Business Fact Sheet
Political and economic data
-
NATO member since May 2004; EU entry expected in
2007
-
2003 real GDP growth of
4.3%
-
2003 year-end inflation
of 2.3%
-
2nd in international IQ tests (MENSA
International)
-
significant percentage
of English speakers
-
monthly average gross
salary of € 149
-
EU, EFTA and CEFTA
countries,
Lower operational costs for water
supply and construction works compared to other CEE countries
Major
investment incentives
How does
Investment position
|
Country |
GDP growth, %
|
Inflation, average 2003, %
|
Investment rating,
Moody’s |
Corruption Index
2003 (10 = lowest
corruption) |
|
|
2002 |
2003 P |
||||
|
|
4.8 |
4.3 |
2.3 |
Bа2 |
3.9 |
|
|
3.5 |
4.3 |
n.d. |
Baa3 |
3.7 |
|
|
2.0 |
2.9 |
-0.1 |
A1 |
3.9 |
|
|
3.5 |
2.9 |
4.7 |
A1 |
4.8 |
|
|
1.6 |
3.7 F |
0.7 |
A2 |
3.6 |
|
4.9 |
4.9 F |
15.3 |
Ba3 |
2.8 |
|
|
4.0 |
5.0 |
13.4 |
n/a |
2.3 |
|
|
4.4 |
4.2 |
8.5 |
A3 |
3.7 |
|
|
7.8 |
5.8 F |
n.d. |
B1 |
3.1 |
|
EU 15 |
1.0 |
0.7 |
2.0 |
|
|
Source: EUROSTAT, IMF,
Moody’s, Transparency International, national banks
Investment performance
|
Country |
FDI per capita, USD, 2001-2003 P |
FDI per capita, USD, 2003 P |
Rank in the UNCTAD FDI performance index, 1999-2001 |
Starting a business |
||
|
No. of procedures |
Duration, days |
Cost, GNI per capita, % |
||||
|
|
132 |
182 |
25 |
10 |
30 |
8.3 |
|
|
308 |
381 |
22 |
13 |
50 |
18.2 |
|
|
167 |
170 |
53 |
5 |
65 |
64.3 |
|
|
57 |
70 |
75 |
6 |
27 |
11.9 |
|
|
63 |
128 |
- |
10 |
44 |
13.3 |
Source: Population
Reference Bureau, UNCTAD, World Bank, central banks
Taxation rates and labour cost
|
Country |
Corporate tax, %, 2004 |
VAT standard rate, %, 2004 |
Average monthly gross salary, EUR, 2004 |
Social security contribution as % of employees’ gross salary |
Personal income tax rate for salaries, % |
|
|
paid by the employer |
paid by the employee |
|||||
|
|
19.5 |
20 |
149 (March)
|
32.2 |
10.5 |
12-29 |
|
|
20 |
22 |
794 (March) |
16.6 |
20.6 |
15-45 |
|
|
28 |
22 |
510 (Q1) |
35 |
12.5 |
15-32 |
|
|
16 |
25 |
565 (March) |
29 |
12.5 of which 4% is uncapped and 8.5% is capped at HUF 5,307,000 annual
gross income in 2004 |
20-40 |
|
|
19 |
22 |
506 (April) |
22.72 |
18.71 |
19-40 |
|
|
25 |
19 |
204 (April) |
38 – 45 |
19.67 |
18-40 |
|
|
14 |
17 |
187(April) |
16.3 + 3.5% payroll tax |
16.3 |
14 |
|
|
19 |
19 |
392 (4Q, 03) |
35.2 subject to limit |
13.4 subject to limit |
19 |
Source: KPMG, national
statistical offices
Infrastructure
The
road infrastructure of
There
are 6,400 km of developed railways, more than 65% of which are electrified.
