Doing Business In... 2023 Comparisons

Bulgaria has a typical civil law system and judicial decisions do not form binding case law except for certain decisions of the supreme courts.

The judicial system is based on a “three instances” model. In addition to the regular courts dealing with civil, commercial and criminal cases, there are separate systems for administrative and military justice.

There are no generally applicable approval requirements for foreign entities contemplating an investment in Bulgaria.

Certain restrictions apply to foreign investments of offshore companies from tax havens, as well as in the gambling industry and when it comes to the acquisition of farmland, but they are rather limited in scope and effect (see 2.2 Procedures and Sanctions in the Event of Non-compliance).

Restrictions on Investments by Offshore Companies

The 2014 Offshore Companies Act prohibits companies from certain tax havens and the entities under their control from directly or indirectly engaging in 27 different economic activities in Bulgaria (mostly in traditionally highly regulated sectors such as banking and finance, insurance, gambling, etc). The effective list of tax havens includes 21 jurisdictions.

There are eight groups of exceptions to the prohibitions that are in any case subject to disclosure of the ultimate beneficial owners of the company and certain preliminary registrations in the Bulgarian Commercial Register.

The consequences of investing in violation of the Offshore Companies Act vary depending on the business activity and include measures such as refusal or revocation of a licence/registration, voting bans, exclusion from award procedures, termination of awarded contracts, and monetary fines.

Restrictions on Foreign Investments in the Gambling Industry

Pursuant to the 2012 Gambling Act, gambling operations require a game-specific licence. Companies from Bulgaria, another member state of the European Economic Area (EEA) or Switzerland are generally deemed eligible to apply for such licences except that the state-owned enterprise Bulgarian Sports Totalisator is vested with a monopoly over all lottery products, except for raffle, bingo and keno games.

Non-EEA/Swiss foreign persons need to invest at least EUR10 million in other activities in Bulgaria and create more than 500 jobs to hold interest in a locally licensed company or own a hotel rated with four stars or more and operate a casino in it. Non-compliance with the relevant requirements may lead to refusal or revocation of the respective licence.

Restrictions on Foreign Investments in Farmland

Non-EEA nationals and legal entities and companies held by them are generally not allowed to acquire farmland, unless expressly permitted by an international treaty. Companies held by offshore companies, political organisations and foreign states are also not allowed to acquire farmland.

From 2014 onwards, the EU/EEA citizens enjoy national treatment in respect of the acquisition of farmland in the country, but there is a general long-term residence requirement (five years), creating acquisition barriers even for such persons.

There are commitments required from foreign investors in the gambling industry. For more information, please refer to 2.2 Procedure and Sanctions in the Event of Non-compliance.

As a rule, access to justice is guaranteed by the applicable laws in Bulgaria subject to certain absolute deadlines for filing a defence. The scope of legal challenge and applicable timing are to be assessed on a case-by-case basis. 

Bulgarian law allows for the incorporation of different types of companies, the most popular being the limited liability company (LLC) and the joint-stock company (JSC). Both can be incorporated by one or more shareholders, who subject to certain exceptions are not liable for the company's liabilities.

The minimum registered capital of LLCs is BGN2 (ca. EUR1) and the capital contributions may be monetary or in kind. The LLC affairs are administered by its manager(s) and the general meeting of the shareholders. Shares, however, are not freely transferrable and require approval by the other shareholders. In addition, there is a highly controversial shareholder expulsion procedure for LLCs, which allows, in certain cases, for a minority shareholder to expel a majority shareholder.

JSCs are generally preferred by foreign investors because of their greater flexibility in management and decision-making. The minimum capital is BGN50,000 (ca. EUR25,000). There are two systems of management: the one-tier system (with a board of directors) and the two-tier system (with a supervisory board, and a management board appointed by the latter). The ultimate managing body is that of the general shareholders. Share transfers are normally unrestricted (unless the articles of association provide otherwise).

