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Foreign Investments in Bulgaria

Bulgaria is a great place to invest for both small investors and large corporate institutions. It has one of the most liberal foreign investment laws in the European Union. Most foreign investment occurs in the form of a joint venture with existing companies either state-owned or private or by purchasing a company through privatisation or setting up a new venture or making a portfolio investment. Law firm NYD Law explains the definition of foreign investment contained in paragraph 1, article 6 of the Investment Promotion Act.

What the Act Says

According to the Investment Promotion Act, a foreign investment is any investment or increase of an investment made by any non-resident person or a subsidiary wholly owned in the following way:

(a) as shares and interests in commercial corporations.
(b) the right of ownership to buildings and limited real estate rights.
(c) the right of ownership and limited real estate rights of the nature of physical fixed assets;
(d) the right of ownership to self-contained parts of commercial corporations wherein the State or a municipality holds an interest in the capital exceeding 50 per cent according to the definition given in the Privatisation and Post-privatisation Control Act.
(e) securities, including bonds and Treasury bills, as well as investments derived from them  issued by the Bulgarian State, the municipalities or any other Bulgarian legal person with an outstanding period of not less than six months until the bond matures.
(f) Credit, including a finance lease, extended for a term exceeding twelve months.
(g) Intellectual property i.e. the subject matter of copyright and neighbouring rights, inventions, which are patented, utility models, trade marks, service marks, and industrial designs.
(h) Rights arising from contracts about concessions and management contracts.

Complying With the Terms of the Act

If the investment falls under the definition of an investment by a foreign person in compliance with the terms of the Investment Promotion Act, the investment can be promoted through the following means:
1. Decreased waiting time for administrative services.
2. Individualised administrative services to help with the implementation of the investment project.
3. The acquisition of the right of ownership to real estate made up of private State and private municipal property.
4. Financial support for the construction of physical infrastructure elements needed for the implementation of one or more investment projects.
5. Financial support for training for the achievement of professional qualification anyone who is under 29 years of age, including interns from Bulgarian high schools, who are employed in any capacity linked to the foreign investment.

What is more, the Corporate Income Tax Act, the Value Added Tax Act and the Employment Promotion Act will govern the procedures of such foreign investments providing that they comply and qualify under the terms of these acts.

Other Points for Consideration

According to article 12(2) from the Investment Promotion Act the following conditions should be fulfilled in order to promote the investment; the investments should be related to setting up a new business or to the extension of an existing enterprise. They should also be implemented in the areas of manufacturing and the production of electricity for renewable energy sources or in the field of high technology providing the period of implementation does not exceed three years.

In principle, foreign persons may invest and perform business activities in Bulgaria but if they wish their investment to be promoted under the terms of the Investment Promotion Act the investor should apply for an Investment Class Certificate in order to protect his and the country’s interests.

Obviously, it is clear from the above explanation that the Investment Promotion Act generally applies to large investment projects, which are predominantly concentrated in the field of industry. A specific feature of the investment is its long term character. The receipt of income from the investment is postponed in time and has a lasting continuing nature. Therefore any foreign party wishing to develop a long term investment project in Bulgaria should familiarise themselves with the favourable terms of the Investment Promotion Act.

This article is provided by NYD Law