The
main Bulgarian sea ports are at Bourgas and
The
There
are 5 international airports in
Operational
cost in
|
Gross
monthly salary, average, March 2004, EUR |
149 |
|||
|
Social
security, unemployment and health care contributions as % of monthly salary,
2004 |
32.2% paid
by the employer |
|||
|
Corporate
income tax, 2004, % |
19.5 |
|||
|
VAT,
2004, % |
20 |
|||
|
Office
rent in Sofia, A class, March 2004, EUR
per sq m/month |
14-16 |
|||
|
Office
purchase price in the centre of EUR
per sq m |
700-1,400 |
|||
|
Apartment
purchase price in the prestigious areas of |
600-800 |
|||
|
Price of land, 2003,
average |
|
|||
|
Agricultural land, EUR
per 1,000 sq m |
46-230 |
|||
|
Industrial land, large
cities, EUR per sq m |
8-40 |
|||
|
Costs of rough construction,
as of Dec. 2003, EUR per sq m |
|
|||
|
Industrial
construction |
250-300 |
|||
|
Office building
construction |
350-500 |
|||
|
Water
charges for corporate clients in |
0.47-0.53 |
|||
|
Water
charges for household use in |
0.43 |
|||
|
Telephone
installation charge, VAT not included, 2004, EUR |
36 |
|||
|
Monthly
telephone subscription fee, VAT not included, 2004, EUR |
private – 5.11;
business – 8.44 |
|||
|
Telephone
transfer charge, VAT not included, 2004, EUR |
private and
business – 20.45 |
|||
|
International
phone call from |
BTC |
to |
to the |
through a
satellite |
|
Fixed lines |
0.18-0.23 |
0.37 |
1.84 |
|
|
VoIP |
0.10 |
0.13 |
- |
|
|
Electricity Prices per
kWh including VAT, 2004, EUR |
|
|||
|
Electricity for
industrial use, medium voltage (1 kV – 60 kV) |
|
|||
|
3 tariff-reading |
|
|||
|
peak electricity |
0.070 |
|||
|
day electricity |
0.043 |
|||
|
night electricity |
0.027 |
|||
|
2 tariff-reading |
|
|||
|
day electricity |
0.056 |
|||
|
night electricity |
0.027 |
|||
|
1 tariff-reading electricity |
0.053 |
|||
|
Electricity for
household use, 2 tariff reading |
|
|||
|
day electricity, over
75 kWh |
0.078 |
|||
|
night electricity,
over 50 kWh |
0.042 |
|||
|
Motor fuel, VAT
included, average as of June 2004, EUR |
|
|||
|
95 unleaded |
0.74 |
|||
|
98 unleaded |
0.86 |
|||
|
Diesel |
0.63 |
|||
|
Natural gas for
industrial users, VAT included, 2Q 2004, EUR per 1,000 m3 (price
depends on the distribution company and the volume consumed) |
125-190 |
|||
Main customs & VAT-regime
provisions
Compliance with the EU standards
Bulgarian
Customs Law is based on the EU Customs Code. The same procedure and regimes as
those of the EU are applied: release for import; transit; customs warehousing;
inward processing; processing under customs control; temporary admission;
outward processing; export; temporary export, etc.
The
Customs Tariff of Bulgaria consists of the Combined Nomenclature of Bulgaria
and the appropriate rates of customs duties. The Combined Nomenclature of the
Although
Project implementation phase
Special preferential VAT regime for imports of
goods necessary for implementation of an investment project
As of
The importer exercises his right by:
·
declaring in the filed customs declaration that he will use this regime;
·
declaring
that at the time of the import he is registered for VAT and has no outstanding tax liabilities and liabilities to the
obligatory employee social and health insurance.
Where the importer has exercised his right, the customs authorities
agree
to the release of the goods without effective payment or securing of
the VAT.
The above special import regime is applicable
to the
legal person who simultaneously
meets the following requirements:
· implements an investment project approved by the Minister of
Finance
· is registered for VAT
·
has no outstanding tax liabilities and obligatory social and health insurance liabilities
· has obtained a permit by the Minister of
Finance; within 6 months after the permit has been issued, the person could apply for a new permit for
additional goods that will be imported for the needs of the investment project
approved
The investment project is approved by the
Minister of Finance in compliance with the following requirements:
· term of fulfilment
of the project –
up to two years
·
size of the investments – over BGN 10 million (around EUR 5 m) for a period not longer than two years
·
opening
of more than 50 new jobs
·
capability
of the person to finance the project, as well as to construct and maintain
sites providing for the fulfilment of the project
Special duty free regime for imports
In case a
foreign company moves entirely a production facility to
Manufacturing
phase
Inward
processing regime (named also “active improvement”)
When certain goods (raw materials) are imported to the
1.