The simplified corporate governance structure makes the LLC suitable for fully owned subsidiaries and for closely held companies, where it is unlikely that diverging interests among shareholders arise. The more developed corporate governance structure makes the JSC suitable for joint ventures and other structures where shareholders with potentially diverging interests may participate and where financial minority investors may need additional protections, without the need to be involved in day-to-day management.

Both LLCs and JSCs are established by registration in the Commercial Register. The incorporation process includes the following main steps:

• preparing the documents (resolutions, articles of association, declarations, etc);
• opening a bank account in Bulgaria and transferring the share capital to it; and
• registering the company in the Commercial Register.

The entire procedure may take two to four months whereas the most time-consuming step is usually the opening of a bank account because of the extensive KYC checks of the banks.

After their incorporation, companies must file to disclose their ultimate beneficial owner(s) with the Commercial Register. Approved annual financial statements are also to be filed with the Commercial Register by 30 September.

Changes in the corporate details of the company (eg, management, seat and registered address), and in the announced corporate documents, are to be filed for registration with the Commercial Register.

LLCs have a simple corporate governance structure, consisting of a shareholders’ meeting (single shareholder) and one or more registered managers whose representative powers cannot be restricted (except by joint signature rules). LLCs do not have boards of directors or other collective operational bodies. Key decisions require resolution by the shareholders.

In contrast, JSCs are governed by a shareholders’ meeting and either a board of directors (one-tier management system) or a managing board and supervisory board (two-tier management system). Super-majorities (2/3 or 3/4) are provided by law for the usual or extended minority shareholder protections, but not unanimity. Minority shareholders enjoy certain enhanced protections, compared to LLCs.

Liability of shareholders in LLCs and JSCs is limited to the value of their shares in the company's capital, resulting in a limited personal liability to the company’s creditors. Certain exceptions apply in the case of tax evasion (could extend to the management too), and for serious administrative infringements, such as antitrust infringements.

There are four main types of liability that are relevant for a director or officer of a company:

• civil liability: liability for damages towards the company or third parties;
• administrative liability: many laws contain sanctions (mainly fines) for the company or its management (eg, for breaches of employment and accounting legislation); in certain cases representatives may also be held liable for tax evasion on account of the company;
• criminal liability: there are various forms and types of criminal liability; and
• disciplinary liability: applicable only to persons under employment contracts.

Employment relationships are regulated by laws, including the Bulgarian Labour Code (LC), collective labour agreements, and internal rules, policies, and orders of employers. The LC sets minimum standards and most of its provisions are mandatory and may not be waived by the employee.

Employment contracts should be in writing and cover, among others, the following particulars:

• place of work;
• position name and work description;
• employment term;
• notice period for termination (should be equal for both parties);
• base monthly salary and permanent additional labour remunerations and the periodicity of their payment; and
• duration of the working day or the working week.

Employers are to notify the National Revenue Agency of the employment contract within three days as of execution. Employment contracts are deemed concluded for an indefinite term unless expressly agreed otherwise. Employment contracts for a fixed term may be concluded only in exceptional cases.

The employment contract may be for full-time work or part-time work.

The normal working time is eight hours a day within a five-day working week. The maximum working week is 40 hours. There are special provisions for specific types of work such as night and shift work, for employees under 18 years old, etc.

The normal working time cannot be extended except as provided for by the law in the following cases:

• Prolongation of the working time: for production reasons, the employer may extend the working time on some working days and compensate for it on other working days subject to certain requirements.
• Open-ended working hours: due to the special nature of the work, the employer, after consultation with the trade union organisations and employees' representatives, may establish open-ended working hours for certain positions where if necessary employees may need to continue to perform their duties after normal working time.
• Overtime work: overtime work is such done by order or with the knowledge of (and with no objection from) the employer or the respective superior by an employee beyond the fixed working time. As a rule, overtime work is forbidden, except in certain cases exhaustively listed in the LC (eg, for emergency repair on working premises of machinery or other equipment, for completion of work that cannot be performed within normal working time, for performance of intensive seasonal work). Overtime work is paid with an increase, may not exceed certain limits and is prohibited for certain categories of employees (eg, pregnant women). The employer keeps a special book to account for overtime work, and overtime work is to be notified to the labour inspectorate by January 31st of the following year.

