefer to obtain financing from local banks instead of drawing from the local financial markets. At the end of 2018, the Financial Supervision Commission approved the “SME beam market,” a special market that provides small and medium-sized businesses the opportunity to raise new capital more easily. In 2022, the “SME beam market” capitalization reportedly increased over 18 percent compared to 2021.

Bulgaria’s first “unicorn,” a technological start-up called Payhawk, raised USD 1 billion of capital in 2022. It operates in the U.S., UK, and other global markets.

Foreign investors can access credit on the local market.

### Money and Banking System

The Bulgarian bank system is well capitalized and liquid. As of the end of September 2022, the total capital adequacy ratio was 20.5 percent, above the EU average and adequately shielding domestic banks against potential macroeconomic risks. As of December 2022, there were 25 banks (including 7 branches), with total assets of BGN 155.4 billion (USD 84 billion), equivalent to 94 percent of GDP. The market share of the five significant banks (directly supervised by the ECB) was 66.7 percent, the share of less significant banks was 29.8 percent, and the share of foreign bank branches was 3.5 percent.  Non-performing loans were equal to 4.6 percent of the total loan portfolio of the banking system in December 2022.

The Bulgarian government has raised funds by issuing both Euro-denominated and BGN- denominated bonds.  Commercial banks and private pension funds and insurance companies are the primary purchasers of these instruments. EU-based banks are eligible to be primary dealers of Bulgarian government bonds.

### 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.

In 2014, United States and Bulgaria signed an intergovernmental agreement, ratified by Parliament in 2015, that implements provisions of the Foreign Account Tax Compliant Act (FATCA), which targets tax non-compliance by U.S. persons who do business with Bulgarian financial institutions. Bulgaria joined the Eurozone’s precursor mechanism ERM II in July 2020 and the EU Banking Union in October 2020.

In February 2023, the government withdrew its plans for adopting the euro on January 1, 2024. Officials are now targeting a 2025 Eurozone accession.

#### Remittance Policies

There is no official policy regarding remittances. Remittances are an important source of funding for Bulgarian families with relatives overseas. In 2022, Bulgarian emigrants sent a total of EUR 1.22 billion, an increase of 4.3 percent from 2021. Bulgarians living in Germany, the United States, Spain, and the UK accounted for more than half of that amount. Over the last several years, remittances generally exceeded new FDI in the country.

### Sovereign Wealth Funds

Bulgaria does not have a sovereign wealth fund. The government maintains a multiannual fiscal savings reserve, a farmer subsidy fund, and an electricity price premium fund. Their annual budgeting is compliant with the government’s budget plans.

							7. State-Owned Enterprises					

Upon EU accession, Bulgaria was recognized as a market economy in which the majority of companies are private. Significant state-owned enterprises (SOEs) remain, however, such as railways and the postal service. SOEs also predominate in the healthcare, infrastructure, and energy sectors; many of these are collectively managed by holding companies, which are also SOEs. Some of the SOEs receive annual government subsidies for current and capital expenditures that is not linked to their performance. SOEs’ budgets and audit reports are posted on the website of the Agency for Public Enterprises and Control. The list of all SOEs can be found (reports.appk.government.bg/public/pubic/organizations). At the end of 2021, the government controlled a total of 265 companies in which it had participation of 50 percent or higher. The number of employees in these public enterprises was approximately 122,000. In 2021, government participation in the overall economy equaled 9.6 percent.

Cross-subsidization is common within holding companies. In the energy sector, for example, the debts of some energy producers are covered by more lucrative entities within the holding structure.

In 2019 Parliament approved the State Enterprise Act, introducing updated corporate standards and management practices. The law lists timeline and criteria for SOE senior management approval. SOEs are typically run by government elected boards. Public and private sector companies are in theory treated equally regarding 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

Foreign investors can participate in privatization programs, yetno major privatizations are currently planned in Bulgaria. Parliament must approve government proposals to privatize any company with over 50 percent government ownership. All majority or minority state-owned properties are eligible for privatization, with the exception of those included in a specific list, including water management companies, state hospitals, and state sports facilities. The sale of specific parts of such companies follows a Council of Ministers decision or a decision of the Agency for Public Enterprises and Control, after a proposal made by the government-owned majority holder of the company. 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.

