Bulgaria: Country and Foreign Investment

Bulgaria History, Population, Language and Culture

The Bulgar peoples were originally a Turkish tribe who settled beside the Slavic tribes in the area that is now the Balkans in the 7th century. Due to its location in the Balkans and proximity to the Ottoman Empire, the Bulgars were vulnerable to invasion and succumbed to an Ottoman invasion in the 14th century. However, Bulgaria gained its independence in 1908 but then sided against the West in both world wars. After World War II, Bulgaria became part of the Soviet bloc. As with the rest of the communist countries in Eastern Europe, Bulgaria asserted its own democracy in 1990 when the Soviet bloc collapsed.

Bulgaria has an estimated population of 7.5m. The capital, Sofia, is one of the oldest cities in Europe and with a population of 1.4m is the country’s largest city. Other important cities are Plovdiv (population 380,000), Varna (population 355,000) and Burgas (population 218,000).

The principal language is Bulgarian (spoken by 84% of the population). Nearly 10% of the population speak Turkish. This corresponds with the population’s ethnic split, and there is also a Romany community. The majority of people follow the Bulgarian Orthodox religion, with 12% following the Muslim faith.

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Bulgaria Government

The National Assembly of Bulgaria comprises 240 Deputies, elected every four years. A party (or coalition) must obtain 4% of the vote to be represented in parliament. The Bulgarian parliament is the supreme power in the country and makes executive decisions on all major government policies and issues.

The Coalition for Bulgaria won the largest share of the vote in the 2005 elections (31%). The Prime Minister is Sergei Stanishev and the President is Georgi Parvanov, who was re-elected to that position in 2006. The President is elected for a term of five years.

Ministers, including the Prime Minister, are appointed by Parliament. The President is the head of state and has the power of veto over Parliament, though this can be overturned by a majority vote in the National Assembly.

The legal system is overseen by the Supreme Judicial Council and has 25 members. The judicial system has three tiers of judiciary, namely trial, appellate and cassation. The Supreme Administrative Court and the Supreme Court of Cassation are the courts of appeal. There is a Constitutional Court that is outwith the main umbrella of the judiciary as a whole.

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Bulgaria Economy and Currency

High inflation and economic mismanagement plagued Bulgaria during the 1990s as the country struggled to shake off the hangover of the collapse of the Soviet bloc. Political troubles in the Balkans and the first Gulf War also affected Bulgaria. Economic reforms were introduced in the latter part of the 1990s and the creation of a Currency Board kept inflation in check.

Bulgaria joined the European Union in 2007 and high levels of foreign investment came into the country. The country’s low tax base is aimed at encouraging business and personal economic growth. GDP per capital was USD12,372 in October 2008, with GDP growth estimated at 5.9%. Industry and services make up more than 90% of the economy. Inflation was still running at an average of over 7% in mid-2009.

The Bulgarian currency is the Lev (BGN), which is pegged to the Euro at EUR1 = BGN1.95583.

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Bulgaria Entry and Residence

As a member of the European Union, Bulgaria has started the process of moving towards membership of the Schengen Area, thereby easing border controls. This is expected to happen by 2011.

If a person wishes to reside in Bulgaria for a period in excess of 180 days, a residence permit will be issued. A long-stay visa must first be obtained. The authorities can issue either a long-stay residence permit or a permanent residence permit, though the latter requires that the person has first been resident for a period of five years.

Anyone resident in the country for more than 183 days in a calendar year will be classed as a resident for purposes of tax and will therefore be liable to pay tax on their income in Bulgaria and worldwide. Double taxation treaties with several countries should ensure that tax is not paid twice on the same income.

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Bulgaria Business Environment

The standard of Bulgaria’s transport infrastructure falls behind many other European countries. Sofia has important rail links to other neighbouring countries, including Greece, Romania and Turkey. The rail network still suffers from under-investment, although the Plovdiv rail line to the Greek and Turkish borders has been upgraded in recent years. The quality of the country’s roads still leaves much to be desired with barely 200 miles of high-speed motorways in use. However, plans are under way to upgrade roads and build new links, notably the Trakiya motorway to the Turkish border, which was due for completion in 2009, although problems with funding have delayed completion to 2010. There is also a major motorway route that runs from Sofia to the Black Sea.

Sofia Airport is by far the largest and most important in the country, carrying passengers and freight to many European destinations. The airport carried more than 3m passengers in 2008. Provincial airports at Varna and Burgas deal primarily with non-commercial traffic and internal flights.

Internet usage in Bulgaria is low by comparison with other European countries. The cost of purchasing a computer and the connections required are still out of the reach of the budget of many Bulgarians. The infrastructure is growing and there are a number of ISPs operating in the country. Just under 2m people have Internet access.

Take-up of mobile telephony is as prolific as other countries. There are now around 10m mobile phones in Bulgaria and over 2.3m fixed landlines.

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Bulgaria Investment Incentives

With corporation tax at a very low rate of 10%, this is itself a good incentive to invest in Bulgaria. There are various schemes available to foreign investors, aimed at technology start-up enterprises, research and development (R&D) establishments and innovative, new entrepreneurs. A variety of incentives can be made available, from loan guarantees and voucher schemes, to tax incentives.

Tax incentives come in the form of tax allowances, tax credits, or tax relief on R&D staff costs. Corporation tax is reduced to zero (for a period up to five years) for companies investing in areas of high unemployment, provided that the unemployment rate exceeded the national average by 50% in the previous year and that 80% of employees reside in the region where the business is to be located. Tax savings must also be reinvested in the company’s development.

Bulgaria has established several duty-free zones to encourage economic co-operation between Bulgaria and other nations. These zones offer movement and storage of goods free from excise duty and taxes.

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