Procedure and grounds for termination of employment contracts are not freely negotiable between the parties. Termination of employment is heavily regulated and is only permitted with cause and after following procedural requirements specific to that cause. Non-observance of the applicable grounds and procedure may result in a court dispute whereby the termination is found unlawful, involving the reinstatement of the employee to his previous position and the obligation of the employer to pay compensation to the employee for the period of unemployment but for not more than six months.

Permissible termination grounds are listed exhaustively in the Labour Code and include but are not limited to the following cases:

• Termination by either party without notice: permissible upon expiry of the contractual term; in case of inability of the employee to perform the assigned job because of illness resulting in permanent disability (invalidity); and other cases.
• Termination by employer with notice: permissible in case of closure of enterprise or staff cuts; reduction in volume of work; work stoppage (for > 15 days); lack of efficiency in employee’s performance at work; entitlement to old-age pension; and in other cases.
• Termination by employer without notice: permissible in case of prohibition for practising profession or for occupying position by virtue of court or administrative decision; in case employee refuses to take medical examination prescribed for job offered; in case of disciplinary dismissal; in case of incompatibility (employee is unfit/unable to do the job) and in other cases.
• Termination by employee with notice: an employee may terminate the employment contract at will without giving specific reasons.
• Termination by employee without notice: permissible in case of delay of payment of remuneration; illegal alteration of the employment contract by the employer; and in other cases.
• Termination by mutual consent – there are two main options: (i) termination without payment of termination compensation; or (ii) termination against payment of compensation amounting to not less than four months' wages (based on the employee's wages for the last month).

Regardless of the cause for termination, the employer must notify the territorial direction of the National Revenue Agency within seven days of the effective termination date.

All employees in a company form the employees' general meeting. Where a company (LLC or JSC) has more than 50 employees, their representatives are allowed to participate at the general meetings of shareholders without the right to vote.

The employees’ representatives may be elected by the employees’ general meeting. The LC recognises two types of employees’ representatives: one of them may be elected regardless of the head count of the company (under Article 7 LC) and the other - only in enterprises meeting certain head count thresholds (under Article 7a LC).

Employers and employees' representatives may establish the procedures for consultation and information through a Collective Bargaining Agreement or another separate agreement, unless and as long as the consultation and information procedural rules are provided for by law (eg, in the case of mass dismissals, transfer of undertaking).

Where there are elected employee representatives under Article 7a LC, the employer must provide them with information regarding:

• the recent and probable development of the enterprise's activities and economic situation;
• the situation, structure and probable development of employment within the enterprise and regarding any anticipatory measures envisaged, in particular where there is a threat to employment;
• the number of employees commissioned by an enterprise providing temporary work, or its intentions to make use of such employees;
• the possible substantial changes in work organisation, including the introduction of work at home and remote work.

After providing the above information, the employer must hold consultations on the matters under points (ii) – (iv) above.

The employer may refuse to communicate information or undertake consultation when its nature is such that it would seriously harm the functioning of the enterprise or the legitimate interests of the employer.

Tax Residence of Individuals

Irrespective of citizenship, an individual is considered a Bulgarian tax resident if he/she fulfils one or more of the following criteria:

• has permanent address in Bulgaria; or
• resides in Bulgaria more than 183 days in any 12-month period; or
• is assigned abroad by a Bulgarian company or the state; or
• the centre of his/her vital interests is in Bulgaria.

Any other individuals are foreign tax residents. While Bulgarian tax residents are taxed in Bulgaria for their global income, the foreign tax residents are taxed only for the incomes of Bulgarian origin as provided for by law, subject to any applicable double taxation treaty (DTT).

Any income derived from employment and paid by an employer considered a tax resident in Bulgaria to Bulgarian tax residents or foreign tax residents for employment exercised in the territory of Bulgaria is subject to taxation with personal income tax at the flat rate of 10%.