When the goods are owned by the Bulgarian legal entity that is going to do the
processing of the goods and the re-export of the final products – 10%
of the total amount of the duties and VAT due has to be deposited in favor of
the customs office. This deposit is reimbursed after the re-export of the
compensatory products. In case of import from the EU, the customs duty is 0 and
only 10% of the VAT due should be deposited.
1.1. Less than 10%,
if a special permit is received by the Director of the Customs Agency.
2.
When the goods that are to be re-exported are owned by a company outside of the
The regime of “inward
processing” does not differentiate between goods with EU or other origin. The
issuance of the documentation under this regime is within the authority of the
Regional Customs Office.
It is
possible for larger companies with big turnover to acquire a status of “Temporary storage facilities” on
the territory of their production plant in
If for a given month a
VAT registered person has more input VAT than output VAT, the tax authorities
offset the excess against any other outstanding tax liabilities of the person.
If there is any remainder, the person offsets it against the output VAT he
charges during a 3-month term following the month, in which the excess of input VAT occurred. If after this term there is still any
remainder, the tax authorities set it off against any other outstanding tax
liabilities of the person or refund it to him within 45 days as of the
submission of the VAT return for the third month.
Exporters are entitled to a VAT
credit refund within 45 days as of the date of submitting the VAT
declaration for the respective month. Persons with turnover from
export supplies exceeding 30% of the value of their supplies in aggregate for the preceding twelve months
are considered “exporters”. VAT credit is also subject to recovery in case of
carrying out supplies, which are
exempt by virtue of international agreements to which
Direct
taxation – main provisions
Corporate income tax
Under the Corporate
Income Tax Act (CITA) all companies and partnerships (including
non-incorporated partnerships), carrying out business in the country, are
liable to a corporate income tax at a rate of 19.5%.
Depreciation
Depreciation
is calculated by systematically applying the straight-line depreciation method. Depreciation norms should not exceed the following rates:
|
Category of assets |
Assets
description |
Annual depreciation norms (%) |
|
I |
steady buildings, facilities, communication devices,
electricity carriers, communication lines |
4 |
|
II |
machinery, manufacturing equipment,
apparatus |
30 |
|
III |
transportation vehicles, excluding
automobiles; coverage of roads and airplane runways |
10 |
|
IV |
computers, software and right of using
software |
50 |
|
V |
automobiles |
25 |
|
VI |
all other depreciative assets |
15 |
Tax incentive for
investments in regions with high unemployment
Companies engaged in production, including production
under job processing, enjoy 100%
exemption of the corporate income tax in case they meet all of the
following requirements:
1.
The objects obligatory declared under the Tax
Procedure Code, incl. company headquarter as well as the assets of the company,
not counting funds in bank accounts and other companies’ shares or
stakes owned, are entirely located within the administrative boundaries of the
municipalities with unemployment exceeding 50% the average of the country for
the previous year[1].
2.
At least 80% of the annual average number of the
employees, working under labour contract, have a
permanent address in a municipality under item 1.
3.
In the calendar year of exemption the company
does not have any due tax or obligatory social security liabilities or any
interests on such liabilities.
Corporate
income tax exemption could be enjoyed if the amount of the tax, accounted as
reserves, is invested for acquiring assets necessary for the production
activity as well as for remuneration of the employees, working under labour contract, by the end of the calendar year following
the year of exemption.
If as a
result of decreased unemployment, the municipality is excluded from the list
approved by the Minister of Finance, the company, which has qualified for the above
tax exemption, can further enjoy it for the following 5 years.
