Annual Report on Exchange Arrangements and Exchange Restrictions 2005
Chapter

BULGARIA

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
September 2005
Share
  • ShareShare
Show Summary Details

(Position as of April 30, 2005)

Status Under IMF Articles of Agreement
Article VIIIDate of acceptance: September 24, 1998
Exchange Arrangement
CurrencyThe currency of Bulgaria is the Bulgarian lev.
Exchange rate structureUnitary.
Classification
Currency board arrangementAn amendment to the Law on the Bulgarian National Bank (BNB) effectively established a currency board arrangement. The peg currency is the euro at the rate of lev 1.95583 per €1. The BNB is required to buy and sell euros on demand against leva on the basis of spot exchange rates that may not differ from the official exchange rate by more than 0.5%, inclusive of any fees, commissions, and other charges to the customer. Cash transactions involving an exchange rate that differs from the official rate by more than 10% require a written contract.
Exchange taxYes.
Exchange subsidyNo.
Forward exchange marketNo.
Arrangements for Payments and Receipts
Prescription of currency requirementsBalances remain on clearing accounts maintained under former bilateral arrangements. These arrangements are now inoperative, and the only transactions that take place are those that are intended to settle the balances. Valuation and settlement of the balances take place in convertible currencies.
Controls on the use of domestic currency
For current transactions and paymentsYes.
For capital transactions
Transactions in capital and money market instrumentsYes.
Credit operationsYes.
Payments arrangements
Bilateral payments arrangements
InoperativeThere are arrangements with Albania, Cambodia, Guinea, the Democratic People’s Republic of Korea, the Lao People’s Democratic Republic, and the Syrian Arab Republic. Bulgaria has outstanding transferable ruble accounts with Cuba and Mongolia.
Regional arrangementsOn April 25, 2005, Bulgaria joined the EU. Bulgaria is a member of the CEFTA and has concluded free trade agreements with Albania, Bosnia and Herzegovina, the EFTA States, Israel, the former Yugoslav Republic of Macedonia, Moldova, Serbia and Montenegro, and Turkey.
Barter agreements and open accountsThere are inactive agreements with the Islamic State of Afghanistan, Guyana, and Mozambique.
Administration of controlForeign exchange control is exercised by the MOF, the BNB, the customs administration, and the postal authorities.
International security restrictions
In accordance with IMF Executive Board Decision No. 144-(52/51)Yes.
Payments arrears
PrivateFour commercial banks that are in bankruptcy have outstanding debt-service arrears.
Controls on trade in gold (coins and/or bullion)Residents carrying out extracting, processing, or other transactions involving precious metals and stones as their business activity are obliged to register with the MOF within 14 days before starting their activity.
Controls on domestic ownership and/or tradeBanks may trade in precious metals.
Controls on external tradeResident and nonresident natural persons may export and import freely precious metals and stones or products thereof for personal use in amounts prescribed by MOF regulations. Transactions exceeding these quantities are treated as commercial goods and have to be declared to customs. The export or import of precious metals and stones by mail are prohibited except in the case of parcels with declared values. This prohibition does not apply to the BNB and the commercial banks. Imports of diamonds are subject to the Kimberley Process Certification Scheme.
Controls on exports and imports of banknotes
On exportsEffective September 1, 2004, resident and nonresident natural persons may export domestic or foreign currencies in cash without a declaration if the amount is less than the equivalent of lev 8,000 (previously lev 5,000). Amounts exceeding lev 8,000 must be declared to customs. In the case of exports exceeding lev 25,000 (previously lev 20,000), resident and nonresident natural persons must obtain a certificate from the tax authorities stating that they do not have any tax arrears and must declare to customs the origin of the funds. Nonresident natural persons may export cash amounts exceeding lev 25,000 or its equivalent in foreign currency with a customs declaration, provided the amounts do not exceed the amount of foreign currency previously imported and declared to customs. Effective September 1, 2004, the export of domestic and foreign banknotes by mail is prohibited, except in cases of parcels with declared values. This prohibition does not apply to the BNB and commercial banks.
Domestic currencyYes.
Foreign currencyYes.
On importsResident and nonresident natural persons may import unlimited amounts of domestic and foreign currency in cash; however, amounts exceeding lev 8,000 or its equivalent in foreign currency must be declared to customs.
Domestic currencyYes.
Foreign currencyYes.
Resident Accounts
Foreign exchange accounts permittedYes.