Social Charges

Thus, the total national insurance contribution rate (social security and health insurance) is 32.7% to 33.4% (of which 18.92% to 19.62% is payable by the employer and 13.78% is payable by the employee).

The above rates are applicable to Bulgarian nationals, as well as to EU/EEA nationals who are subject to Bulgarian social security contributions. Non-EU/EEA nationals are also subject to these contributions under certain conditions, except for health insurance contributions (unless they have a permanent residence permit for Bulgaria).

The minimum insurance base varies. The maximum monthly insurance base is limited to BGN3,400 (circa EUR1,700).

The above taxation and insurance contribution rules apply also to individuals working under management service contracts (managers or controllers of companies).

As a rule, a company is resident in Bulgaria for corporate tax purposes if it is incorporated in Bulgaria.

Permanent Establishment (PE)

PEs of foreign tax residents (eg, branches), although not separate legal entities, are treated as such for tax and accounting purposes as Bulgarian corporate tax residents. PE represents a fixed place (own, rented, or otherwise used) through which a foreign entity partly or wholly conducts business in Bulgaria (DTTs may apply different definitions for their purposes).

Taxation of Corporate Income

The worldwide profit of a Bulgarian resident company is subject to corporate income tax (CIT) at the rate of 10%. Other companies are taxed for income with a source in Bulgaria including if the income is derived through a PE or, if not, the income may be subject to withholding tax (WTH). Thus, a branch (a PE) of a non-resident company will be subject to CIT at the standard rate of 10% and should such non-resident company receive other taxable incomes that are not related to its PE, these incomes may be subject to a separate WHT at the rates established by law or by the respective DTT.

Alternative taxation regimes apply in the gambling industry and for the maritime merchant shipping industry.

One-off Taxes

The following corporate expenses are subject to a one-off tax of 10%:

• representative expenses related to a company’s business;
• social expenses provided to employees in kind; and
• expenses in kind related to the private use of company assets.

Withholding Taxes (WHT)

A company that is a Bulgarian tax resident must deduct WHT on payments made to non-residents of dividends, liquidation quotas, interest, royalties, fees for technical services, for the use of properties, under operating leasing, franchising, and factoring agreements and management fees. The WHT rates are between 5 and 10% unless a DTT provides for a lower rate.

Value Added Tax (VAT)

The standard VAT rate for Bulgaria is 20%. A reduced VAT rate of 9% applies to:

• particular tourist services;
• baby foods and hygiene products; and
• books, physical or electronic periodicals such as newspapers and magazines.

Other reduced rates are applied for limited time periods (eg, 9% rate for tourist and restaurant services until the end of 2023; 9% rate for natural gas and central heating until 1 July 2023; 0% VAT rate for supplies of bread and flour until the end of 2023).

0% VAT rate is also applied to intra-community supplies, exports of goods to countries outside the EU, international transport of goods, and supplies of goods and services related to vessels and aircraft.

Certain supplies are VAT-exempt (eg, sale of land, leasing of residential property to individuals, financial, insurance, gambling, educational, and health services).

The mandatory VAT registration is triggered upon certain conditions (eg, reaching a statutory registration threshold of BGN100,000 per annum). Voluntary VAT registration is also possible. The VAT reporting is organised on a monthly basis.

Excise Duties

Excisable products comprise petrol and diesel fuel, liquefied petroleum gas, heavy oil, kerosene, beer and spirits, tobacco and tobacco products, and electricity. Excise duties are charged as a percentage of the sales price or customs value or as a flat amount in Bulgarian lev per unit (or per other quantity measures, depending on the type of the excisable good).

Taxation of Real Property

Each municipality council determines an annual property tax rate in the range of 0.01% to 0.45% of the tax value of the immovable properties (land and buildings) in the municipality payable by the owners of such property.

Transfer Tax

A transfer tax is due on the value of transferred real estate or motor vehicles. The rate of the tax is within the range of 0.1% to 3% and is determined by each municipality council for the territory of the relevant municipality.

