Foreign direct investment in Bulgaria more than doubled in the first eight months of 2026, reaching €3.829 billion, according to preliminary figures from the Bulgarian National Bank (BNB). This represents an increase of 100.5% compared with the same period last year, although the figures may still be revised.
Most of the investment came from profits reinvested by foreign-owned companies operating in Bulgaria. These amounted to €3.095 billion, up from €2.816 billion a year earlier.
But what makes Bulgaria an attractive place for foreign investors?
Joining the eurozone is an advantage, although not necessarily the deciding factor, according to Prof. Todor Yalamov, Deputy Dean of the Faculty of Economics and Business Administration at Sofia University St Kliment Ohridski.
"I wouldn't say the eurozone is a factor that will attract investors, but it is a useful addition to the other advantages because it reduces transaction costs and currency risk," he told Radio Bulgaria.
Prof. Todor Yalamov
PHOTO Sofia University St Kliment Ohridski
"A much more important factor is the simplicity of the tax system. You don't need expensive tax consultants to navigate it. In many European countries, you can pay low taxes only if you have good tax advisers. Otherwise, you end up paying high taxes.
Another advantage, according to Yalamov, is Bulgaria's low corporate tax rate of 10%, which is particularly attractive to smaller investors. Even the 15% minimum effective tax rate applicable to qualifying large corporate groups with annual consolidated revenue of at least €750 million is highly competitive.
He believes the flat-rate tax system and the country's social security contribution thresholds offer another competitive advantage.
"The flat tax is a more important factor, along with reasonable social security contribution thresholds compared with the rest of the European market. With the same labour costs for an employer in France or Germany, an employee in Bulgaria would take home more money. This helps companies attract staff and gives Bulgaria an advantage for certain investors."
Not everyone, however, sees rising wages as good news.
"Others who came here solely because labour was cheap have started leaving as wages have risen," he added.
Yalamov points to the growing number of Italian-owned restaurants in Sofia as an example of businesses that can earn more in Bulgaria than they might in their home country. Different investors, he explains, are attracted by different advantages.
PHOTO magnific.com
"Many Greek companies have moved not just their registered offices but also their actual production facilities to Bulgaria. They did so not because labour was cheaper, but because of financial stability. That is another reason Bulgaria is an interesting investment destination."
Yet the discussion about investment tends to overlook another important aspect: Bulgarian companies investing abroad.
Such investments, Yalamov argues, also contribute to Bulgaria's economic growth, employment and competitiveness. Companies cannot continue expanding indefinitely without entering foreign markets.
"Fortunately, many Bulgarian companies are investing abroad. And some of what is recorded as foreign investment in Bulgaria is actually Bulgarian capital. If you look closely at corporate ownership databases, you'll find that some businesses classified as foreign are in fact Bulgarian."
He mentions fintech companies operating worldwide, businesses trading in petroleum products and oils, and pharmaceutical firms. One company from Veliko Tarnovo has even established a textile factory in Florida.
"Learning through investment in foreign markets is extremely useful for the next generation of companies that have taken, or want to take, the same path," Yalamov said.
PHOTO Bulgarian Investment Agency
This raises another question: what prompts Bulgarian companies to invest overseas?
One obvious answer is access to markets.
In the early years after 1990, some foreign investors entered Bulgaria simply to secure a place in the market before their competitors did. This was particularly true in food production, sanitary products and certain services. Today, however, attention is increasingly turning towards foreign entrepreneurs who choose Bulgaria as the place to establish their businesses.
"According to traditional economic theory, investment is the most important thing. Nowadays, however, entrepreneurship seems to matter more than investment, because it is more often driven by innovation and aimed at new markets.
"In other words, attracting entrepreneurs who establish their companies in Bulgaria could prove more valuable than attracting a conventional investor who simply moves here the production of something previously made in Italy."
Yalamov recalls the Italian garment factories that relocated to Bulgaria. Some eventually closed, leaving workers without opportunities to retrain.
Ultimately, attracting investors is only part of the challenge. Keeping them in Bulgaria depends not just on competitive taxes but also on the quality of public institutions and how effectively the state functions. These, Yalamov argues, are among the factors that determine whether foreign businesses choose to stay for the long term.
Editor: Elena Karkalanova