Held domesticallyThe crediting and debiting of up to the equivalent of lev 5,000 are not subject to regulations. Transfers abroad exceeding the amount of lev 5,000 may be made only by commercial banks after declaring, for statistical purposes, the reason for the transfer. For payments abroad, the declaration must be submitted on the day of the order; for receipts, within 30 days after the account of the beneficiary has been credited. In cases where amounts exceed the equivalent of lev 25,000, the transferor must submit documentation. If the transfer is related to transactions for which a BNB statistical declaration is required, the commercial bank should verify the declaration with the BNB.
Held abroadExport proceeds must be repatriated. Approval is not required, but a declaration must be submitted to the BNB within 15 days after the account has been opened.
Accounts in domestic currency held abroadApproval is not required, but a declaration must be submitted to the BNB within 15 days after a payment is made.
Accounts in domestic currency convertible into foreign currencyYes.
Nonresident Accounts
Foreign exchange accounts permittedYes.
Approval requiredTransfers abroad exceeding the amount of lev 5,000 may be made only by commercial banks after declaring, for statistical purposes, on the day of the order the reason for the transfer.
Domestic currency accountsYes.
Convertible into foreign currencyYes.
Blocked accountsn.a.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for importsNo.
Documentation requirements for release of foreign exchange for imports
OtherYes.
Import licenses and other nontariff measures
Negative listImports of certain goods—such as dangerous substances with ozone-depleting potential; machinery and equipment for air conditioning using Freon 12; or refrigerators, freezers, and other equipment using Freon 11 or 12—are banned for health and security reasons.
Other nontariff measuresNonautomatic licenses (permits) are applied to monitor trade in arms and ammunition and to protect human, animal, and plant health and life. They are required for imports of nuclear materials, radioactive substances and other sources of ionizing radiation; asbestos, asbestos products, and asbestos-containing materials and products; polygraph production for public supply; powder, explosive, and pyrotechnical materials and derivatives thereof for civil application; trinitrotoluene (TNT); certain weapons and ammunition; medications for humans; products for plant protection; veterinary medical products; live game and its genetic material; wild flora and fauna species included in the Washington Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), including live or dead species as well as parts and products thereof; alien flora and fauna species designated for propagation and breeding (except for some parrot species); military and special production, and products and technologies for possible dual (civil and military) use; narcotic and psychotropic substances; controlled chemicals used for the production of narcotic and psychotropic substances; certain types of wastes, according to the Basel Convention on Hazardous Wastes; and ozone-depleting substances, according to the Montreal and Kyoto Protocols.
Import taxes and/or tariffsThere are 22 tariff bands; import tariffs range from zero to 74% and are calculated on a transaction-value basis in foreign currency and converted to leva. The maximum rate of import tariffs for nonagricultural goods is 27%, and for agricultural goods, 74%. The arithmetic mean tariff for all products is 11.6%. The simple unweighted average level of Bulgaria’s MFN tariffs is 11.10%. The average tariff for industrial goods is 8.62%, and for agricultural products, 21.69%.
State import monopolyNo.
Exports and Export Proceeds
Repatriation requirementsProceeds from exports must be repatriated.
Surrender requirementsProceeds do not have to be surrendered; they may be retained in foreign currencies or sold in the interbank exchange market.
Financing requirementsNo.
Documentation requirements
Letters of creditYes.
OtherYes.
Export licensesAutomatic licenses (registration) are required for exports of precious metals and unsawn timber (coniferous and deciduous with a diameter at the thin end of more than 4 cm, and all wood species, as well as firewood, except for fire-burnt timber). Nonautomatic licenses (permits) are required for exports of nuclear material, radioactive substances, and other sources of radiation; gunpowder, explosives, and pyrotechnic material and their derivatives for civil uses; TNT; certain weapons and ammunition; artifacts and objects with historical, archeological, numismatic, ethnographic, artistic, and antiquarian value, as well as museum-grade natural specimens; wild plants and parts thereof, as well as tetter and moss; wild mushrooms; wild animals and parts thereof (other than those that are subject to the regulations of the Hunting and Game Protection Act); clams, sea and land snails, and frogs, including those raised on farms; live game and genetic material thereof, as well as hunting trophies, shed game horns and antlers, and game products; military products or special-purpose products, and products and technologies for possible dual use (civil and military); narcotic and psychotropic substances; and controlled chemicals used in the production of narcotic and psychotropic substances.