Insurance Premium Tax

A tax of 2% is levied on all insurance premiums paid under insurance agreements covering risks insured in Bulgaria. Certain premiums (eg, for life insurance, aircraft, international transport) are exempted. Insurance companies deduct the tax and remit it to the budget.

Tax incentives are provided for by law and include the following main incentives:

• Exemption from levy of CIT: collective investment schemes admitted to public offering in Bulgaria, national investment funds and alternative investment funds set up for the implementation of financial instruments under funding agreements under Article 38(7) of Regulation (EC) No 1303/2013, and special purpose investment companies are exempt from levy of CIT. Certain organisers of games of chance are also exempt from levy of CIT for this activity.
• Incentives for hiring unemployed personnel: companies employing for at least 12 consecutive months unemployed individuals (eg, persons registered as unemployed for more than one year or unemployed persons who are at least 50 years old or have reduced working capacity) are entitled to reduce their taxable profit by the amounts paid for labour remuneration and the social and health security contributions during the first 12 months of employment.
• Social and health insurance funds: social and health insurance funds, established by law, may be allowed to retain 50% of the corporate tax.
• Tax relief for manufacturing activities in municipalities with unemployment rate above national average: companies are entitled to retain up to 100% of the corporate tax in respect of the taxable profit derived from the manufacturing activity performed in municipalities with rate of unemployment of 25% or more than national average subject to certain other conditions.

Bulgarian law does not provide for tax consolidation. Companies pay tax on their individual profits on a standalone basis.

The CIT Act provides for thin capitalisation rules. Overall, thin capitalisation rules do not apply if the debt-to-equity ratio is less than 3:1. The tax deductibility for interest expenses that exceed interest income is restricted to 75% of the accounting result of the company, exclusive of interest income and expense. When the taxable result of a company before including the effect of the interest income and expenses is a loss, none of the net interest expense will be deductible for tax purposes. The thin capitalisation regulations do not apply to interest on bank loans and interest under financial lease agreements unless in the case of related parties.

Interest expenses which are not deductible in a particular year due to the thin capitalisation regulations, may be deducted from the taxable financial result within the following years.

Under Bulgarian law, companies must apply the arm’s-length principle to prices at which they sell or buy goods, services and intangibles to and from related parties. Bulgarian transfer pricing rules follow the OECD Transfer Pricing Guidelines.

If prices for supply of goods or services or interest over loans differ from the market standard, they would deviate from the arm’s-length principle. The market prices are determined by specific methods (eg, comparable uncontrolled price method; resale price method; cost plus method, etc).

Companies should generally be able to demonstrate that the transactions with its related parties are in line with the arm’s-length principle.

The general anti-evasion rules are stipulated under the CIT Act. One of them is that if related parties enter into commercial and financial relationships under terms affecting the tax base and differing from the terms between unrelated parties, the tax base is determined and taxed under the terms applicable between unrelated parties. Furthermore, if transactions (including between unrelated parties) are concluded under terms leading to tax evasion, the tax base is determined by ignoring the tax evasion aspects.

The CIT Act provides for certain examples of tax evasion (eg, substantial excess of production inputs and other production costs; gratuitous use of assets; interest-free loans; charging for services not actually performed).

If a transaction is concealed by a fictitious transaction, the tax liability is assessed under the terms of the concealed transaction.

The local merger control rules are triggered where a transaction constitutes a “concentration” within the meaning of the Bulgarian Protection of Competition Act (PCA) and the relevant domestic turnover thresholds are met.

As a rule, concentrations are notifiable to the Commission for the Protection of Competition (CPC), if they are not within the competence of the European Commission. “Concentration” under the PCA is in place in case of change of control on a lasting basis and specifically:

• in the case of merger or amalgamation of two or more previously independent undertakings; or
• where one or more persons, already controlling at least one undertaking, acquire control, directly or indirectly, in respect of other undertakings or parts of them, via acquisition of shares or property, by contract or by any other means.

Joint ventures (JV) performing on a lasting basis all the functions of an economically autonomous entity would also constitute concentration.

