Merchandise Trade

 

 

• Bulgaria has been a member of the World Trade Organization (WTO) since December 1, 1996. Bulgaria bound all of its tariffs under the General Agreement on Tariffs and Trade on accession to the WTO, including zero rates for products falling under the Plurilateral Agreement on Civil Aviation and the Agreement on Information Technology.


• Bulgaria has been a member of the EU since January 2007. This means that a common tariff applies to the import of goods across the external borders of the EU. Once goods are cleared by customs authorities upon entry into any EU member state, these imported goods can move freely among EU member states without any additional customs procedures. At an average of 1.6%, tariff rates in Bulgaria are particularly low.


• Bulgaria applies the EU's Common External Tariff, which means that goods manufactured and imported from within the EU are not subject to customs charges. The trade policy is, thus, largely the same as that of the wider regional bloc. The EU updated its trade policy (and by extension its import tariffs, customs, duties and procedures) in 2017.
   
• In February 2020, the Council of the EU amended the 2019-2020 import tariff quota list as so far as it relates to certain hard fish roes.


• Goods from outside of the EU will attract import tariffs which can range from 0% (for books) to 48.5% (for bicycles imported from China). Additional taxes may be payable on alcohol and tobacco products.
   
• In December 2019, the EU issued a regulation imposing an additional import duty on a number of fruit and vegetables for the period 2020-2021.


• The EU is party to some 50 free trade agreements (FTAs), and access to other markets of the countries concerned is currently mediated through those agreements. The EU's Generalised System of Preferences came into effect on January 1, 2014. Under the scheme, tariff preferences have been removed for imports into the EU from countries where per capita income has exceeded USD4,000 for four years in a row. Bulgaria is a relatively open market, but certain administrative and procedural requirements can become non-tariff trade barriers. Poor intellectual property rights protection and the need for greater transparency and predictability in the regulatory environment are common market access issues for investors.


• The EU has imposed various anti-dumping measures on a wide range of products – predominantly textiles, parts, steel, iron and machinery – on goods coming from Mainland China and a few other Asian nations in order to protect domestic industries. A number of Mainland China-origin products are subject to the EU's anti-dumping duties, including bicycles, bicycle parts, ceramic tiles, ceramic tableware and kitchenware, fasteners, ironing boards, and solar glass. On November 13, 2016, the EC imposed a provisional anti-dumping duty on imports of some of the primary and semi-processed metals from Mainland China. As of the end of December 2017 the EU did not apply any anti-dumping measures to imports originating from Hong Kong.
   
• In August 2019, the EC initiated an anti-dumping investigation on imports of certain hot-rolled stainless steel sheets and coils from Mainland China, Taiwan and Indonesia. In April 2020, a provisional duty was imposed. The investigation is still in progress. In March 2016, the EC imposed a definitive countervailing duty (8.7% or 9.0%) on imports, consisting largely of textile products, originating from India.


• In 2016 the EC introduced an import licensing regime for steel products exceeding 2.5 tonnes. The regulation was active until May 15, 2020.

Sources: WTO – Trade Policy Review, Fitch Solutions

Trade Updates

In September 2019,  Bulgaria temporarily backed off from its bid to join the EU's Schengen Agreement.

Multinational Trade Agreements

Active

1. EU Common Market: The transfer of capital, goods, services and labour between member nations enjoy free movement. The common market extends to the 27 member nations of the EU, namely Austria, Belgium, Bulgaria, Croatia, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain and Sweden.
    
2. European Economic Area (EEA)-European Free Trade Association (EFTA) (Iceland, Liechtenstein, Norway and Switzerland): While it enhances trade flows between these countries and the EU, only Switzerland is a fairly major trading partner.


3. EU-Turkey: The customs union within the EU provides tariff-free access to the European market for Turkey, benefitting both exporters and importers.


4. EU-Canada Comprehensive Economic and Trade Agreement (CETA): CETA is expected to strengthen trade ties between the two regions, having come into effect in October 2016. Some 98% of trade between Canada and the EU is duty free under CETA. The agreement is expected to boost trade between partners by more than 20%. CETA also opens up government procurement. Canadian companies will be able to bid on opportunities at all levels of the EU government procurement market and vice versa. CETA means that Canadian provinces, territories and municipalities are opening their procurement to foreign entities for the first time, albeit with some limitations regarding energy utilities and public transport.


5. EU-Japan Economic Partnership Agreement (EPA): In July 2018, the EU and Japan signed a trade deal that promises to eliminate 99% of tariffs that cost businesses in the EU and Japan nearly EUR1 billion annually. According to the European Commission, the EU-Japan EPA will create a trade zone covering 600 million people and nearly a third of global GDP. The result of four years of negotiation, the EPA was finalised in late 2017 and came into force on February 1, 2019, after the European Parliament ratified the agreement in December 2018. The total trade volume of goods and services between the EU and Japan is an estimated EUR86 billion. The key parts of the agreement will cut duties on a wide range of agricultural products, and it seeks to open up service markets, particularly financial services, e-commerce, telecommunications and transport. Japan is the EU's second biggest trading partner in Asia after Mainland China. EU exports to Japan are dominated by motor vehicles, machinery, pharmaceuticals, optical and medical instruments and electrical machinery.


