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Doing Business in Bulgaria

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Doing business in Bulgaria Learn how EY can help you navigate through Bulgaria 2019 01 Introduction 02 Bulgaria at a glance 03 Country profile: general information, geography, demographics 04 Business landscape: economy, financial system, key sectors, reasons to invest, foreign trade 10 Business incentives 12 Tax incentives 12 Non-tax incentives 13 EU funding opportunities 14 Tax guide 16 Personal taxation 17 Income tax 19 Immigration 21 Property taxes 22 Corporate income tax 25 Indirect taxes 30 Legal guide 32 Establishing business presence 32 Business entities 33 Acquisition of property 33 Regulatory compliance 33 Banking 34 Intellectual and industry property 34 E-business 34 Competition & Consumer protection 34 Data privacy 35 Labor 36 Accounting and financial reporting. Audit. 48 EY Bulgaria Dear reader, hank you for taking the time to get acquainted with this guide containing a comprehensive tax and legal analysis of the business environment in T Bulgaria. We have tried to touch upon the various questions that you as an investor might have when trying to find the best destination for your next business endeavour. Of course, you need to be aware that the economic, tax and legal landscapes change with time and there are a number of details within your specific industry sector and company business model that need to be observed. In the last 27 years, Bulgaria has made considerable progress in terms of economic and political reforms. Today, in 2019, the country enjoys stable economy, political landscape and financial system. According to the World Bank, the Bulgarian economy will grow by 3.1% in 2019 in line with the forecasted 2.9% GDP growth of the global economy. We look forward to welcoming you in Sofia! All the best, Nikolay Garnev Country Managing Partner, EY Bulgaria EY Bulgaria is here “for every step of your business. 1 Doing business in Bulgaria How do we build a better working world? ulgaria is situated on the Balkans and is bordering Romania to the North, the Republic of Serbia and North BMacedonia to the West, Greece and Turkey to the South and the Black Sea to the East. The Danube River separates Bulgaria from Romania connecting Bulgaria with countries from Europe. The Black Sea provides water access to Russia, Ukraine and Georgia, and through the Bosphorus, to the World Ocean. Its location in southeastern Europe puts it at the crossroads of important routes connecting Western Europe with the Middle East and Russia and Asia. The strategic location combined with developed transportation infrastructure leads to close economic ties with other countries. Bulgaria has four commercial airports in Sofia, Plovdiv, Varna and Burgas, which operate international and domestic flights. Doing business in Bulgaria 2 Population According to the official statistics by UNICEF, Bulgaria’s RO population is highly educated with an adult literacy rate of 98% for 2015. This, combined with a relatively low cost of labor, makes Bulgaria an attractive destination for foreign investments. RS Blak Bulgaria sea nder working age 16 t working age 43 er working age 13 MK TR rban 52 GR ural 1 ale 345 eale 365 0 1 2 3 4 5 6 oulation b orking status oation ender At a glance in ln Source: National Statistical Institute Climate Time zone Continental EET 1 New Year’s Day Jan The continental Mediterranean Bulgaria is in the Eastern European Time (EET) zone climate of Bulgaria is a 3 National Holiday combination of cold, damp and is 2 hours ahead of Mar (Bulgaria’s Day of Liberation from Ottoman Rule) winters and hot, dry summers. Coordinated Universal Time. The country is partly The zone uses Daylight Saving 1 Labor Day May mountainous with lowlands in Time and is 3 hours ahead the north and the southeast. during the summer. 6 St. George’s Day, Day of the Bulgarian Army May Day of Bulgarian Enlightenment and Culture, and of Currency 24 Language May Slavonic Alphabet Bulgarian Lev Bulgarian 6 Bulgaria’s Unification Day Sept The country’s official language The official currency of Bulgaria is Bulgarian. Secondary is Bulgarian Lev. Bulgaria 22 Bulgaria’s Independence Day language closely corresponds enjoys stable currency due to Sept to the ethnic background. a currency board arrangement According to the most recent introduced in 1997 (Bulgarian 1 Enlightenment Leaders’ Day – a day-off for educational Nov establishments census from 2011, 85% are currency is pegged to the euro ethnic Bulgarians, 8.8% are at a rate of BGN 1.95583 : EUR 1). 