Following a period of numerous legislative reforms started in 1989, today Bulgaria has a relatively liberal and clear legislation relating to foreign investment. The problems facing foreign investors in Bulgaria are not due to shortage of legislation but rather ensue from the poor administration of laws and the deficiencies in the management and administrative capacity of the state and municipal authorities. The Bulgarian governments over the last years have adopted a policy of unification of the regime for the foreign and the Bulgarian investors – a policy which is grounded on the provision of the Constitutional for equal legal treatment of the business entities located in the country.  

The Constitutional principle of inalienability of private property is upheld except for such rare cases where state and public needs can not be alternatively met. 

The main factors outlining the framework of conditions for foreign investment in Bulgaria can be presented as follows:

1) Restrictions on the size of foreign investment

In practice Bulgaria places no restrictions on the size of foreign investments. This refers both to the size of direct investments and to the shareholdings in the Bulgarian commercial companies, as well as to other non-direct investments, etc.

2) Acquisition of real property

The Bulgarian law distinguishes between acquisition of ownership of land, on the one hand, and acquisition of right to construction and to a building on the land, on the other hand. At present the acquisition of ownership of land is restricted entirely for citizens of countries outside of the EU. The citizens of EU member states can freely acquire land for their second dwelling on the territory of Bulgaria. The restrictions on the acquisition of land by EU citizens are due to fall off in 2012. Bulgaria can retain in force the restrictions in respect of the acquisition of title on agricultural land, forests and forest land within 7 years of the date of the accession to the EU, i.e. 2014.

No restriction is imposed on the right of foreigners to acquire a right to construction and a right to ownership of buildings. Moreover, no restrictions exist for the acquisition of other real rights, such as the right of use of real property, contracting of mortgages, etc.  

3) Licenses, permits and other administrative  requirements for  foreign investments in Bulgaria

In principle, there exists no license or permission regime for foreign investment in Bulgaria different from the regime applicable to the Bulgarian business entities. The Bulgarian government aims to minimize the number and scope of activities subject to a regime of licensing and permission. As of the present, a regime of license and permission exists only in few sectors of the economy, e.g. the energy sector, the arms trade, the trade with non-ferrous metals, the banking and insurance sector, etc. The conditions for the foreign investors are on a par with those for the Bulgarian businesses.

4) Participation in public procurement

There exist no restrictions for foreign investors to participate in tenders for public procurement on the territory of Bulgaria. The only prerequisite for this is that the foreign investors meet the requirements for financial, technological and special eligibility for the specific public tender. 

5) Tax

The Bulgarian legislation sets forth the so called general flat rate tax of 10% for all kinds of income in Bulgaria, regardless of whether these incomes refer to companies or private individuals. VAT amounts to 20%.

6) Financial system

There exist no impediments before foreign persons to open a bank account on the territory of Bulgaria or to effect currency bank transfers to other countries. However, the only exception applies to the transfer of dividends or liquidation quotas. In the latter case the taxable person must pay in Bulgaria the withholding taxes unless there is an Avoidance of Double Taxation Agreement with the respective country.

7) Registration of company

The administrative procedure for entering a commercial company into the Commercial Register takes between 3 to 5 days. One should however allow for the time required for obtaining the necessary documents from abroad, which time may be different for the different countries depending on the international agreements between Bulgaria and the respective country. Currently the required capital for a limited liability company is BGN 2. The required capital for a joint-stock company is BGN 50,000 (around EUR 25,000).

8) Employment relations

Bulgaria has opened the labor market for EU citizens who can work in the country with no formalities whatsoever relating to obtaining of work permits.  It is enough to conclude an employment contract. The employment contract in this case may also provide for the application of a foreign law. Non-EU country citizens must obtain a work permit from the Bulgarian Ministry of Labor and Social Policy.  There are no restrictions for foreign citizens to hold executive positions and company board member positions in Bulgarian companies. No quotas are provided for Bulgarian citizens in the management bodies of such companies. The contracts of the managers and the members of the managing boards are deemed management contracts and as such they are not subject to permission from the Bulgarian authorities.