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Moody’s: Bulgaria’s strong fiscal position and resilient economy underpin Baa2 rating – Global Credit Research – 14 Oct 2016


Frankfurt am Main, October 14, 2016 — Bulgaria’s strong fiscal position, resilient economy and broad reform agenda support the country’s Baa2 rating and stable outlook, Moody’s Investors Service said in an annual report published today.

The report, “Government of Bulgaria — Baa2 Stable, Annual Credit Analysis”, is now available on www.moodys.com. Moody’s subscribers can access this report via the link at the end of this press release. The research is an update to the markets and does not constitute a rating action.

“Bulgaria’s rating is underpinned by debt metrics that compare favourably with similarly rated peers, and the stabilization of its external position,” said Marco Zaninelli, a Moody’s Assistant Vice President — Analyst and co-author of the report.

Bulgaria’s fiscal position is strong thanks to the high sustainability of the current level of debt-to-GDP and the authorities’ commitment to the gradual consolidation of fiscal metrics without impairing economic growth.

Fiscal consolidation will continue this year and next. Moody’s expects the fiscal deficit to narrow to 1.3% of GDP in 2016 and to 0.9% in 2017. The debt-to-GDP ratio will marginally rise in 2016 before stabilizing in 2017 and starting to decline from 2018 onwards.

Moody’s sees Bulgaria’s real growth decelerating slightly to 2.8% in both 2016 and 2017, from 3.6% in 2015. An almost stable or mildly benign — but less than previously stated – growth outlook for Bulgaria’s European Union trading partners is likely to help keep its exports growing. The pace of export growth is likely to be slower than imports, however.

The Bulgarian government has accelerated its structural reform programme and has made progress in areas such as healthcare, the judiciary, banking, energy and education. This successful reform implementation signals a return to political stability that will support real GDP growth.

                Competitive advantages of Bulgaria

• Economic and political stability;

• Financial stability – Currency Board until entry into the Euro zone;

• Membership in NATO and EU;

• Strategic geographic location;

• Liberalized access to markets with more than 560 million consumers;

• The lowest corporate tax in the EU: 10%;

• Zero percent capital gains tax for investments in 130 municipalities with high unemployment (out of 264 municipalities);

• Increased depreciation rates (50%) for investment in new machinery, industrial equipment and appliances, computers, peripheral devices and software;

• Use of tax credit under the special procedure for charging VAT on imports for the implementation of investment projects over BGN 10 million;

• 5% withholding tax on dividends;

• 10% “flat tax” on personal income;

• 1 procedure, 1 charge up to 2 days to register a company in the electronic commercial register of the Registry Agency;

• Continuing improvement of the administrative environment – removed or alleviated are 83% of all regimes proposed for mitigation; Removal of the unnecessary, mitigation and transfer of some regulatory regimes of the NGO sector;

• The lowest operational costs in the EU;

• Incentives for promotion of investment under the Investment Promotion Act.

The basis of the Bulgarian economy is free economic initiative. The economy of Bulgaria is an open market economy with a developed private sector and a limited number of state enterprises. Bulgaria has been a member of the World Trade Organization since 1 December 1996. Since 1 January 2007, Bulgaria has also been a member of the EU.

The Bulgarian economy is characterized by economic, political and financial stability. The country has a strategic geographic location, liberal access to markets consisting of more than 560 million consumers, and the lowest corporate tax in EU – 10%. Investments in municipalities with high levels of unemployment enjoy tax-free status. There are also increased amortization norms (of 50%) for investments in new machinery, manufacturing equipment and other apparatus, computers, peripheral computing devices, and software. Bulgaria offers tax credits in accordance with special provisions for VAT assessment for the import of material related to investment projects amounting to more than 10 million BGN. There are also provisions for a 5% tax upon dividends and a 10% “flat rate” tax on the incomes of physical persons. Bulgaria enjoys the lowest operating costs in the EU. The level of national indebtedness and the state deficit for 2011 is also among the lowest in the EU. Bulgaria is one of three countries in the EU that has not changed tax rates as a result of the financial crisis. As of 1 January 2011, the country has the lowest tax burden for households and businesses in all of the entire European Union. Its farsighted fiscal policy and stable business environment make Bulgaria one of the most stable countries in the EU. Bulgaria has a population of 7,351,234 as of 01.02.2011, with 72.9% of its people living in either cities or villages. The country is justly famous for its yoghurt and other dairy products, for its rose oil products, and for its wines and brandies. One of Bulgaria’s preeminent industries is tourism.

