Foreign Investments in Bulgarian according to the Investment Promotion Act

The definition of foreign investment is contained in paragraph 1, article 6 of the Investment Promotion Act. According to the text of the provision a foreign investment is any investment or increase of an investment made by any non-resident person or a subsidiary wholly owned thereby in:
(a) Shares and interests in commercial corporations;
(b) right of ownership to buildings and limited real estate rights;
(c) right of ownership and limited real estate rights of the nature of tangible fixed assets;
(d) 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, within the meaning given by the Privatization and Post-privatization Control Act;
(e) securities, including bonds and Treasury bills, as well as instruments derivative there from issued by the Bulgarian State, the municipalities or any other Bulgarian legal person with a residual period to maturity of not less than six months;
(f) Credit, including a finance lease, extended for a term exceeding twelve months;
(g) Intellectual property: subject matter of copyright and neighboring rights, patentable inventions, utility models, trade marks, service marks, and industrial designs;
(h) Rights arising under contracts of concession and management contracts.

If the investment by a foreign person could be considered as a foreign investment in a compliance with the terms of Investment Promotion Act, the investments could be promoted through:
1. shortened waiting time for administrative services;
2. Individualized administrative services needed for implementation of the investment project;
3. acquisition of a right of ownership or limited property to real estate constituting private state and private municipal property;
4. Financial support for construction of physical infrastructure elements needed for the implementation of one or more investment projects;
5. Financial support for training for attainment of professional qualification of persons who have not attained the age of 29 years, including interns from the higher schools in Bulgaria, who have occupied the new jobs linked to the investments.

Moreover, investments shall furthermore be promoted according to the procedure established by the Corporate Income Tax Act, the Value Added Tax Act and the Employment Promotion Act, if they fulfill the conditions provided for in the said acts.

According to article 12(2) from the Investment Promotion Act the following conditions should be fulfilled in order to promotion of the investment: the investments should be related to setting up a new enterprise or to the extension of an existing enterprise. Also they should be implemented in manufacturing industry and production of electricity for renewable energy sources or in high technology activities, the period of implementation does not exceed three years, etc.

In principle the foreign persons may invest and perform business activities in Bulgaria free but if they wish their investment to be promoted under the terms of the investment promotion act the investor should apply for issuing of an investment class Certificate for the purpose of protection of the national interests.

In relation to the above the Investment promotion act usually applies for big investment projects which are concentrated mainly in the filed of industry. A specific feature of the investment is its long term character. The receipt of income from the investments is postponed in time and has a lasting continuing character.

In conclusion if the foreign persons intend to develop a long term investment projects in Bulgaria they may avail themselves of the more favorable terms of the Investment Promotion act.

This article was created by Valova & Angelova law firm.