6. EU-Southern African Development Community (SADC) EPA (Botswana, Lesotho, Mozambique, Namibia, South Africa and Swaziland): An agreement between EU and SADC delegations was reached in 2016 and is fully operational for SADC members following the ratification of the agreement by Mozambique. The remaining six members of the SADC not included in the deal (the Democratic Republic of the Congo, Madagascar, Malawi, Mauritius, Zambia and Zimbabwe) are seeking EPAs with the EU as part of other trading blocs, such as the East African Community and the Economic Community of Central African States.

Provisionally Active

CETA: CETA is an agreement between the EU and Canada. CETA was signed in October 2016 and ratified by the Canadian House of Commons and the EU Parliament in February 2017. However, the agreement has not been ratified by every European state and has only provisionally entered into force. CETA is expected to strengthen trade ties between the two regions, having come into effect in October 2016. Some 98% of trade between Canada and the EU will be duty free under CETA. The agreement is expected to boost trade between partners by more than 20%. CETA also opens up government procurement. Canadian companies will be able to bid on opportunities at all levels of the EU government procurement market and vice versa. CETA means that Canadian provinces, territories and municipalities are opening their procurement to foreign entities for the first time, albeit with some limitations regarding energy utilities and public transport. The EU is Canada's second biggest trading partner after the United States, accounting for around10 % of its trade in goods with the world.

Ratification Pending

1. EU-Vietnam Free Trade Agreement: The EU and Vietnam signed a trade agreement and investment protection agreement on June 30, 2019. The agreements are now waiting on the Vietnamese National Assembly for ratification.


2. EU-Central America Association Agreement (Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica, Panama, Belize and the Dominican Republic): An agreement between the parties was reached in 2012 and is awaiting ratification. The agreement has been provisionally applied since 2013.

Under Negotiation

1. EU-Australia: The EU, Australia's second largest trade partner, has launched negotiations for a comprehensive trade agreement with Australia. Bilateral trade in goods between the two partners has risen steadily in recent years, reaching almost EUR48 billion in 2018 with bilateral trade in services adding an additional EUR33 billion. The negotiations aim to remove trade barriers, streamline standards and put European companies exporting to or doing business in Australia on equal footing with those from countries that have signed up to the Trans-Pacific Partnership or other trade agreements with Australia. The Council of the EU authorised opening negotiations for a trade agreement between the EU and Australia on May 22, 2018.


2. EU-United States (Transatlantic Trade and Investment Partnership): This agreement was expected to increase trade and services, but it is unlikely to pass under the administration led by Untied States President Donald Trump against a backdrop of rising global trade tensions.

Sources: WTO Regional Trade Agreements Database, Fitch Solutions

Foreign Direct Investment

• Value Added Tax: 20%
• Corporate Income Tax: 10%

Source: National Revenue Agency, Bulgaria

Important Updates to Taxation Information

• As of January 1, 2020, VAT registration is mandatory for foreign companies performing taxable supplies in Bulgaria for which VAT is due by the supplier, irrespective of their taxable turnover.
   
• Taxation in Bulgaria is generally reasonable, with personal income and corporate tax rates generally set at 10%. However, high VAT and social security contributions create a heavy tax burden for Bulgarian employers and businesses, and a stagnant and inefficient bureaucracy increases delays excessively. These create an unattractive taxation environment for investors.


• The taxability of subsidiaries or branches of foreign commercial operations active in the country would depend on the existence of a bilateral treaty for the avoidance of double taxation between Bulgaria and the entity's host nation. To this end Bulgaria has concluded 68 agreements on the avoidance of double taxation, including the United Kingdom, the United States, Russia, Germany and Japan. This is a sizeable number and greatly reduces risks to investors and businesses seeking to operate in Bulgaria.

Foreign Workers

Foreigners may reside in Bulgaria for short-term periods (90 days from the date of entry), continuous stay (one year), long-term periods (with an initial authorised period of five years renewable) and permanently (for an indefinite period).

Foreigners can obtain continuous residence permits in the following circumstances:

• The foreigner is engaged in commercial activity in Bulgaria and has at least 10 Bulgarian citizens employed.
• The foreigner is a specialist staying in Bulgaria under international treaties.
• The foreigner is a representative of foreign companies.

 Localisation Requirements

Foreigners can obtain a work permit under the following conditions:

• No Bulgarian citizenship is required for the position under the law.
• Account is taken of the development and public interest of the national labour market.
• The total number of foreign employees of the local employer does not exceed 10% of the average number of staff on the payroll for the preceding 12 months.
• The conditions of labour and remuneration of foreigners are not less favourable than those for the comparable Bulgarian worker.

 Foreign Worker Permits

EU nationals, citizens of European Economic Area member states and citizens of Switzerland enjoy the right of free movement within the EU. They do not need to obtain a work permit or register with the National Employment Agency to work or engage in self-employment activities in Bulgaria. Individuals who do not enjoy preferential treatment who intend to work in the country under a local employment contract or under the terms of a secondment or intercorporate transfer must obtain a work permit from the National Employment Agency. The term of validity of the standard work permit is up to one year and should be renewed each year. In general, non-EU nationals may not reside in Bulgaria while their work permit application is being processed. Work permits are inexpensive, averaging around BGN600 and residence permits are around BGN500.

Sources: Government websites, InvestBulgaria Agency, Fitch Solutions

Sovereign Credit Ratings

Sources: Moody's, Standard & Poor's, Fitch Ratings

Competitiveness and Efficiency Indicators

Sources: World Bank, IMD, Transparency International

Fitch Solutions Risk Indices

Source: Fitch Solutions
Date last reviewed: November 11, 2019

Hong Kong’s Trade with Bulgaria