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MARKET ENTRY INFORMATION

Doing Business in Bulgaria

Overview About Bulgaria Setting up a Business in Bulgaria Company Registration Procedures Taxation

ABOUT BULGARIA

Despite a turbulent history, Bulgaria is the oldest surviving state in Europe to have kept its original name (since AD681) and most of the population are descendants of the Bulgar invasion of the south Danube around that time.

Part of the Ottoman Empire for around 500 years and a former satellite of the Soviet Union for nearly half a century, Bulgaria succeeded in integrating into Western alliances when it became a NATO member in March 2004.

The 10th November 1989 marked the beginning of the democratic changes in Bulgaria. In 1990 Zhelyu Zhelev became the first democratically elected President of Bulgaria. A new constitution was adopted (1991), the political parties were restored, and privatisation and restitution of the land started. After joining NATO, the key priority in Bulgaria's foreign policy is to join the European Union and as of 1 January 2007, Bulgaria became a Full Member.

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GEOGRAPHY

Bulgaria is situated in the South-Eastern part of the Balkan Peninsula. The country's population is 7.97 million and has a territory of 110,912 sq.km, bordering Greece and Turkey to the South, Republic of Macedonia and FR Yugoslavia to the West. The River Danube separates it from Romania to the North. Its natural eastern border is the Black Sea. Bulgaria ranks fifteenth in size among the European countries. Its climate is Continental-Mediterranean.

Bulgaria is situated in the center of a region, which is undergoing dynamic transition. Within 500 km of its capital Sofia (1.2 million people) a population of over 60 million is concentrated throughout 10 countries, most of which have only recently embarked on their way to a market economy. This is a large market with one of the most rapidly increasing market demands in Europe. All these regions are only several hours' drive from any point in Bulgaria. A network of international motorways crosses the country, making vital connections to Western Europe, Russia, Minor Asia, to the Adriatic, the Aegean and the Black Sea. Both sea and river transport (the Black Sea and the Danube River) offer good communications and transportation to and from the region.

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POLITICAL STRUCTURE

Bulgaria is a parliamentary republic that abides by the Constitution of the Republic passed by the Grand National Assembly in July 1991. The constitution of the Republic of Bulgaria is the supreme law of the country and no other law may contravene it. All international treaties, which are ratified pursuant to the constitutional procedure, are considered part of the domestic legislation.

The supreme legislative body is the National Assembly (Narodno Sabranie), seated in the capital Sofia. It enacts legislation and ratifies international treaties. Municipal councils perform legislative functions at the local level and in full compliance with the laws enacted by the National Assembly.

The 240 members of the National Assembly are elected for a four-year term directly by the electorate based on a system of proportional-majoritarian representation. The Council of Ministers heads the Executive on a national level. District Governors and Mayors represent the Executive, and implement the Government’s policy within their respective jurisdictions at the local level.

The President is elected directly for a five-year term. He has limited authorities in the law-making process, certain representative functions and symbolizes the unity of the nation.

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COUNTRY STRUCTURE

The territory of the Republic of Bulgaria is divided into 278 municipalities and 28 regions. Municipalities are legal entities and have the right of ownership and independent municipal budgets. Mayors of the municipalities and municipal councils are elected through direct local elections at every 4 years, following the law regulations. The municipal council is the local government authority, which determines the development policy of the municipality. The municipal council consists of the directly elected municipal councilors. The executive power body in the municipality is the mayor of the municipality.

The regions are administrative-territorial units executing the regional policy of the central government. The regional government is performed by regional governors and regional administration staff on municipality budget expenses. The regional governor is a monocracy body of the executive power in the region, performing the state government in the region and providing compliance of national and local interests in executing the regional policy. The regional governor is appointed by the Council of Ministers.

