Foreign investment regime

Legal framework concerning foreign investments in Bulgaria

1. Foreign investment regime

The Law on Encouragement of Investments (State Gazette 37 of 2004, last amended State Gazette 65/2006) which changed the Law on Foreign Investment of 1997, together with the Rules on the Enforcement of the Law on Encouragement of Investments (State Gazette 74 of 2004, last amended State Gazette 78/2005) outline the general framework of the investment climate in Bulgaria.

Legal framework

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 by 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 a 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 Privatisation and Post-privatisation 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 favourable terms and conditions for foreign investment, these terms have precedence over the local rules.

Legal guarantees against adverse legislative changes

Foreign investment, made prior to the adoption of amendments in laws imposing statutory restrictions regarding foreign investments only, shall not be affected by these restrictions.

Protection against expropriation

Foreign investments in Bulgaria may not 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 investor's 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 goods
  • sum received after the enforcement of a writ of execution.

Property rights

Presently, foreign individuals and legal entities can acquire buildings, premises within a building and limited property rights (e.g., a construction right, right of use) on land in Bulgaria. Foreign entities can acquire ownership rights over land in Bulgaria through a company registered in Bulgaria that could be up to 100% foreign property.

By the Law on Amendment and Supplement of the Constitution (published, State Gazette 18/2005) the Bulgarian Constitution has been amended, liberalizing the regime for acquisition of land by foreigners. Foreign individuals and legal entities may acquire land under the terms and conditions arising from the accession of the Republic of Bulgaria to the European Union or by virtue of a ratified, published and effective international agreement. The specified amendments shall enter into force as of the effective date of the Agreement on Accession of the Republic of Bulgaria to the European Union and shall not apply to the current international agreements.


2. Investment incentives

2.1. Incentives offered to large investors

The Law on Encouragement of Investments sets forth preferential treatment measures for investments meeting the following criteria:

  • the investment to be in fixed assets 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 the 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 privatisation agreements.

Different measures apply according to the class of the investments, depending on the investment project value as follows:

  • 1st class - investment over BGN 70 million
  • 2nd class - investment from BGN 40 to 70 million
  • 3rd class - investment from BGN 10 to 40 million

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 stipulated in the respective legislation.

Apart from speeded-up administrative service, 3rd-class investments receive by 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:

  • information services, and
  • individual administrative services with respect to all central and regional bodies; investors have the opportunity to authorize officials of the Agency to obtain from 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 assists investors by providing:

  • 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 investment project site

2.2. Tax incentives for investments in depressed regions1

Companies engaged in production, including production under job processing, enjoy 100% exemption of the corporate income tax in case they meet all of the following requirements:

  • All business sites and premises, as well as all assets of the company (except for cash in bank accounts and shares or stakes in other companies) are entirely located within the administrative boundaries of a depressed region
  • In the calendar year of exemption the company should not have any outstanding tax or social security liabilities, or any penalty interests on such liabilities

Corporate income tax exemption could be enjoyed if the amount of the tax, accounted as reserves, is invested for acquiring assets necessary for the production activity within 3 years following the year of exemption. The cost of the fixed intangible assets acquired should not exceed 25% of the costs of the fixed assets. At least 25% of the asset acquisition cost has to be financed by investor's own resources, incl. bank credits. The assets acquired could not be disposed of for a period of 5 years, except for in cases of company merger or restructuring.

The incentive is available for a period of 5 subsequent years, subject to meeting the special conditions in each respective year. If, as a result of decreased unemployment, the municipality is excluded from the list of depressed regions, the incentive is applied until the expiry of the above mentioned term. If a company that qualifies for the exemption has started preparatory activities for investing in a depressed region, but prior to commencement of manufacturing the region is excluded from the depressed regions list, the company can benefit from the incentive for 4 years.

Another incentive is the possibility to take advantage of tax credit at the rate of 10% of the value of assets acquired as part of an initial investment or investment for expansion of activity in a depressed region. The tax credit can be carried forward for a period of 5 years.

Requirements: the acquisition cost of intangible assets should not exceed 25% of the costs of the fixed assets; the assets acquired for the purpose of the incentive-eligible investment cannot be disposed of for a period of 5 years, except in cases of company merger or restructuring.

Preconditions for taking advantage of the incentives:

  • The application of the corporate income tax incentives is possible only upon fulfillment of the state aids granting requirements as follows:
  • If the value of the exemptions/incentives and other state aids for regional development exceeds EUR 35.8 million, a permission from the Commission for Protection of the Competition is required
  • If the amount of the state grants and subsidies does not exceed EUR 100,000 in a 3-year period, the tax incentives can be used under less strict conditions
  • Companies in liquidation and bankruptcy or in financial difficulties, as well as companies engaged in the following activities: automotive assembly, shipbuilding, coal mining, steelmaking industry, manufacturing of synthetic fibers, agriculture and fish breeding - from the date of the EU accession (1 January 2007), cannot benefit from regional incentives.

