Doing business in Bulgaria – trade, business, investment with the UK

Bulgaria export overview

Bloomberg has ranked Bulgaria as the sixth best country for doing business in eastern Europe and central Asia. The World Bank rates Bulgaria 38th for ease of doing business. A T Kearney ranks Bulgaria as number one in Europe and ninth globally as an outsourcing destination.

Over the past 10 years the UK has been the fifth largest investor in Bulgaria.

Large British companies operating in Bulgaria, including Shell, GlaxoSmithKline, AstraZeneca, Petroceltic, Nuvia, JCB, White Young Green, Mott McDonald, IPF Provident, Dyson and William Hughes. Small and medium sized companies also successfully enter and operate in various export sectors and in offshoring/outsourcing.

Benefits for UK businesses exporting to Bulgaria include:

• more than EUR 9 billion European Union (EU) funds up to 2020
• English is widely spoken
• good air links to the UK
• gateway to the markets of Commonwealth of Independent States (CIS)
• lowest corporate and income tax in the EU (10%)
• tax incentives for some investment projects

Strengths of the Bulgarian market include:

• signs of sustained economic recovery
• skilled, multilingual labour force
• low operating costs
• strong potential for growth as Gross Domestic Product (GDP) per capita lower than EU average
• political stability, with public consensus on social and economic priorities
• occupies a strategic location in the Black Sea region

Economic growth

Growth in the next few years is expected to come from:

• private consumption
• fixed investment
• exports
• EU structural funds absorption

GDP is made up of:

• services sector (64%)
• industrial sector (31%)
• agricultural sector (5%)

The Bulgarian currency lev (BGL) is linked to the euro giving a stable monetary system.

Bulgarian membership of the EU has refocused economic activity from the former partners of the Soviet Union bloc to the EU member states.

The economy has benefitted from increased services off-shoring and manufacturing outsourcing.

EU funds

Bulgaria was allocated almost EUR 9 billion for the 2007 to 2013 programming period and expects to receive a similar level of funding for the programming period 2014 to 2020. Increasing emphasis will be placed on:

• infrastructure
• science
• education
• innovation
• development of the knowledge economy

Absorption of EU funds in these strategic sectors will result in attractive opportunities for UK companies.

Emerging Europe

The Central and Eastern European (CEE) region offers considerable potential for British businesses. UK exports are worth over £16 billion, with goods exports doubling over the past decade, and services exports – over £4 billion – trebling.

GDP growth is expected to reach 4% to 5% per annum over the next 20 years. Bulgaria can act as a gateway into the other CEE markets.

The CEE region:

• is easily accessible from the UK
• offers a market of over 100 million consumers
• has widespread use of English as the business language
• is making major investments in energy, transport and other infrastructure as a result of billions in EU funding

Trade agreements

Bulgaria is a member of the EU, the World Trade Organization (WTO) and other international bodies. Goods manufactured in the UK are exempt from import duties.

 

UK and Bulgaria trade

UK-Bulgaria bilateral trade has doubled in the past 10 years and increased by about 10%.

UK exports to Bulgaria reached EUR 444.2 million in 2014. The UK was the fifth largest investor into Bulgaria in 2014 with about EUR 180.1 million indirect investment.

Top 10 UK exports to Bulgaria (2014):

• telecommunications equipment
• iron and steel
• specialised machinery
• medicines and pharmaceuticals
• road vehicles
• beverages
• miscellaneous manufactured articles
• textile and fabrics
• electrical machinery and appliances
• general industrial machinery

 

Opportunities for UK businesses in Bulgaria

There will be EUR 950 million investment to 2020 for power plant upgrades and environmental projects to help with growing electricity demand.

For the UK so there will be supply chain opportunities for:

• private financing
• fuel
• training preparation as local experience is with Russian VVER reactors

Funding from the EU via the European Bank for Reconstruction and Development (EBRD) will support decommissioning work up to 2020.