Information on the import duties on goods originating from third world countries applied by the EU

Since 01.01.2007, Bulgaria has applied the Common Customs Tariff of the European Union (customs and tariffs applied by the EU on goods imported from third countries). Information on custom duties, which have to be paid on goods imported into the EU from third countries, can be found on the Internet through the so called TARIC system of the EU and on the website of the National Customs Agency, http://www.customs.bg/en/page/145.

The European Customs Information Portal

The European Customs Information Portal brings together in one website a variety of relevant information on the EU legislation and explanatory documents on the safety and security amendment of the Community Customs Code. Here, you can also find news, and links to databases, documents and procedures used by the national customs administrations. The portal also offers interactive “model transactions” which explain the main steps in standard import, export, and transit customs procedures into and out of the European Union. http://ec.europa.eu/ecip/

Global Europe: a stronger partnership towards market access development

The European Union Market access policy has the potential to generate real economic benefits for its Member States and for the business as a whole, as well as making a key contribution to growth and jobs in Europe.

The renewed EU Market Access Strategy was launched in 2007: Global Europe: a stronger partnership to deliver market access for European exporters.


Trade barriers in the global economy include the following: tariff barriers, burdensome customs procedures, technical regulations and standards, misuse of sanitary and phytosanitary measures, restrictions on access to raw materials, poor protection of intellectual property rights, barriers to trade in services, restrictive government procurement rules, use of trade defence instruments that are incompatible to rules of the World Trade Organization (WTO), unfair use of state aids and other subsidies.

The partnership between the European Commission, Member States, and EU business has led to overcoming the difficulties in accessing third country markets. The Directorate General for Trade of the European Commission regularly publishes reports and newsletters which provide detailed information on the work of overcoming trade barriers and the achieved outcomes. Detailed information on the implementation of the EU Market Access Strategy can be found on the website of the Directorate General for Trade of the European Commission – http://ec.europa.eu/trade/creating-opportunities/trade-topics/market-access/.

Information Resources of the European Union, which can be used by commercial operators

EU legislation database (Eur- lex). Eur-lex website, /http://eur-lex.europa.eu/en/index.htm/, provides free access to European law. The website is available in all official languages of the European Union. Eur-lex offers daily editions of the Official Journal of the European Union online which are structured in chronological order. The database offers a variety of options for document browsing and retrieving.

Market Access Database. The European Union Market Access Database, /http://madb.europa.eu/mkaccdb2/indexPubli.htm/, provides wide information on import duties and documentary import requirements, trade barriers, sanitary and phytosanitary measures, applied by countries outside of the European Union. On the website, there is also a complaint register section, through which the EU economic operators can notify the European Commission of trade barriers to third country markets. The database also contains statistical information on trade flows between the EU (including individual Member States) and non-EU countries and offers options for obtaining reports based on product tariff number, country of origin, or country of destination. The European Commission has developed a Market Access Database User Guide, which provides full description of its capabilities.

Taric Consultation Module – the EU Integrated Community Tariff (Taric) allows you to make a consultation on the trade flow conditions flows between the EU (including individual Member States) and non-EU countries – customs duties, tariff preferences, and tariff quotas. Taric contains information on whether a particular product is eligible for “export refund” and, if so, what is the refund size.