A change of control assessment would require consideration of both law and facts. Generally, the substantive test is whether the transaction will result in the ability of exercising decisive influence over an independent undertaking by means of the right of veto on one or more of the strategic decisions of the company (eg, approval of budget and business plans, appointment of senior management).

In Bulgaria, currently there is no market share notification threshold. The quantitative criterion is based on domestic turnover thresholds and a transaction is subject to mandatory prior notification and clearance by the CPC where:

• the combined aggregate annual turnover of all the undertakings participating in the concentration in the territory of Bulgaria during the preceding financial year exceeds BGN25 million; and
• either the total annual turnover of each of at least two of the undertakings participating in the concentration in the territory of Bulgaria during the preceding financial year exceeds BGN3 million; or
• the total annual turnover in the territory of Bulgaria during the preceding financial year of the entity subject to acquisition (the target) exceeds BGN3 million.

The merger control assessment by the CPC is made upon notification from the party/parties acquiring control. Initially, the CPC conducts a preliminary review of the notification for completeness within five working days and, if necessary, requires additional information and documents. Once the notification is considered complete, the chairperson of the CPC initiates proceedings (a brief notice is published on the website of the CPC).

Phase I (Accelerated) Review Process

For most mergers, the CPC carries out an accelerated review process in the so-called “Phase 1” proceeding that is to be completed within 25 business days. At this stage, the CPC may send formal requests for information to the notifying party, as well as to its major competitors, suppliers and customers which stop the clock. Usually, the overall process takes 6-8 weeks after submission of the notification.

After the Phase I review, the CPC is to issue a decision by which it:

• declares that the transaction is not a concentration or does not fall within the scope of the mandatory merger control regime (negative clearance); or
• clears the transaction unconditionally; or
• clears the transaction subject to commitments by the parties; or
• initiates in-depth (Phase II) proceedings on the case.

Phase II (In-Depth) Review Process

If during the Phase I proceedings, the CPC concludes that the concentration raises serious doubts that effective competition in the relevant market may be significantly impeded, it may initiate an in-depth (“Phase II”) investigation of the case.

The Phase II investigation should be completed within 90 business days. In certain cases, this period may be extended (eg, for more complex cases with an additional 25 business days; in the case of remedies offered by the parties, automatically with another 15 business days).

The actions following the initiation of a Phase II investigation follow a similar path to those under the Phase I proceedings. Interested third parties may submit observations within 30 days following the Phase II opening decision.

At the end of the review, the CPC will either issue an unconditional clearance, or adopt a statement of objections to the notifying party. The parties will have a right to respond to the statement of objections and be heard in an open hearing.

At the end of the Phase II investigation, the CPC will issue a decision by which it:

• approves the transaction unconditionally; or
• approves the transaction subject to conditions and obligations; or
• prohibits the transaction.

Bulgarian legislation on prohibited agreements, decisions and concerted practices is almost entirely based on EU legislation. EU competition law applies in parallel with Bulgarian competition law in this area, if a prohibited agreement, decision or concerted practice can have effect on trade among EU Member States.

Agreements among independent undertakings, decisions of associations of undertakings, as well as concerted practices among two or more independent undertakings, which have as their object or effect the prevention, restriction, or distortion of competition, are prohibited and are deemed to be automatically void.

This prohibition covers cartels (agreements between competitors that eliminate or reduce competition by fixing prices, by allocating customers or suppliers, or by restricting output or innovation), as well as less critical agreements, among competitors (horizontal agreements) or non-competitors (such as agreements among various undertakings on the production and supply chain – vertical agreements), that are capable of reducing competition.

Cartels are the most critical and heavily penalised types of infringements in this category. They include infringements such as bid rigging, market partitioning and customer allocation among competitors, quota agreements and other forms of output or capacity limitation among competitors. Other anti-competitive agreements that are caught within the scope of the prohibitions include vertical price fixing, exclusive, selective distribution, territorial restrictions on resales and others.