If in the
year before starting production, the company qualifies for 100% corporate tax
exemption and if in the next year when they start manufacturing the
municipality is no longer on the list of high unemployment areas, the company
can get advantage of the 100% corporate tax exemption for 4 years counting from
the year when they have commenced manufacturing.
Companies
investing in municipalities with unemployment rate exceeding 50% the country
average for the previous year enjoy reduction
of the corporate tax by 10% of the amount invested in acquisition,
modernization or reconstruction of fixed assets including buildings, equipment,
transmitters, electricity networks, telecommunication lines, machines,
production facilities, transportation facilities, (excluding personal cars),
road cover, computers and peripheral devices, software and the right to use
software if the funds for these investments have been generated from
contributions made by shareholders for acquisition of new shares, including
incorporation.
Personal income tax
Incomes
derived under an employment contract are taxed on a monthly basis as follows:
|
Monthly income |
Tax |
|
up to BGN 120 |
non-taxable |
|
from BGN 120 to BGN 150 |
12% on the
excess over BGN 120 |
|
from BGN 150 to BGN
250 |
BGN 3.6 + 22%
on the excess over BGN 150 |
|
from BGN 250 to BGN
600 |
BGN 25.6 + 26%
on the excess over BGN 250 |
|
over BGN 600 |
BGN 116.6 + 29%
on the excess over BGN 600 |
The annual taxable base
is the sum of all taxable incomes received during the calendar year. The total
annual income is subject to some adjustments and is then taxed in accordance
with an annual progressive scale as follows:
|
Annual income |
Tax |
|
up to BGN 1,440 |
non-taxable |
|
From BGN 1,440
to BGN 1,800 |
12% on the
excess over BGN 1,440 |
|
From BGN 1,800 to BGN 3,000 |
BGN 43.2 + 22%
of the excess over BGN 1,800 |
|
From BGN 3,000
to BGN 7,200 |
BGN 307.2 + 26% of the excess over BGN 3,000 |
|
over BGN 7,200 |
BGN 1,399.2 + 29%
of the excess over BGN 7,200 |
Education
Prevalence of technical
and foreign language education in Bulgaria
One of the most
attractive benefits of investment in
Apart from the
universities, foreign language education is provided for by 62 secondary
language schools and a large number of private specialized courses. English and
German language are most popular in
Comparative educational structure of the
population, 25 to 64 years of age, %
|
Country |
At least upper
secondary education, 2002 |
Tertiary education (at least
bachelor), 2001 |
|
|
87 (2001) |
28 |
|
|
82 (2001) |
20 |
|
|
83 (2001) |
19 |
|
|
82 |
18 |
|
|
42 |
17 |
|
|
72 |
15 |
|
|
72 |
14 |
|
|
83 |
13 |
|
|
64 |
12 |
|
|
53 |
12 |
|
|
81 |
12 |
|
|
88 |
11 |
|
|
44 |
10 |
|
|
25 (2001) |
9 |
|
|
21 |
7 |
Source: EUROSTAT,
OECD Statistics Portal
Labour force and
employment regulation
Employment issues
Working
hours: 8
hours a day. A 24 hour rest period is
required during a 7-day period.
Annual
leave: not less than 20 days.
Retirement
age: minimum of 62 for men and 57 for
women[2].
Minimum
monthly gross salary: EUR 61
Average monthly gross salary: EUR 147
(4Q, 2004)
Social security: A complex
system covering retirement, health and unemployment risks and obligations. Side
costs to the amount of 32.2% of the gross monthly salary are to the account of
the employer.
|
Type of insurance |
Paid by |
Total (%) |
|
|
Employer (%) |
Employee (%) |
||
|
Health |
4.50 |
1.50 |
6.00 |
|
Social: |
|
|
|
|
Pension insurance fund |
21.75 |
7.25 |
29.00 |
|
Sickness insurance fund |
2.25 |
0.75 |
3.00 |
|
Employment insurance fund |
0.70 |
0.00 |
0.70 |
|
Unemployment fund |
3.00 |
1.00 |
4.00 |
|
Total |
32.20 |
10.50 |
42.70 |
The above
contributions are calculated on the remuneration and other employment income of
the employee for the respective month but on not more than the maximum monthly insurance
base fixed annually in the Mandatory National Insurance Budget Act. The fixed
base for 2004 is BGN 1,200 (around EUR 614). Since January 2003
minimum monthly insurance bases for the main economic activities and groups of
professions have been introduced.