The 2010 Privatization and Post-Privatization Act created a single Privatization and Post-Privatization Agency responsible for privatization oversight. The new State Enterprise Act in 2019 reshuffled and renamed the agency into the Agency for Public Enterprises and Control (www.appk.government.bg/bg/17 ).

							8. Responsible Business Conduct					

**In 2007 the government adopted a National Corporate Governance Code**(NCGC)**to encourage companies to adhere to the principles of responsible business conduct (RBC).**The**NCGC****w**as amended**in 2012, 2016**,**and 2021**,**and Bulgarian publicly owned companies**comply with it.****2**021**updates**correspond to**the EU a**nd**national**sustainable development**policies**— the****so-called****Green Deal, the Taxonomy Regulation,**and**the Corporate Sustainability Reporting Directive.****The provisions of the Code are aligned with the 2015 UN Sustainable Development Goals as well as the UN Guidelines on Business and Human Rights**from**2011**.****In 2019, the government approved a Corporate Social Responsibility Strategy for the period until 2023.****According to the Accountancy Act,**“Public Interest Enterprises”****(PIEs)**sub**mi**t a declaration on corporate**gover**na**nce**along with their annual activity report.****PIEs****include**:****companies**whose**corporate**transferable securities****can be**trad**ed**on the regulated market in a**EU member state**; credit institutions;**and**insur**ance and reinsurance companies.**

*There is a growing awareness of RBC standards and business’ obligation to proactively conduct due diligence to ensure they are doing no harm, with larger international firms generally further along than smaller domestic companies. Bulgarian companies are more frequently building RBC awareness through events organized in partnership with employer associations.*****The non-governmental Bulgarian Network for Social and Corporate Responsibility (CSR) (**csr.bg)**promotes CSR among Bulgarian companies and reports good business practices.**

Bulgarian NGOs continued to report the exploitation of children in certain industries, particularly small family-owned shops, textile production, restaurants, construction businesses, and periodical sales. Children living in vulnerable situations, particularly Roma children, were exposed to harmful and exploitative work in the informal economy, mainly in agriculture, construction, and the service sector.

The OECD Investment Review in 2022 proposed options that would help promote RBC further, such as the active implementation of the OECD *Guidelines for Multinational Enterprises* to help resolve RBC issues related to environment, labor, human rights, and governance.

Bulgaria is not a member of the Extracting Industries Transparency Initiative (EITI).

							Additional Resources					

Department of State
                    - Country Reports on Human Rights Practices ;
                    - Trafficking in Persons Report ;
                    - Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities ;
                    - U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises ; and;
                    - Xinjiang Supply Chain Business Advisory 

Department of the Treasury
                    - OFAC Recent Actions

Department of Labor
                    - Findings on the Worst Forms of Child Labor Report ;
                    - List of Goods Produced by Child Labor or Forced Labor ;
                    - Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World  and;
                    - Comply Chain .

### Climate Issues

Bulgaria remains highly vulnerable to climate variability and change, particularly for the country’s water resources, agriculture, public health, energy, and forestry sectors. Air quality is low in many cities and other hot spots that continue to present a significant threat to human health. Overall, national emissions are high compared with those of western European countries and other central and eastern European countries. Emissions from large industrial facilities remain major health and environmental hazards, as do those from residential/commercial sector use of low-quality solid fuels.