Opportunities include:

• supply of equipment for ion exchange resin analysis
• dealing with contaminated soil
• design dismantling
• Engineering, Procuring and Construction (EPC) at Radiana Phase 1
• supervision at Radiana EPC Phase 1

Oil and gas

Bulgaria’s strategic location is important for the development of 2 major gas pipelines. The Trans-Adriatic Pipeline (TAP) and South Stream project are currently in the planning stage.

Opportunities for UK companies resulting from these transnational projects include:

• new interconnection projects with Greece, Serbia and Turkey
• construction of an import pipeline connecting Bulgaria and Romania
• extension of the storage capacity of Galata gas deposit
• EUR 200 million capacity upgrade of Chiren gas repository
• research on the potential oil and gas reserves in Bulgaria’s area of exclusive economic control in the Black Sea

Bulgaria’s market for advanced manufacturing is expected to grow, especially with regard to the automotive parts and electronics sectors.

The main opportunities for UK companies include:

• supply chain for hydraulic parts, cable equipment, sensors, metal, rubber and plastic modules, design and testing services, etc
• collaborative R&D and technology transfer under EU funding programmes Horizon2020 and OP “Competitiveness”
• low cost sub-assemblies and components
• spare parts for the aftermarkeAgriculture

Agriculture is one of the core sectors of the Bulgarian economy. Around 50% of the territory of Bulgaria is utilised agricultural land.

EUR 2.9 billion of EU funds are available to Bulgaria under the OP Rural Development Programme. This support is available for supporting small farms, boosting competitiveness and addressing environmental concerns by supporting organic production.

Opportunities for UK companies include:

• agricultural machinery and equipment
• knowledge and know-how transfer
• bio-agriculture
• innovative technologies for sustainable development in agriculture and forestry
• agri-tourism
• stock breeding
• market gardening and organic products

Upgrade and extensions of information and communication networks are expected in the period 2014 to 2020.

Opportunities in the ICT sector include:

• supply of computers, peripherals, servers and hardware technologies under government-led procurement
• hardware technologies and telecommunications equipment
• broadband internet access technologies
• cyber security and e-health
• smart grid technologies

Start-up considerations

 

A local business can be established by:

• registration of a representative office or branch office
• incorporation of a new legal entity

A large number of company forms are available. Foreign investors are allowed to hold up to 100% of the registered capital of a company. New companies can be incorporated on the national electronic commercial register.

 

Legal considerations

Legislation in Bulgaria has been aligned with EU legislation to ensure the free movement of people, goods, services and capital.

 Standards and technical regulations

Products and packaging should meet EU standards.

Bulgaria is a member of the:

• International Organisation for Standardization (ISO)
• International Electrotechnical Commission (IEC)
• International Technical Union (ITU)

The Bulgarian Institute for Standardisation (BDS) is responsible for standards.

Bulgaria has standardisation and product certification bodies. Bulgarian ministries or agencies issue specific standards and certificates for various sectors.

Intellectual Property (IP)

Trademarks, designs, patents and copyright are the principal forms of IP protection available to companies and individuals.

The Bulgarian Patent Office is responsible for implementing legislation on IPR.

Tax and customs considerations

The UK has signed a double taxation convention with Bulgaria.

The Ministry of Finance has responsibility for tax in Bulgaria.

Value Added Tax (VAT)

The standard VAT rate is 20%. There are reduced VAT rates to 9% for hotel services.

Company tax

Corporate income tax is 10%.

Certain company expenses are taxed at 10%.

Income tax

Income tax is set at a flat rate of 10 %.

Customs

The internal market of the EU is a single market which allows the free movement of goods and services. Therefore, no import duties apply.

Most goods can be imported into Bulgaria without restriction. However, permits from the Ministry of Economy will be required for:

• agricultural products
• precious metals
• military goods
• drugs

Entry requirements

You don’t require a visa to enter Bulgaria. If you intend to stay longer than 6 months you must apply for a continuous residence certificate with the Migration Directorate of the Bulgarian Ministry of Interior. If you staying as the result of an employment contract you must acquire a work permit from the local labour office.

 

Contact us for consultation and business possibilities in Bulgaria

 

 

 

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