Without quotasYes.
Export taxesNo.
Payments for Invisible Transactions and Current Transfers
Controls on these transfersTransfers abroad exceeding the amount of lev 5,000 may be made only by commercial banks after declaring, for statistical purposes, the reason for the transfer.
Trade-related payments
Indicative limits/bona fide testPayments abroad for trade purposes that exceed lev 25,000 are subject to documentary requirements.
Investment-related payments
Indicative limits/bona fide testPayments abroad for investment purposes that exceed lev 25,000 are subject to documentary requirements.
Personal payments
Indicative limits/bona fide testPayments abroad exceeding lev 25,000 are subject to documentary requirements.
Foreign workers’ wagesForeign workers’ wages may be transferred abroad, provided applicable taxes have been paid.
Other payments
Indicative limits/bona fide testPayments abroad exceeding lev 25,000 are subject to documentary requirements.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsYes.
Restrictions on use of fundsNo.
Capital Transactions
Controls on capital transactionsYes.
Controls on capital and money market instrumentsNo.
Controls on derivatives and other instrumentsNo.
Controls on credit operations
Financial credits
By residents to nonresidentsYes.
To residents from nonresidentsYes.
Guarantees, sureties, and financial backup facilities
By residents to nonresidentsYes.
Controls on direct investment
Outward direct investmentA declaration to the BNB is required within 15 days of concluding a direct investment transaction abroad. Direct investment abroad occurs when a resident (1) acquires equity participation in a nonresident juridical entity and is eligible to exercise more than 10% of the voting power at a shareholder meeting, (2) extends a loan for the abovementioned purpose, (3) makes additional investments to an existing direct investment, or (4) acquires real estate for business purposes. Registration is not required for investments in amounts up to the equivalent of lev 25,000; however, for purposes of balance of payments statistics, such transactions must be declared to the BNB within 15 days of their conclusion. For investments exceeding this limit, the appropriate documents must be submitted to a domestic bank.
Controls on liquidation of direct investmentNo.
Controls on real estate transactionsFor purchases exceeding lev 5,000, the appropriate documents must be submitted to a domestic bank.
Purchase locally by nonresidentsNonresidents may not purchase or own land. If they inherit land, they must dispose of it within three years. Foreign citizens and foreign legal entities may acquire the right of ownership in premises and limited property rights to real estate, unless otherwise provided by law. A foreign state or an intergovernmental organization may acquire right of ownership in land, premises, and limited property rights to real estate on the basis of an international treaty, by way of legislation, or through an act of the Council of Ministers.
Controls on personal capital transactions
Loans
By residents to nonresidentsYes.
To residents from nonresidentsYes.
Provisions specific to commercial banks and other credit institutions
Borrowing abroadPrior registration with the BNB is required if the bank is licensed to carry out only domestic transactions.
Maintenance of accounts abroadPrior registration with the BNB is required if the bank is licensed to carry out only domestic transactions.
Open foreign exchange position limitsEach bank must maintain daily (1) a maximum ratio of up to 15% between its open position in any particular currency and the amount of its own funds, excluding the euro; and (2) a maximum ratio of up to 30% between its net open foreign currency position and the amount of its own funds, excluding the euro.
On resident assets and liabilitiesYes.
On nonresident assets and liabilitiesYes.
Provisions specific to institutional investorsNo.
Other controls imposed by securities lawsNo.
Changes During 2004
Arrangements for payments and receiptsSeptember 1. The limit on the amount of banknotes that may be exported without a declaration to customs was increased to lev 8,000 from lev 5,000. The amount above which the customs declaration required information on the origin of the funds and any tax arrears was increased to lev 25,000 from lev 20,000.
September 1. The export of domestic and foreign banknotes by mail was prohibited, except in cases where the value is declared. This prohibition does not apply to the BNB and commercial banks.
Changes During 2005
Arrangements for payments and receiptsApril 25. Bulgaria joined the EU.

    Other Resources Citing This Publication