Labor
contracts: According
to the Labor Code the employment contract may be concluded for an indefinite
period of time or, alternatively, as an employment contract for a fixed term.
An employment contract is considered to be concluded for an indefinite period
unless explicitly agreed and stated otherwise. An employment contract concluded
for an indefinite period may not be changed to a fixed-term contract unless
explicitly requested by the employee, and stated so in writing.
1. An
employment contract for a fixed term may be concluded:
·
for
a definite period no longer than 3 years – upon request in writing by
the employee or for execution of temporary, seasonal or short-term work and
activities
·
until
completion of some specified work
·
for
substitution for an employee who is absent from work
·
for
a job, which is to be taken through a competitive examination, for the time
until it is taken on the basis of the competitive examination.
2. Employment
contract for a trial period
In
cases when the work requires the ability of the employee who will perform it to
be tested, his final appointment may be preceded by a contract providing for a
trial period of up to 6 months. Such a contract may also be concluded in the
case when the employee wants to make sure the job is suitable for him. This contract indicates to whose benefit has been agreed the trial
period. Prior of the expiration of the trial period, the party to whose benefit
it has been agreed may terminate the contract without notice.
Termination: Employees
other than senior management cannot be dismissed without sufficient
justification. The employee has the
right to sue for damages for unfair dismissal.
Certain people cannot be dismissed during absence (e.g. on sick leave,
pregnant, nursing mothers, military assignment).
Notice
periods are usually 30 days. If the employee, working under an
indefinite-period contract, is dismissed without a notification and there is a
sufficient justification by the employer, the employee is compensated by 1
monthly salary.
If the
relation is based on a term contract, the compensation is equal to the amount
of the gross salaries to be paid for the rest of the contract time.
The employer
can initiate a dismissal of the employee on “mutual consent” terms. In this
case he has to compensate the employee with at least 4 monthly gross salaries.
Upon dismissal due to closing down of the enterprise or part of it,
staff reduction, reduction of the volume of work and work stoppage for more
than 15 working days, the employee is entitled to compensation from the
employer. The compensation is in the amount of his gross labour remuneration
for the period of unemployment but not for more than one month. A compensation
for longer periods may be stipulated by a collective contract or by the labour
contract.
Upon termination of
the employment relationship after the employee has acquired the right to a
pension for insured service and age, irrespective of the grounds for the
termination, he is entitled to compensation by the employer in the amount of
his gross labour remuneration for a period of two months; where the employee
has worked with the same employer for the last ten years of the length of
service, the compensation is equal to his gross labour remuneration for a period
of six months.
Employment of foreign persons: All foreign
persons that have a permanent residence permit or are granted the right of
sanctuary or refugee status can be employed in the same way as Bulgarian
citizens. Temporary work permits are issued by the National Office of
Employment of the Ministry of Labour and Social
Policy. The work permits are issued for a specified time, job and employer. The
permit is issued after a request by the employer and is valid for the time of
the employment contract but not more than one year. The permission can be
prolonged several times but within a three year period.
Foreign
persons that have an employment contract and a valid work permit can acquire a
permit for stay in the country for the time of the contract but for no more
than one year. The permission for continuous residence can be prolonged if the
work permission is prolonged but the maximum period for prolongation of the
work permission cannot exceed three years.
The number of
employees who are foreign citizens cannot be over 10% of the total work force.
Further information on
doing business in
Bulgarian Trade
Promotion Agency
Bulgarian
Chamber of Commerce & Industry
Job Tiger - Bulgarian employment portal
[1] The Minister of Finance annually approves the list of
municipalities with high unemployment.
[2] For men and women the minimum
retirement age is being increased by 1 year annually. There are certain limits
set that will no longer be changed:
-
63
years for men; this limit will be reached in 2005 and
-
60
years for women; the limit will be reached in 2009.