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FACTS AND FIGURES

General Economic Indicators

2000 2001 2002 2003 2004 2005E
GDP (EURbn) 13.7 15.2 16.5 17.6 19.4 21.1
GDP growth (%) 5.4 4.1 4.9 4.5 5.6 5.2
GDP per capita (EUR) 3.274 3.704 4.109 4.398 4.901 5.329
Population (m) 8.2 8.0 7.9 7.8 7.7 7.7
Unemployment (eoy %) 18.0 17.9 16.3 13.5 12.2 10.6
Average monthly gross wage (avg.EUR) 115 123 132 140 154 162
Export (EUR m) 5.253 5.714 6.033 6.668 7.994 9.511
Import (EUR m) 6.533 7.493 7.755 8.868 10.712 13.010
FDI (EUR m) 1.103 903 980 1.851 2.278 2.200
FDI (% of GDP) 8.1 5.9 5.9 10.5 11.7 9.5
Inflation (avg.%) 10.3 7.4 5.8 2.3 6.1 4.4
Budget deficit (% of GDP) -1.0 -0.9 -0.7 0.0 1.7 -0.3
Government Debt (% of GDP) 85.8 69.9 55.9 48.4 43.5 41.0
EUR/BGN exchange rate - pegged at 1.95583 1.96 1.96 1.96 1.96 1.96 1.96
USD/BGN exchange rate (annual avg) 2.12 2.16 2.08 1.73 1.57 1.56
Base Interest rate (avg.%) 3.97 4.59 4.00 2.70 2.60 n.a

Investment Climate

Foreign Direct Investment

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BULGARIA AND THE EUROPEAN UNION

In the recent years the key priorities in Bulgaria’s foreign policy became the membership in the European Union and NATO. As a result of the country’s considerable progress towards meeting the criteria for EU membership, Bulgaria received on 10 December 1999 the invitation to start the pre-accession negotiations.

Bulgaria signed the Agreement for Accession to the EU on 25 April 2005 in Luxembourg. The proposed date for Accession of Bulgaria to the EU is 1 January 2007. Bulgaria joined NATO in 2004 and signed the Agreement for Accession to the EU on 25 April 2005 in Luxembourg, and as of 1 January 2007 became a full member of the European Union.

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JUDICIARY SYSTEM

The judicial power in Bulgaria is independent. It is built up on the basis of a procedure of three instances.

Statutory law governs Bulgaria. Case Law doctrines of precedent and stare decisions are unknown. The legal system is based on legal models found elsewhere in Europe, especially on the civil law systems of France, Germany, Italy and Belgium. After the Second World War and the Soviet troop invasion in the country Soviet influenced laws were introduced. However, most of the principles of the civil law system were not destroyed.

After 1989 democratization of the country, most of the laws based on the Soviet Union system were repealed and replaced with acts influenced by the EU legislation.

The harmonization of the Bulgarian legal system with the EU one is still continuing.

A major effort toward democratization is the Constitution of 1991, which sets forth the principle of new social order: supremacy of national laws and international treaties ratified by the National Assembly; separation of powers and independent judiciary; respect for the human rights, including private property rights; free economic entrepreneurship and equal treatment of state and private property; protection of foreign investments, among others.

Bulgarian judicial system complies of three instances. Regional courts, District courts, Courts martial, Courts of appeal, Supreme Court of Cassation and Supreme Administrative Court operate within its structure.

The Regional court operates only as a first instance court. All cases are under its competence, except those, which, according to the provisions of the law, are jurisdictional to another court.

The District Court operates either as a first or as a second instance court. Some categories of civil and criminal cases, provided by the law, are jurisdictional to the District court as a first instance court. As a second instance court it functions on cases initiated upon claims and protests against Regional court’s decisions. The District court may comprise Civil, Commercial, Penal and Administrative departments.

Court of appeal operates only as a second instance court on cases upon appeals and protests against first instance court’s decisions. The Court of appeal may comprise Civil, Commercial and Penal departments.

The Supreme Court of Cassation is the high instance for penal and civil cases. It exercises supreme judicial supervision for precise and equal application of the law by all Courts. Its jurisdiction spreads upon the whole territory of the Republic of Bulgaria. It consists of civil, penal and military college, divided into departments.

The Supreme Administrative Court is the high instance for administrative justice. It is an instance of cassation for the judicial acts of all Courts concerning legality of the administrative acts. The law defines a group of acts, subject to appeal at the Supreme Administrative Court, for which this is the sole instance.

The Supreme Administrative Court (SAC) and the Supreme Cassation Court (SCC) exercise control over the implementation of the law by the courts of lower instances, SAC takes decisions on the legality of the executive power’s acts.

Lack of Jurisdiction – Bulgarian courts do not have jurisdiction over foreign states. Diplomats enjoy full jurisdictional immunity.

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