The text below is kindly provided by:
Deloitte Bulgaria OOD
- Territory - 111,002 sq. km (28% arable land and 33% forest);
- Population - 7.61 million (December 2008);
- Political system - Parliamentary republic;
- Capital: Sofia - 1.2 mln;
- Language - Bulgarian;
- Currency - Bulgarian Lev (BGN), pegged to Euro (EUR 1 = BGN 1.95583);
- Time - GMT+2 (winter); GMT+3 (summer)
A closer look at Bulgaria
1. Stable political and economic environment
Bulgarian economy has undergone rapid economic development during the past few years, with real GDP growth levels of between 6.0% and 6.3% for the period 2005-2008. The impact of the global economic and financial crisis reached the country late, leading some economists initially to predict that it would be spared the worst of its impact. Bulgarian economy contracted by 4.2% year-on-year in the first half of 2009. Despite the current effects of the economic downturn, Bulgaria is one of the economies in CEE that so far is in relatively good shape despite the recession, and gradual recovery is expected to take place in 2010-2011 (source: EIU Country forecast, October 2009).
The Bulgarian economic development in recent years has been fostered by the EU Accession, which took place in early-2007. With the enlarged European Union channeling funds to member countries, imposing unified regulations and driving openness in trade and (to a lesser extent) free movement of labour, Bulgaria has begun economic integration with the other EU countries. However, building the necessary administrative capacity and adopting good practices in EU funding utilization and management have been one of the key development areas for Bulgaria since accession.
The currency board, pegging the Bulgarian lev to euro, has paved the way to achieving and maintaining macroeconomic stability. The progress achieved was acknowledged by the major international credit rating agencies giving Bulgaria an investment grade rating.
2. Favourable tax environment
Bulgaria applies flat tax rate of 10% for corporate profits and personal income tax. Some of the tax incentives include:
- 0% corporate tax rate in high-unemployment areas;
- 2-year VAT exemption for imports of equipment for approved investment projects over 5 million euro, creating at least 50 jobs;
- Tax depreciation for 2 years of computers and new manufacturing equipment;
- 5% withholding tax on dividends and liquidation quotas (0% for EU tax residents).
Some tax incentives applicable for manufacturing and for large projects are presented in detail in Section 4: Tax incentives in Bulgaria.
3. Competitive labour and operational cost levels
Bulgaria remains competitive in terms of labour and operational cost levels as compared with the other CEE countries.