Foreign Investments
Foreign Direct Investments (FDI) stock for the period 1992-2004 reached USD 8.2 bln. A record high FDI inflow of USD 1.4 bln was reported in 2003 and USD 2 bln is expected in 2004.
The Ministry of Economy is the government institution that sets the investment policy of Bulgaria and co-ordinates the activities of the state institutions in the field of foreign investment. In August 2004 Bulgarian Foreign Investment Agency was transformed into InvestBulgaria Agency (IBA) under the Ministry of Economy in line with the new Law on Encouragement of Investments. The Agency is now responsible for assisting both foreign and domestic investors. Its core services include: investment marketing, information and individual administrative service, pre-and after investment care, identification of suitable investment sites and potential Bulgarian suppliers and partners, up-to-date information on the investment process in the country, legal advice, sector analyses, etc.
In the last 7 years, green-fields have considerably outnumbered privatization investments.
FDI stock by sector (1999-2004)
| Sector | % |
|---|---|
| Manufacturing | 28.2 |
| Financial activities | 22.8 |
| Telecommunications | 20.6 |
| Trade and repair | 20.2 |
| Real Estate | 3.8 |
| Tourism | 2.3 |
| Electricity, gas and water supply | 1.8 |
| Others | 0.3 |
Legal framework
The Law on Encouragement of Investments (State Gazette 37 of 2004) which changed the Law on Foreign Investment of 1997, together with the Rules on the Encouragement of Investments (State Gazette 74 of 2004) outlines the general framework of the investment climate in Bulgaria.
Foreign persons may freely choose the form of investment to be performed in Bulgaria. Foreign investment is defined as any investment or increase of investment made y a foreign person or its branch, in shares or stakes of trade companies, right of ownership and limited ownership rights over movable and immovable property, debentures, treasury bonds and other kinds of securities issued by the State, by the municipalities or by Bulgarian legal persons (with remaining term until maturity not shorter than 6 months), loans and financial leasing for not less than 12 month period, right of ownership of detached parts of commercial companies with more than 50% state or municipal participation in the capital in the sense of the Law on Privatization and Post-privatization Control, intellectual property rights, rights stemming from concession contracts, etc. There are no limitations on the share participation of foreign persons in commercial companies. There are no minimum capital investment requirements, nor is prior permission for the investment needed.
National treatment
The Bulgarian Constitution and the Law on Encouragement of Investments stipulate that foreign investors are entitled to perform economic activity in the country under the same conditions applicable to Bulgarian investors unless provided otherwise by law. When international treaties to which Bulgaria is a party stipulate more favorable terms and conditions for foreign investment, these have precedence over local rules.
Guarantees to foreign investors
- Legal guarantees against adverse legislative changes foreign investment made prior to the adoption of amendments in laws imposing statutory restrictions regarding foreign investment only shall not be affected by these restrictions.
- Protection against expropriation foreign investments in Bulgaria may note be expropriated except for exclusively important state needs that cannot otherwise be met, and subject to prior and adequate compensation in the form of another immovable property in the same location, or, with the foreign investors explicit consent, in another location, or in cash if the foreign investor prefers so.
- Profit and capital repatriation foreign investors can freely purchase foreign currency and transfer it abroad upon presentation of receipts for paid taxes in the following instances: income generated through an investment; property alienation driven indemnification proceeds when for state needs; liquidation quota resulting from the termination of the investment; proceeds from the sale of investment good; sum received after the enforcement of a writ of execution.
Investment incentives
The Law on Encouragement of Investments sets forth preferential treatment measures for investments meeting the following criteria:
- The investment to be in fixed assets acquisition with the purpose of creating new or enlarging, or modernizing existing production of goods and/ or services;
- New jobs to be created;
- The investment project to be implemented within 3 years;
The incentives in this Law, however, do not apply to investment in banks, non-banking financial institutions, insurance companies, investment companies and companies with special investment purposes, managing companies, pension funds, health insurance companies, gambling companies and investments made under privatization agreements.
The measures are differentiated according to the class of the investments, depending on the investment project value as follows:
- 1st class investment over BGN 100 million
- 2nd class - investment from BGN 50 to 100 million
- 3rd class investment from BGN 10 to 50 million
(Fixed exchange rate: 1.95583 BGN/EUR)
For all investment classes, central and territorial executive authorities, as well as local self-government authorities provide administrative services to investors within time limits by 1/3 shorter than those provided for in the legislation.
Apart from speeded-up administrative services, 3rd class investments receive by the InvestBulgaria Agency information services as follows:
- pre-developed information materials
- information about potential partners and sites in the country
- information about all administrative procedures concerning the implementation of the investment project.
For 2nd class investments InvestBulgaria Agency provides:
- informatioin services
- individual administrative services with respect to all central and regional bodies. Investors have the opportunity to authorize officials of the Agency to obtain fro the corresponding competent bodies on investors` behalf and for investors` account any documents necessary for implementation of the particular investment project.
For 1st class investments InvestBulgaria Agency provides:
- individual informational and administrative services
- assistance with real estate titling: issues on a request of the 1st class investor the Agency may propose to the corresponding authorities to transfer ownership rights or establish limited ownership rights over real estate, necessary for the implementation of the investment project (private- state or municipal property) without a tender, free of charge or at preferential prices.
- resources for building elements of technical infrastructure, to the borders of the investments project site.
Where the technical infrastructure networks and facilities of the transport, water-supply, sewerage, communication, and other systems are public property, their construction will be financed from the state budget, or by the corresponding municipality on a decision by the Municipal Council; in all other cases they will be for the account of the managing operation company.
Property rights
Foreign persons in Bulgaria can acquire building, premises within a building and limited property rights (e.g., a construction right, right of use) on land. Foreign entities can acquire ownership rights over land in Bulgaria through a company registered in Bulgaria that could be up to 100% foreign property.