Bulgaria’s Integrated Energy and Climate Plan sets out the country’s key objectives of encouraging low-carbon economic development, developing a competitive and secure energy sector, and reducing dependence on fuel and energy imports. EU Green Transition goals are reflected in Bulgaria’s National Recovery and Resilience Plan (NRRP). The NRRP includes pilot projects for the production of green hydrogen and biogas; infrastructure for hydrogen transport; and a program to finance ad hoc renewable energy measures in buildings not connected to heat or gas transmission networks. The EU-funded grant payment plan is designed to attract investment in large-scale solar and geo-thermal projects, buttressed by battery storage. In December 2022, public discussions were launched about the grant provision for the construction of individual use photovoltaic and energy storage facilities. The NRRP aims to add 4,000 MW of RE capacity by 2026.

Bulgaria has a National Climate Change Adaptation Strategy and 2030 Action Plan. Bulgaria’s Strategy outlines climate change risks and vulnerabilities of multiple economic sectors including agriculture, forestry, water, energy, transport, health, and tourism.

In the 2022 MIT Technology Review’s Green Future Index, Bulgaria was ranked 25th in the comparative ranking of 76 nations and territories on their ability to develop a sustainable, low-carbon future (https://www.technologyreview.com/2022/03/24/1048253/the-green-future-index-2022/).The report noted that in the third quarter of 2021, Bulgaria saw the largest increase in greenhouse gas emissions in the European Union—22.7 percent, more than four times the EU average.

The Bulgarian government has policies in place to encourage residents to replace coal burning stoves for woodburning stoves and/or to replace stoves using firewood with those that use wood/plant-based pellets. These initiatives are not designed to get Bulgaria to net-zero carbon emissions, but to diminish the current level of emissions. No specific expectations on private sector contributions to achieving relevant targets are identified.

Bulgaria does not have its own policies related to commodities and deforestation, however, as an EU Member State, Bulgaria will be required to implement the EU’s Deforestation-Free Supply Chain regulation.

Public procurement policies do not include environmental and green growth considerations such as resource efficiency, pollution abatement, and climate resilience.

							9. Corruption					

Corruption remains a significant issue in Bulgaria. Laws exist mandating conflict of interest statements and asset declarations from public officials, but there are exceptions for certain family members and enforcement of penalties is lacking. Bulgaria ranks 72nd out of 180 countries in Transparency International’s Corruption Perception Index for 2022, a slight improvement from the previous year but still the second worst result in the EU after Hungary.  Human trafficking, narcotics, and contraband smuggling all contribute to corruption.  With the gradual introduction of technologies in public administration, including e-filing and the electronic issuance of certificates, some progress has been made in addressing petty corruption.  However, high-level corruption, particularly in public procurement, remains a serious concern.  The high-profile prosecutions that do take place are often seen as selective or politically motivated and typically end in acquittals after a lengthy judicial process.  The lack of serious convictions against senior officials and the need for reforms in the criminal justice sector remained high on the public agenda.

Established in 2018 on the foundations of several previously independent bodies for asset recovery and conflict of interest prevention, the Anti-corruption Commission has been criticized for its unimpressive record. The Anti-Corruption Fund (acf.bg), a civic organization created in 2017, conducts its own investigation of cases suspected either of corruption or conflict of interest among Bulgarian senior politicians and policy makers. NGOs and investigative journalists covering corruption report experiencing threats, harassment, and intimidation against them.

Bulgaria has ratified the 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.  The new law required registered business groups to declare by May 2019 their beneficial owners. Some companies continue to avoid ownership publication by registering shell entities in tax heavens and offshore zones. Local capacity to detect suspicious and potentially illicit money flows remains low.

### Resources to Report Corruption

Mr. Anton Slavchev, Deputy ChairmanCommission on Corruption Prevention and Illegal Assets Forfeiture6, Sveta Nedelya Sq. Sofia, 1000Email: caciaf@caciaf.bg

Mr. Boyko StankushevDirector and Member of the Managing BoardMr. Joeri Buhrer TavanierChairman of the Managing Board

Anticorruption Fund71, Knyaz Boris Str., Office 2Email: acf@acf.bg

Mr. Ognyan MinchevBoard PresidentTransparency International BulgariaPO Box 72, SofiaEmail: mbox@transparency.bg

							10. Political and Security Environment					

Daily anti-government protests that took place throughout the summer of 2020 in Sofia generated sporadic reports of excessive force by protestors and police, but there has been no significant political violence in recent years. In April 2023 Bulgaria held its fifth parliamentary election in two years. In the periods between regular governments, the country has been governed by caretaker administrations appointed by the President.

