Bulgaria: Wide open to non-EU investment


Tzvetoslav Mitev discusses opportunities for Indian companies in Bulgaria

Bulgaria’s legal framework and government policy is structured to actively attract foreign investment capital through a wide variety of incentives. The country is a member of the EU although not of the Eurozone.

Key incentives

The Investment Promotion Act encourages foreign investment in the industrial sector, the services sector and other areas of the local economy. The services sector comprises high-tech and intensive knowledge-based activities (as classified by the EU statistics office, Eurostat), R&D, education, human healthcare, logistics including transport infrastructure, etc.

Under the act, the Bulgarian Investment Agency can issue a general investment certificate class A or class B to any investor, depending on a minimum level of investment that varies from sector to sector. The lowest minimum investment for class A certificate eligibility applies to high-tech activities in the services sector, where a minimum investment of 4 million leva (US$2.7 million) is required, while a minimum of 2 million leva is needed for a class B certificate. Each certificate corresponds to a different package of incentives.

Tzvetoslav Mitev
Tzvetoslav Mitev

In addition, an investment could qualify as a priority investment project (PIP) – a project significant for Bulgaria’s national or regional economic development. Investments in PIPs offer even greater incentives. The lowest PIP minimum investment is 20 million leva and again applies to the high-tech services sector. Generally, all PIP investments must generate employment and in this sector at least 50 people must be employed. Investment amounts for PIPs could be significantly reduced as more employment is generated, however, it must be maintained for several years.

General investment certificates create the following incentives during the realization of an investment project: administrative services obtained from central and local authorities in shorter periods than the statutory ones; acquisition of state or municipal property without tender on a market price assessment; and financial support considered on a case-by-case basis for the construction of public infrastructure (roads, water supply and sewerage), for employee training and professional qualifications, and other expenditures.

PIP certificates provide additional incentives: acquisition of property rights at prices lower than the market price (but not below the tax assessment) and exemption from state fees for changing the land’s purpose of use; entry into public-private partnerships (PPPs) with regional and municipal authorities and academic organizations including universities; and the provision of grants of up to 50% of expenses for investments in education, scientific research, etc.

Setting up a company

Local legislation provides for easy online registration of all forms of legal entities known to the business world with comparatively low statutory minimum capital requirements. Most investors choose to set up a wholly owned limited liability company as it guarantees quick corporate and management decisions and is at the same time easily transferable. However, an investment could be realized through other company types.

Bulgaria also offers investors access to a labour force domestically that to a large extent is educated, English speaking and relatively cheap.


Bulgarian legislation provides for various state and municipal taxes which are not onerous. For example, value added tax is at the rate of 20%, which is neither the highest nor the lowest within the EU. In addition, Bulgaria has over 60 enforceable treaties for the avoidance of double taxation with countries including India.


Foreign investors and foreign legal entities may freely acquire the right of ownership over buildings in Bulgaria. However, such entities may not directly acquire ownership over land, woodlands and agricultural lands. Investors can overcome this prohibition by registering a company in Bulgaria, which will have the status of a local entity, even if it is foreign-owned.

Bulgaria is still undergoing privatization with public offerings and tenders of entire state-owned companies or separate units comprising assets, which might be of interest to Indian and international investors.


There is no one particular piece of legislation exhaustively regulating all forms of PPPs. However, local authorities generally prefer PPPs in the form of concession agreements, which are regulated in detail under the Concessions Act. The types of concession depend on whether they relate to construction, services or extraction. Recently, non-EU investors have shown great interest in Bulgarian mineral water sources, which are high in quality, large in number and suitable for therapeutic use.

Pending airport concession projects for the construction and operation of cargo and civil terminals in major Bulgarian cities also are open to non-EU investors. In line with local legislation, concessions are granted though an “open procedure” where any potential investor can submit an offer, not just those invited by the authority concerned. The maximum statutory term for a concession agreement is 35 years with some minor exceptions.

Structural funds

Non-EU foreign investors should also consider EU structural funds as a useful tool for financing a project and receiving other forms of support. Local entities established or owned by non-EU investors can apply for such funding.

Seven EU operational programmes are available on a local level in Bulgaria: transport, environment, regional development, competitiveness, technical assistance, human resources development and administrative capacity. The total EU budget for some of them is impressive; for example, 190 million (US$250 million) for competitiveness and 1.3 billion for human resources development.

Obtaining a residence permit

After investing in Bulgaria, some investors may consider applying for a permanent residence permit. With a residency permit, investors and their families could become EU citizens in five years. Such an opportunity is open to non-nationals of EU member states who invest over 1 million leva in Bulgaria or have increased their investment by such an amount through the acquisition of a variety of local financial instruments, shares of local companies, Bulgarian intellectual property rights, rights under concession agreements, etc.

Bulgaria has been relatively successful in its efforts to create a friendly foreign investment environment. Local legal advisers can help investors overcome any remaining gaps.

Tzvetoslav Mitev is an attorney at Georgiev Todorov & Co in Sofia, Bulgaria. He can be reached at Tzvetoslav.Mitev@georg-tod.com.