Investments

Bulgaria is one of the fastest growing economies in Europe. A member of the European Union since 2007, Bulgaria has an industrialised and open free market economy for new investor. Promising sectors for foreign investors include: energy (including alternative energies), information technology, transportation, telecommunications, and agriculture.

Sound economic performance and political stability have enabled Bulgaria to attract leading foreign investors. Gradual convergence with the EU common market, fiscal prudence and a national currency pegged to the Euro have provided stability and incentives for increased trade and investment.

Bulgarian investment climate highlights:

• Stable political environment and low country risk, EU, NATO and WTO membership
• Macroeconomic and financial stability
• EU′s most favourable taxes: (10% corporate income tax; 0% in high unemployment areas; 10% flat tax on personal income)
• Strategic geographic position as a bridge between Europe and Asia
• Highly skilled, multilingual work force
• Europe′s lowest operational costs
• Favourable investment legislation
• Access to EU Structural Funds
• Free movement of capital
• Government financial support for priority investment projects
• Excellent climate, natural scenery, food and hospitality
• Unique benefit of physical residence exemption for applicants in the Investor Program for Residence and Citizenship

The Investment Promotion Act (IPA), the main legislative act regulating investment in Bulgaria, stipulates equal treatment of foreign and domestic investors. It creates conditions for improved administrative services and includes an investment incentive package. The Act encourages investment in manufacturing and renewable energy, in high-technology, as well as in education and human resource development. The Act regulates the terms and procedures for encouraging investment in the country, the activities of the state authorities in the field of investment encouragement, as well as protection of investments.

InvestBulgaria Agency (IBA) the government’s coordinating body for investment, provides information services, individual administrative services and assessment of qualification to receive investment incentives. First-class investments (investments over 70 million BGN, about USD 50 million) are deemed to be priority "Class A" investment projects. At the request of investors receiving first-class investment certificates, IBA can recommend that the competent authorities grant them free real estate (either state or municipal property). For first-class investments, the Council of Ministers may provide state financing for critical infrastructure deemed necessary for the investment plan’s implementation. Additionally, IBA represents first and second-class investors "Class B" (investments of 40-70 Million BGN, about USD 28 - 50 million) before all central and territorial executive authorities and the local self-government authorities, and processes all administrative documents. The government policy for promotion of investment is not applicable to investments in coal and steel production, shipbuilding, synthetic production, agriculture, and fisheries. In 2003, the GOB introduced tax incentives for investments in regions with high unemployment. VAT exemption on imports for investment projects over 10 million BGN (about USD 7.1 million) under certain conditions, was introduced in 2004.

The renewable energy sources (RES) sector in Bulgaria has undergone rapid development in the past few years. Large-scale hydro power is currently the main source of renewable energy, however; investment in wind, solar and biomass has increased steadily. International players, green energy arms of the international utility companies and private equity (PE) green energy funds have started to play an important role in the market. As an EU-Member State, Bulgaria has committed to reach certain levels of energy generated by RES, including 16% share of RES and 10% share of biofuels in the gross electricity consumption by 2020.

Incentives for renewable energy sources (RES) projects include:

• Mandatory purchase at preferential prices of the electricity generated by renewable energy sources
• Feed-in tariffs set by the State Energy and Water Regulatory Commission
• Connection with priority to the electricity grid
• Certificates of origin
• Eligible for incentives under the Investment Promotion Act

A decisive amendment in the Bulgarian legislation as of May 2009 is one of the significant government measures for encouragement of foreign investments providing considerable advantages for foreigners in Bulgaria. Under this investor program, foreigners and their families can receive Permanent Residence Permit and have the unique benefit to be exempted from physical residence. This law provision is tailored especially to foreign investors who have made a significant investment in the local economy and allows them to reside freely in Bulgaria for an indefinite term. To that effect they obtain Permanent Residence Permit, issued by the Ministry of Interior on the grounds of a certificate of the Ministry of Finance proving the amount and type of investment made.

Foreign-Trade Zones/ Free Ports

The 1999 Customs Act renamed the six duty-free zones “free zones.” Foreign individuals and corporations, and Bulgarian companies with 1.0 percent or more foreign ownership may set up operations in a free zone. Thus, foreign-owned firms have equal or better investment opportunities in the zones compared to Bulgarian firms.

There are at present six operational “free zones” in Bulgaria: Ruse and Vidin ports on the Danube; Plovdiv; Svilengrad (near the Turkish border); Dragoman (near the Serbian border); and Burgas port on the Black Sea. They are all managed by joint stock or state-owned companies. The government provided land and infrastructure for each zone.

All forms of production and trade activities and services may take place in the free zones. Foreign, non-EU goods delivered to the free zones for production, storage, processing, or re-export are VAT and duty exempt. Bulgarian goods may also be stored in free zones with permission from the customs authorities. With Bulgaria now in the EU, the export of goods of EU origin via the FTZs has lost importance, as the new VAT regime requires full price payment, VAT inclusive, before selling it into another EU Member State.

EU integration has encouraged regional authorities to attract outside investors and spur local economic development. In partnership with the private sector, they provide resources (ground, infrastructure, etc.) for the development of industrial zones and parks, which are different from FTZs as they do not provide for any form of preferential tax treatment. International and local investors can use the favorable factors, such as low-cost and educated labor and easy access to the local market, to relocate their business. Currently, there are a total of 35 industrial parks at various stages of development, with the most advanced being the industrial parks near Sofia, Rakovski, Panagyurishte, Stara Zagora, Silistra, Pazardzhik, Kardzhali, Dobrich, Varna, and Ruse.

Investment ratings

July 26, 2010 global rating agency Standard & Poor’s has affirmed the stable outlook for Bulgaria’s rating at BBB. According to the report, "the ratings on the Republic of Bulgaria reflect Standard & Poor′s Ratings Services′ view of the government′s strong track record of appropriate fiscal policy and low gross debt, despite the severe recession; the country′s solid growth prospects in the medium term; and its EU membership".

July 2011, the rating agency Moody′s Investors Service updated its assessment of Bulgaria′s economic situation. The credit rating is upped from Baa3 to Baa2, with positive outlook. Moody′s Investors Service says that an upgrade of Bulgaria′s ratings is contingent upon the country’s fiscal responsibility, and relative stability of Bulgaria’s financial system in unstable regional environment.

Contact information:

InvestBulgaria Agency
31 Aksakov Street, Sofia 1000, Bulgaria
Tel.: ( +359 2 ) 985-5500
Fax: ( +359 2 ) 980-1320
E-mail: iba@investbg.government.bg