Both EU and Bulgarian law provide for exemptions to the prohibition. EU and Bulgarian law block exemptions, exempt whole classes of agreements, decisions, and concerted practices, subject to certain conditions (eg, limits of market share, absence of hardcore restrictions).

Certain agreements, decisions or concerted practices can be exempted from the prohibition on an individual basis subject to the fulfilment of specific criteria.

Dominance, under EU and under Bulgarian law, is deemed to be the position of market power of an undertaking that is substantially independent from its competitors, suppliers and ultimately from consumers. A dominant company is not sufficiently competitively constrained in its market conduct by other players in the market. A monopoly is an extreme form of dominance, where there is only one player in the relevant market, and under Bulgarian law a monopoly can only be established by law.

Various factors may be used to assess whether an undertaking is dominant, but the primary one is market share. Other factors which may be relevant include holding a market advantage that cannot be easily replicated, market stability, technology change, entry barriers, and the strength of competitors.

Dominance is not in itself prohibited. Bulgarian and EU law prohibit the abuse of dominance, being any conduct by a dominant undertaking that is capable of restricting competition and thereby of negatively affecting consumers.

Abuses are normally divided into two main categories:

• Exclusionary abuses: conduct of the dominant undertaking that prevents other market players from entering or expanding into the market or excludes them from the market (eg, below-cost pricing, leveraging dominance from one market into another, unjustified refusals to supply or purchase).
• Exploitative abuses: conduct that extracts an unfair advantage from the dominant position of the undertaking (eg, excessive pricing, price discrimination).

Patents are granted for inventions in any technical field which are new, involve an inventive step and are industrially applicable. Certain subject matters are not patentable (eg, discoveries, scientific theories and mathematical methods).

The duration of a patent is 20 years after filing, subject to payment of annual maintenance fees. Bulgarian law also envisages registration of utility models subject to a ten-year duration. The test of inventiveness for a utility model is lower than for a patent.

Patent applications are filed with the Bulgarian Patent Office (BPO) and must contain a description of the invention, drawings (if applicable), claims and an abstract of the invention. If the statutory requirements are met and the fees are paid, the BPO issues a decision for granting of the patent.

The patent owner may bring civil proceedings against any infringement of the patent,  requesting from the court to, among others:

• issue injunctions prohibiting the continuation of the infringement;
• order the destruction of the infringing goods and in certain cases the means for committing the infringement;
• award compensation for damages.

A trademark is defined to consist of any signs, in particular words, including personal names, or designs, letters, numerals, colours, the shape of goods or of the packaging of goods, or sounds, provided that such signs are capable of:

• distinguishing the goods or services of one undertaking from those of other undertakings; and
• being represented on the register in a manner enabling the competent authorities and the public to determine the clear and precise subject matter of the afforded protection.

The initial trademark registration is granted for a period of ten years and may be renewed for a fee for consecutive ten-year terms indefinitely. If the trademark is not used for a period of five years, the registration may be revoked.

To register a trademark, an application is to be filed with the BPO describing the trademark and listing the covered goods and/or services in line with the Nice Classification. BPO examines the application and publishes it in an Official Bulletin. After that, third parties are entitled to file opposition proceedings within three months. If no oppositions are filed or if the oppositions are rejected, the trademark is to be registered.

The registered trademark confers on the proprietor exclusive rights of use. In cases of infringement the proprietors may file civil claims before the Sofia City Court. The available remedies are like those described above for patents (see 7.1 Patents). It is also possible to apply for an injunction against intermediaries. In addition, trademark infringement may constitute a criminal offence punishable with a fine and imprisonment for up to six years.

Industrial design is defined as every new, external appearance of an article, which is distinguished by the shape, pattern, ornament, combination of colours or other elements, suitable for reproduction by industrial methods. A design can be protected only to the extent that it is new and has individual character.

Designs are registered for a period of ten years after filing subject to renewals for a fee for up to 15 years in total. The industrial design rights arise by registration at the BPO as of the date of filing. The registration applications are examined for compliance with formal requirements whereas BPO does not check in substance the novelty and the individual character of the design.