The new legislation in Bulgaria effective since May 2009 gives foreign investors in Bulgaria significant benefits both in terms of their business in this country and in personal terms as foreign citizens. On the one hand, the investors’ business is supported by investment promotion measures provided for by the Investment Promotion Act and the Rules on its implementation. On the other hand, foreign investors who have invested in Bulgaria more than BGN 1 million (EUR 511,292) are granted a special status by the government in accordance with the laws currently in force.

Under that programme, foreign investors may obtain a permanent residence permit and, together with their families, enjoy the unique privilege to be exempt from the obligation to settle and physically reside in Bulgaria, as provided for by Article 40, Paragraph 1, Items 5 and 6 of the Foreigners in the Republic of Bulgaria Act (FRBA). That exemption applies only to foreign investors covered by the provisions of Article 25, Paragraph 1, Items 6, 7 or 8 of the FRBA, and the members of their families. A permanent residence permit is issued by the Ministry of Interior based on a certificate by the Ministry of Finance proving the amount and type of the investment made. Foreign investors holding such permits may freely enter and leave Bulgaria for unlimited periods just because they have made a significant investment in the local economy according to the abovementioned article. To apply for a permanent residence permit, a foreign investor shall enter Bulgaria with a visa type D. Strict legal procedures are in place and shall be observed. The first step is the issuance of a certificate by the Ministry of Finance, the second one – the issuance of a visa type D, and finally – the issuance of a permanent residence permit. The procedures are provided for by the Foreigners in the Republic of Bulgaria Act, the Rules on its implementation and the Ordinance on the Terms and Procedure for Visa Issuance and Visa Regime Determination. These legal instruments regulate the entry and residence in, and the leaving of the Republic of Bulgaria by non-EU citizens; it is those citizens that the above residence benefits apply to. The rights of EU citizens are regulated by the European Union Citizens and Members of Their Families Entry and Residence in and Departure from the Republic of Bulgaria Act.

You can find additional information on the requirements, the relevant investments, investment funding and the legal terms and conditions concerning the Investment Programme, residence and citizenship on the website of the InvestBulgaria Agency (IBA).

The IBA’s task is to support potential and existing investors in researching investment opportunities in Bulgaria and implementing greenfield projects. Its team includes 35 specialists in Sofia and a few more abroad, all of them working in accordance with the highest project management, business confidence and integrity standards. The IBA is authorised to contact directly all government institutions in Bulgaria with a view to facilitating the entry and development of investors’ business in Bulgaria. The IBA is the authority issuing investor certificates and applying the investment promotion measures under the Investment Promotion Act. It provides custom administrative and information services to investors with regard to the investment environment and the business climate in Bulgaria, as well as the locations and industrial areas to invest in.

Useful linksYou can find detailed information on exchange rates on the official website of the Bulgarian National Bank

You can find information on currency control on the website of the InvestBulgaria Agency.

Foreign investment promotion

One of the main priorities of the Republic of Bulgaria is promoting investment within its territory, regulating the operations of government authorities in the field of investment promotion, as well as investor protection.

One of Bulgaria’s main goals is improving the competitiveness of the Bulgarian economy through boosting investment in scientific research, innovation and technological development in high-added-value production and services, while observing the principles of sustainable development. Others include improving the investment climate and achieving inter-regional cohesion in social and economic development, and creating new, highly productive jobs.

Investment Promotion ACT

How to register a company

You can find more information on the websites of:

the Registry Agency – http://www.registryagency.bg/?p=873

the InvestBulgaria Agency – http://www.investbg.government.bg/

Bulgarian Chamber of Commerce and Industry – http://www.bcci.bg/english

Import and export

You can find comprehensive information on the import and export terms and conditions on the following web portals:

Ministry of Finance – http://www.minfin.bg/en/

Customs Agency .- http://customs.bg/en/page/2

Ministry of Economy, Energy and Tourism – http://old.mee.government.bg/eng/index.html

InvestBulgaria Agency – http://www.investbg.government.bg/

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