							11. Labor Policies and Practices					

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. Currently, there are five nationally recognized employer organizations, based on membership thresholds. 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). CITUB, the larger of the two, has an estimated membership of about 300,000. Podkrepa has a large share of unionized labor in education.

There are very few restrictions on trade union activity, but employees in smaller private firms are often not represented.  Unionized labor is most commonly 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 levels. 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 2023 is BGN 780 (USD 430) per month.  The Bulgarian Labor Code provides for benefits for departing employees.  In cases of forcible termination, the employee is normally entitled to compensation from the employer, generally up to one month of 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.

The Bulgarian labor market continues to be rigid in classifying different forms of employment (part-time, per-hour, etc.). Driven by business disruption due to the COVID-19 pandemic, in 2020 the Bulgarian Labor Code was amended to allow businesses to reclassify full-time workers as part-time while the state of emergency is in force. The Bulgarian Labor Code limits overtime work to 300 hours per calendar year. Undeclared work is the most common informal labor market practice. The share of the informal economy has decreased from 36.7 percent in 2010 to 21.6 percent in 2021.

*An EU “blue card” work permit can be obtained by high skilled foreigners who have a visa or a long-term residence permit in Bulgaria. *With the**2023****amended Law on Labor Migration and Labor Mobility**, a**blue card**can**be**issued for**from two**to five**years**. The blue card****system**is**designed to meet****the**growing personnel**needs of**the**IT sector.*****Ukrainians and members of their families with the right to temporary protection under Art. 1a, para. 3 of the Asylum and Refugees Act have the right to work in Bulgaria without a labor permit. Persons with temporary protection status can register as jobseekers with the Labor Office Directorate at their permanent or current address. Additional information about the procedure for obtaining temporary protection can be found at: www.aref.government.bg/bg/node/499*.**In**April**2023**the period of subsidized employment for Ukrainian citizens with temporary protection in Bulgaria under**the**“Solidarity” project****aimed at labor market**support****for**Ukraini**a**n refugees**was**extended from**three**to**six**months.**

Ukrainian citizens have the right to seasonal work of up to 90 days in agriculture, forestry and fisheries, hotels and restaurants in Bulgaria without interruption, for a period of 12 months upon registration with the Employment Agency based on a declaration submitted by the employer.

Bulgarians’ literacy rate (aged 15 and older) is 98.4 percent and Bulgarians average 13.9 years of schooling, and 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. Employers have also been slow to offer training. Emigration, particularly among young skilled professionals, has exacerbated the shortages. Bulgaria slipped four places to 68th in the UN Human Development Index for 2021, the lowest score among EU countries.

The Roma community makes up an estimated 10 percent of the total population and a higher percentage of the labor force. These numbers are increasing as a result of demographic trends. The Roma community is often subject to discrimination and socially marginalized, with lower levels of educational attainment. Consequently, Roma are overrepresented among unskilled workers and in the grey economy. Large numbers of Roma also seek unskilled, seasonal employment in other EU member states.

							12. U.S. International Development Finance Corporation (DFC), and Other Investment Insurance or Development Finance Programs					

Bulgaria is working with DFC on potential investment projects, particularly in the energy sector. Bulgaria also has one project and seeks to develop other energy, infrastructure, and digital projects for investment via the region-wide Three Seas Initiative.

In 1991, DFC’s predecessor, the Overseas Private Investment Corporation (OPIC), and the Bulgarian government signed an Investment Incentive Agreement, which governs OPIC’s operations in Bulgaria.

Bulgaria is a signatory to the Convention Establishing the Multilateral Investment Guarantee Agency. Since 2011, OPIC has funded three projects in Bulgaria, in solar energy, small business development, and education.

							13. Foreign Direct Investment Statistics