1. Openness To, and Restrictions Upon, Foreign Investment
Policies Towards Foreign Direct Investment
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.
The Invest Bulgaria Agency (IBA), the government’s investment attraction body, provides information, administrative services, and incentive assessments to prospective foreign investors. Its website contains general information for foreign investors. 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. The Offshore Company Act lists 28 activities (including government procurement, natural resource exploitation, national park management, banking, insurance) banned for business by companies registered in offshore jurisdictions with more than 10 percent foreign participation. The law, however, 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 for screening individual foreign investments. A potential foreign investment can be scrutinized on the grounds of its potential national security risk or through the Law on the Measures against Money Laundering. As each ministry is responsible for screening investments within its purview, interagency coordination is lacking, and there are no common standards. Since the full adoption of the EU investment screening regulation in October 2020, Bulgaria has fulfilled the preliminary requirements of the EU mechanism for cooperation in prescreening new FDI.
Other Investment Policy Reviews
There have been no recent Investment Policy Reviews of Bulgaria by multilateral economic organizations. In 2019, Organization for Economic Cooperation and Development (OECD) published reviews of Bulgaria’s healthcare sector and state-owned enterprises. As part of Bulgaria’s Action Plan for deeper cooperation, in January 2021 OECD published an Economic Assessment of Bulgaria 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 aging and rapidly shrinking population. In February 2021 OECD published a study of Bulgarian municipalities that acknowledged solid progress in local governance standards but also noted insufficient progress in bridging regional disparities.
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. The state-owned Bulgarian Development Bank has committed to supporting 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. Electronic company registration is available at: https://portal.registryagency.bg/commercial-register. Women receive equitable treatment to men, and the Bulgarian law does not discriminate against minorities doing business.
Bulgaria dropped two places to 61st (out of 190 surveyed economies worldwide) in the World Bank’s 2020 Doing Business (DB) report, scoring lowest in the Getting Electricity category, in 151st place, and in the Starting a New Business category, in 113th place. The relatively large number of administrative procedures for a business to complete either of these actions, along with the associated delays, contributed to the low scores in both categories. It took an average of 23 days to start a limited liability company in Bulgaria in 2020, compared to the OECD (high income) average of 9.2 days and peer average of 11.9 days.
There is no government agency for outward investment promotion, and no restrictions exist for local businesses to invest abroad.