24 Christmas Eve Turkish, 4.9% are Roma and Dec the rest are from other ethnic groups. English and, to a lesser 25-26 Christmas Dec extent, German and French are spoken by the population as 2 days Easter (moveable holiday) second languages. Public holidays Doing business in Bulgaria How do we build a better working world? Business landscape n the last few years, Bulgaria Bulgaria has made a considerable has enjoyed a period of progress in the last 25 years, sustained economic growth reforming its economy in line with and political stability, and has the political changes happening in beenI ranked 50th in the World Bank’s the country. Joining the European “Doing Business 2018” index. Union (EU) in 2007 was a driving force for reform, modernization and Bloomberg ranks Bulgaria as the sixth convergence with EU living standards. best country for doing business in Eastern Europe and Central Asia. A. T. The main drivers of economic growth Kearney ranks Bulgaria as number in Bulgaria in 2017 and 2018 were the 15 globally as an outsourcing increase in private consumption and destination. exports. Private consumption will still be one of the main drivers of economic Currently, BMI reports suggest that growth in Bulgaria in 2019, however, Bulgaria has a promising growth foreign direct investments, EU funds potential over the next decade due to and digital transformation will also its competitive labor force, growing contribute to the growth of the local political stability and potential for economy. Exports are expected to increase in productive capacity. With have a decrease in the whole region of the Bulgarian economy showing Central & Eastern Europe. signs of recovery after the recession for 2014 and 2015 and the country The table on the next page presents looking well-positioned to attract the main macroeconomic indicators foreign direct investment (FDI) over for the past five years and estimates the next few years, the forecasted real up to year 2023. GDP growth will average over 2.8% in the next 10 years. Government debt to GDP 200 180 160 140 120 100 80 o D 60 40 20 0 al ala ain aia rane olan relan rus reee elan usria inlan roaia sonia een Belgiu Bulgaria loaia loenia ungar orugal oania Denar eran iuania eerlans uebourg e eubli nie ingo Doing business in Bulgaria 4 Key indicators and forecasts Source: Haver Analytics/Dun & Bradstreet Subject descriptor 2014 2015 2016 2017 2018e 2019f 2020f 2021f 2022f 2023f Real GDP growth (%) 1.8 3.5 3.9 3.8 3.3 3.0 2.8 2.9 2.6 2.7 Nominal GDP in USDb 57 50 53 58 65 67 70 73 76 77 Nominal GDP in local 83 88 94 101 108 110 112 115 117 119 currency (b) GDP per capita in USD 7,841 6,984 7,457 8,205 9,240 9,613 10,024 10,571 11,092 11,384 Population (year-end, m) 7.2 7.2 7.1 7.1 7 7 6.9 6.9 6.8 6.8 Exchange rate 1.5 1.8 1.8 1.7 1.7 1.6 1.6 1.6 1.5 1.5 (yr avge, USD-LCU) Current account in USDb 0.7 0 1.4 3.9 2.9 1.9 1.4 1.3 1 0.8 Current account 1.3 0 2.7 6.7 4.5 2.9 2.1 1.8 1.4 1 (% of GDP) FX reserves 18.6 20.8 23.7 26.7 27 27.3 28.1 28.7 29.3 30.1 (year-end, USDb) Import cover (months) 6 7.9 9 8.6 8.2 7.9 7.7 7.4 7.2 7.1 Inflation (annual avg., %) -1.6 -1.1 -1.3 1.2 2.6 2.3 2 2.1 2 2 Govt balance (% GDP) -3.7 -2.8 1.6 0.8 0.1 -0.2 -0.1 0 0.1 0 Low Among Stable government the highest economy Bulgaria, together with Slovakia and debt to GDP GDP growth Hungary are expected to be the three 2nd lowest government debt to GDP in the EU most stable economies in Central & in the EU (22%) in 2018 Eastern Europe in 2019 (according to Euromoney). 5 Doing business in Bulgaria How do we build a better working world? Financial system • ► In June 2017, KBC Group acquired Sectors United Bulgarian Bank, part of NBG he Bulgarian banking sector Group (holding 7.4% of the total ulgaria has a strong industrial plays the most significant market) for the amount of EUR basis. In the last decade, T part in the country's financial 610m, leading to the consolidation B Bulgaria has increased its system, with assets accounting for of UBB and CIBANK (part of KBC industry share and, also, the total 76% of total financial assets. The Group holding 3.4% of the total share of manufacturing in GDP. Central primary institutions responsible for market). to the economy of Bulgaria are the the financial stability of Bulgaria • ► In January 2019, Societe Generale following sectors: energy, mining, are the Bulgarian National Bank Expressbank was acquired by OTP metallurgy, machine, agriculture (BNB) and the Financial Supervision Group for the amount of EUR 400m.
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