2.3. Accelerated depreciation

The annual depreciation rate for machinery and equipment is increased from 30% to 50% for purchase of new machinery and equipment that is part of initial investment.

2.4. Withholding tax exemption

Dividends and liquidation quotas distributed by a Bulgarian company to a tax resident of a EU member state is not subject to Bulgarian withholding tax, under the following conditions:

  • The person is considered a resident of the respective EU country for tax purposes and is not considered resident of a non-EU country by force of a double taxation agreement
  • The person has held at least 20% of the shares/stocks of the local entity for at least 1 year
  • The person is levied with corporate tax at the respective EU country, without having the right of choice for tax exemption

2.5. VAT incentives

VAT-registered entities developing certain eligible investment projects are entitled to import goods needed for the project implementation (with the exception of excise goods) without effective payment of VAT on imports. Moreover, such investors are entitled to refund VAT incurred on local purchases within 10 days after filing of the tax return, provided that at least 80% of the monthly VAT charges incurred on purchases are paid through a VAT account.

In order to benefit from the special VAT regime, the investor needs to obtain a permit issued by the Minister of Finance. Approval is subject to the following requirements:

  • Investment project value should be at least EUR 5 million for a period not exceeding 2 years
  • The term for completion of the project should be up to 2 years
  • The project should create at least 50 new jobs
  • The project should be eligible for state aid for regional development
  • The investor should prove an ability to finance the project
  • The investor should not have any outstanding tax liabilities and obligatory social and health insurance liabilities

2.6. Programmes and measures for employment of young and/or disadvantaged people on the labour market

The Employment Agency may cover the salaries and the obligatory social and health insurance contributions on account of the employer for the duration of an employment contract for each hired person (no longer than 12 months), as well as the vocational training expenses (no longer than 6 months).


  • The person has to be directed by the division of the Employment Agency on the basis of a contract between the Agency and the employer
  • Unemployed up to 29 years of age without time of service
  • Unemployed up to 29 years with reduced working capacity
  • Young people from social institutions who have completed their education
  • Unemployed with permanently reduced working capacity
  • Unemployed - single parents (adoptive parents) or mothers (adoptive mothers) with children up to 3 years of age
  • Unemployed women over 50 years of age and men over 55 years of age

The same incentive is valid for employers who admit for vocational training and/or work on probation unemployed persons under 29 years of age, directed by the divisions of the Employment Agency, for the term of training or work on probation, but for no longer than 6 months.

2.7. Programmes and measures for encouraging life-long learning

Employers who invest in improving workers' and employees' qualifications can apply for a grant, amounting to half of the maximum determined size of the amounts for training of one person (the maximum amount is EUR 230).

3. Foreign exchange regulations

The foreign exchange regime is regulated by the following basic legal acts - Currency Law (State Gazette 83/1999; last amendment State Gazette 59/2006), Regulation No. 10/2003, issued by the Bulgarian National Bank (BNB), on Export and Import of Bulgarian Levs and Foreign Currency in Cash, Precious Metals and Stones, Regulation No. 28, issued by BNB, on Collecting Information by Banks about Crosborder Transfers and Payments, Regulation No. 27/2003 on Balance of Payment Statistics and Ordinance No. 4, issued by the Ministry of Finance, on the Registration Terms and Procedure and Requirements to the Activity of Exchange Bureaux.

Each local or foreign person may hold an unlimited number of accounts in any currency in any bank in Bulgaria.

The Bulgarian banks may carry out pecuniary transfers outside Bulgaria after specifying the grounds for the transfer. Documentary evidence should be produced for transfers exceeding BGN 25,000 for current international payments (imports of goods and services, transport, interest and principal payments, insurance, training, medical treatment and other purposes defined by the Bulgarian regulations). Local and foreign individuals may import and export money under the following conditions:

  • Amounts not exceeding BGN 8,000 or equivalent in foreign currency - without declaration
  • Amounts over BGN 8,000 to BGN 25,000 or equivalent in foreign currency have to be declared at the customs in terms of type of currency and amount Local and foreign individuals can export amounts over BGN 25,000 or equivalent in foreign currency after declaring to the customs authorities the origin of the money and presenting a certificate by the respective tax office for not having overdue liabilities. Foreigners have the option to declare to the customs authorities that the amount exported does not exceed the amount declared by on their last entering the country.

4. Legislative framework of concessions

Pursuant to the new Law on Concessions (published, State Gazette 36/2006, last amended State Gazette 65/2006), concession is the right of exploitation of a site of public interest, granted by the relevant principle to a concessionaire against the concessionaire's obligation to construct and/or operate and maintain the concession object at its own risk.

