Top challenges of doing business in Bulgaria

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Bulgaria has the most favourable tax regime in Europe and a low cost of doing business across the board, but navigating the local corporate environment can be difficult without having local help on board.

Although Bulgaria isn’t part of the Eurozone, it is a member of the European Union and its currency (the Bulgarian lev) is pegged to the euro. It has the second-lowest government debt in the EU and one of the lowest budget deficits, making Bulgaria one of the most stable countries in which to do business.

Located at the heart of the Balkans, Bulgaria is a strategic logistics hub. With four major airports (Sofia, Plovdiv, Bourgas and Varna) and two main seaports (Varna and Bourgas), there is quick access to huge consumer markets. What’s more, the cost of using Bulgaria as a strategic hub is very low and there are several tax exemptions on offer to urge businesses to invest in the country. A corporate tax rate of 10% and a personal income tax of 10% emphasise the country’s competitiveness next to its European neighbours, and the cost of labour and favourable office rents add to its appeal.

However, the World Bank and International Finance Corporation (IFC) rank Bulgaria in 66th place in the world for ease of doing business, which is why having local help when establishing an overseas venture is crucial.

Starting a Business
It takes almost three weeks to start a business in Bulgaria, most of which is spent registering with the Commercial Register at the Registry Agency and filing for VAT. A deposit should be paid in full to a Bulgarian bank and articles of incorporation must also be completed.

Dealing with Construction Permits
Construction works are by far the most arduous element of establishing a corporate entity in Bulgaria. Dealing with permits can take over 100 days to sort and requires sifting through some 21 procedures, including correspondence with the chief architect of the municipality, water authorities, the telecom provider, fire department, and many other inter-governmental departments.

Getting Electricity
Getting electricity is a similarly laborious process which requires long-term communication with CEZ Distribution Bulgaria. Once the works have been completed, businesses must receive a note from the utility and conclude the contract with the electricity supplier before obtaining meter installation and the flow of electricity.

Registering Property
Property registration takes just over two weeks to complete. A sketch of the estate has to be drafted by the municipality and a tax valuation of the property should be made. A certificate of good standing then has to be issued for the seller and buyer and a certificate from the Real Estate Register has to be picked up before tax can be paid and final registration completed.

Getting Credit and Protecting Investors
There is a healthy public registry coverage, credit information index and legal rights index in Bulgaria, which makes obtaining credit relatively easy. Thanks to a strong regulatory environment, investor protection is also good.

Paying Taxes
It takes a massive 454 hours of company time to make tax payments, which is largely spent dealing with social security contributions and VAT. Despite being tremendously competitive in terms of its fiscal policy, Bulgaria certainly makes businesses work hard to reap the rewards of such a system.

Trading Across Borders
Trading across borders is a very time intensive task, taking up 21 days when exporting and 17 when importing. It is also quite a costly affair, which is out of character for Bulgaria.

Enforcing Contracts
It takes 564 days to enforce a contract, which is far longer that the average time in East Europe and Central Asia. There are 39 procedures to complete during the process, which is likely to be the reason for its longevity.

Resolving Insolvency
Resolving insolvency takes an average of 3.3 years, which is almost double the average time it takes elsewhere in the OECD. The recovery rate is half as much as the global average.

Corruption is still prevalent in the Bulgarian business environment and fair play becomes a competitive disadvantage for certain investors who refuse to bribe. There is also an ageing population and a lack of purchasing power among consumers, which makes doing business challenging.

TMF Group
We have the local knowledge to help you navigate these minefields. Whether you want to set up in Bulgaria or just want to streamline your Bulgarian operations, talk to us.