The holder of a registered design may use it and stop third parties from copying or using it. The use of a design covers the making, offering for sale, placing on the market or using of a product in which a protected design is incorporated or to which it is applied, as well as the importing, exporting or stocking of such products for those purposes. Any use in commercial activities without the consent of the holder is an infringement. Infringement actions may be brought before the Sofia City Court. The available remedies are like those for patents (see 7.1 Patents).

Bulgarian law recognises copyright protection for any literary, artistic and scientific work resulting from a creative endeavour and expressed by any mode and in any objective form. Copyright consists of economic rights and moral rights. Copyright holders may grant exclusive/non-exclusive licence for use for a period of time not exceeding ten years.

Copyright protection arises from the moment the work is created (no registration is required) and lasts for a period of 70 years after the death of the author, subject to certain exceptions (eg, computer programs are protected for 70 years following their publication).

In cases of infringement, the holder of the copyright may file a civil lawsuit before the competent district court and claim, among others, the following remedies:

• injunction prohibiting the continuation of the infringement;
• seizure and destruction of illegally produced copies of the work;
• compensation for damages.

Copyright infringements may also constitute criminal or administrative offences subject to respective penalties and fines.

Software is subject to copyright protection as a literary work under the Copyright Act.

The law grants protection also for databases, in particular for the individuals or entities who have taken the initiative and the risk of investing in the collection, verification or use of the content of a database if this investment is substantial. The database maker has a specific right to prohibit the extraction of the content of the database on another medium and the re-use of the content of the database by disclosure (including by distribution of copies, renting or provision by digital means).

Trade secrets are protected under the Protection of Trade Secrets Act which transposes the provisions of Directive (EU) 2016/943 on trade secrets.

The main legislative act governing personal data protection in Bulgaria is Regulation (EU) 2016/679 (also known as the “GDPR”). The GDPR is supplemented by the Bulgarian Personal Data Protection Act of 2002 ensuring its effective enforcement, containing a few locally specific rules, and implementing Directive (EU) 2016/680.

Directive (EU) 2002/58/EC concerning the processing of personal data and the protection of privacy in the electronic communications sector (“e-Privacy Directive”) is transposed in Bulgaria in the Electronic Communications Act with respect to its rules on direct marketing, and in the Electronic Commerce Act – regarding the rules on cookies, subject to certain transposition deficiencies.

Sector-specific legislation (eg, for employment, electronic communications, health, gambling, private security) also contains data protection rules.

The GDPR applies to the processing of personal data in the context of the activities of an establishment of a company in the EU, regardless of whether the processing takes place in the EU or not.

The GDPR also applies to companies not established in the EU where their respective processing activities are related to the offering of goods or services to data subjects in the EU, or where they monitor the behaviour of data subjects in the EU.

There are no locally specific regulations in that respect.

The Commission on Personal Data Protection is the local authority enforcing the applicable data protection rules. Its main tasks are outlined in the GDPR and include, among others, monitoring and enforcing the GDPR, promoting public awareness on issues related to personal data protection, advising other public bodies, providing information to data subjects, handling complaints, conducting investigations, imposing sanctions for non-compliance.

In addition, it may adopt secondary legislation on data protection and issue guidelines on the application of the GDPR in light of the local legal framework.

The Commission on Personal Data Protection is also the competent national authority under the Whistleblowing Directive (EU) 2019/1937.

Due to the political instability in Bulgaria in the last two years and the inability to elect a lasting parliamentary majority and form a regular government, the state budget for 2023 was not adopted until the end of 2022. That is why, if the current parliament manages to approve the state budget for 2023, certain tax laws are to be amended. Most changes (if any) in the tax legislation are expected to be focused on reducing the budget deficit for 2023 and keeping it within the framework needed for accession of Bulgaria to the Eurozone. Therefore, the temporarily reduced VAT rate of 9% for certain goods and services for 2023 (please refer to 5.2 Taxes Applicable to Businesses) is likely not to be extended. Permanent increase of the taxes is unlikely although the increase of the standard VAT rate from 20% to 22% cannot be excluded.