Objects of public interest include the following:

  • Sites proclaimed as exclusive property of the state
  • Sites, properties or parts of properties - public state or public municipal property, used for commercial activity
  • Sites, properties or parts of properties - private state or private municipal property, used for commercial activity
  • Properties or parts of properties - owned by a public organization, used for commercial activity

Concessions are generally classified as follows:

  • Concession for construction
  • Concession for services
  • Concession for extraction

The Law on Concessions establishes the following qualifying procedures for appointment of a concessionaire:

  • Open procedure
  • Restricted procedure
  • Competitive interview procedure
  • Electronic auction, as a supplementary procedure to the open or restricted procedure

Decisions for starting a concession procedure are taken by the Council of Minister on the grounds of a proposition of the relevant minister in charge (for state property sites), by the Municipal Council on the grounds of a proposition of the major (for municipal property sites) or by the relevant body of the public organization on the grounds of a proposition of the person managing the organization (for sites owned by a public organization).

Granting concessions on some sites is also regulated by special laws - the Law on Waters (for water sites), the Law on Underground Resources (for extraction of underground resources) and the Law on Roads (for national roads).

Concession contracts, irrespective of the property on the site, can be granted for a period of up to 35 years with no option for extension.

5. Legislative framework of public procurement

Public procurement procedures are regulated by the Law on Public Procurement (published, State Gazette No. 28/2004, last amended, State Gazette No. 37/2006). The law harmonizes Bulgarian public procurement legislation with the four major public procurement directives of the European Union. According to the Law, the Minister of Economy is responsible for the state policy in the area of the public procurement. The minister is assisted by the state Public Procurement Agency, which creates and manages a public procurement register.

Public procurement procedures are opened for purchase of goods, delivery of services, construction works and competition for a project.

The parties under the Law on Public procurement are assignors, candidates and contractors.

Assignors could be any of the following persons:

  • The state bodies, the President of the Republic of Bulgaria, the Bulgarian National Bank, as well as other institutions of State established by a statutory instrument
  • The diplomatic missions and the consular posts of the Republic of Bulgaria abroad, as well as the permanent missions of the Republic of Bulgaria to the international organizations
  • The bodies governed by public law
  • The combinations formed by parties referred the presedeing three items
  • The public organizations and any combinations thereof, where carrying out one or several of the activities as described in the next item herein
  • The merchants and other persons which are not public organizations, carrying out one or several of the following activities on the basis of special or exclusive rights:
  • Activities related to natural gas, heat or electric power, including provision or operation of fixed networks intended to provide public services in connection with the production, transport or distribution of: drinking water, electricity, natural gas or heat; or the supply of natural gas, heat or electric power to such networks
  • Activities related to drinking water, including the provision or operation of fixed networks intended to provide public services in connection with the production, transport or distribution of drinking water; or the supply of drinking water to such networks
  • Activities related to transport services, including the operation of networks public services in the field of transport by railway, tramway, trolley bus or bus, as well as of automated transport systems or cableways
  • Activities related to provision of a universal postal service.

A candidate or a participant in a public procurement award procedure may be any Bulgarian or foreign person or an alliance thereof.

Contractor may be a participant in a public procurement award procedure wherewith the contracting authority has concluded a public procurement contract.

Public procurement contracts are awarded following a procedure, which may take one of the following forms:

  • Open procedure - all interested persons can participate in the procedure
  • Restricted procedure - only candidates approved by the assignor could present their offers
  • Competitive interview procedure
  • Negotiations procedure:
    - With announcement (in the State Gazette) - the assignor conducts a preliminary selection and invites only the approved candidates for negotiations
    - Without announcement - the assignor invites for negotiations a limited number of candidates

Design competition procedure can be either open or restricted.

The Law similarly to the European legislation provides for special rules for the award of public procurement contracts by entities operating in transport and telecommunications, water and energy supply sectors.

6. Dispute resolution mechanisms

The national legislation in the field of arbitration consists of the Civil Procedure Code and the Law on International Commercial Arbitration, which is applicable to international commercial disputes, based on an arbitral clause, when the arbitration takes place on the territory of Bulgaria.

Bulgaria has also ratified the following international conventions in the field of arbitration:

  • Enforcement of Foreign Arbitral Awards (ratified 1961)
  • New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards
  • European Convention on International Commercial Arbitration (ratified 1964)
  • European Convention on Mutual Assistance in Penalty and Civil Matters (ratified 1994)
  • Washington Convention for Settlement of Investment Disputes Between States and Other States' Citizens (ratified 2000).
  • 56 bilateral agreements on mutual protection and promotion of foreign investment.

The most reputable arbitration courts in Bulgaria function within the Bulgarian Chamber of Commerce and Industry and the Bulgarian Industrial Association. Under the Law on Public Procurement, a specialized Arbitration Court at the Public Procurement Agency has been established (1 October 2004) to deal with public procurement disputes.

The Law on Mediation (published, State Gazette 110/2004) establishes the grounds for independent mediation services for alternative out-of-court settlement of commercial and other disputes.

The list of depressed regions is approved by the Minister of Finance each year.