INCENTIVES
Investment incentives are available to companies registered in
Bulgaria, regardless owner nationality.
1. The Investment Encouragement Law regulates the terms
and procedures of investing in Bulgaria.
The Investment Encouragement Law sets forth preferential treatment
measures for investments meeting certain criteria specified as follows:
1. 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;
2. New jobs to be created;
3. The investment project to be implemented
within 3 years;
The measures are differentiated according to the class of the investments,
as the latter are grouped in three classes, depending on the investment
project value. The value thresholds are set forth in the Rules on
the Enforcement of the Investment Encouragement Law as follows:
1st class – investment over BGN 70 million (€ 36 million);
2nd class – investment from BGN 40 to 70 million (€ 20-36 million)
3rd class – investment from BGN 10 to 40 million (€ 5-20 million)
For all investment classes, central and territorial executive authorities,
as well as local self-government authorities provide administrative
services (issue of licences, permits, etc.) to
investors within time limits which are 1/3 shorter than the normal
ones.
Apart from faster administrative service, 3rd-class investments
receive information services by InvestBulgaria
Agency as follows:
- Country economic analysis and sector information materials.
- Information about potential partners in the country
- Advice regarding all administrative procedures concerning the
implementation of the investment project.
For 2nd-class investments InvestBulgaria Agency provides investors
with:
- Information services and
- Individual administrative services with respect
to all central and regional bodies of the Government. Investors
will 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
as may be required under the existing legislation.
For 1st-class investments, InvestBulgaria Agency assists investors
by providing:
- Individual informational and administrative services
- Assistance with real estate “titling” issues
– On the 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 or on preferential prices.
- Resources for building elements of technical infrastructure,
necessary for the implementation of the investment plan to the borders
of the investment project site
2. Programmes and measures for employment of young people
and disadvantaged people on the labour market in Bulgaria
1. If the following requirements are met, the Employment Agency
may cover the sums for salaries and the due installments on account
of the employer to the funds of Social Security Institute and to
the Health Insurance Fund for the duration of the employment contract
for each hired person (but for no longer than 12 months), as well
as the expenses for training for acquiring professional qualification
(no longer than 6 months).
Requirements:
- The person has to be directed by the division of the Employment
Agency on the basis of 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 employer who admits for
training for acquiring professional qualification and/or work on
probation unemployed persons under 29 years of age, directed by
the divisions of the Employment Agency on the basis of the contract
concluded, for the term of education or work on probation, but for
no longer than 6 months.
Programmes and measures for training during the lifetime:
1. An employer who provides maintaining and improvement of the qualification
of the hired workers and employees can apply for granting of half
of the maximum determined size of the sums for training of one person
(the maximum sum is BGN 450 according to the National Operative
Employment Plan).
Steps of the procedure:
- The local division of the Employment Agency - “Employment bureau”
announces every month on the information board and in at least two
local or regional mass media the encouragement measures, for which
contracts can be concluded with employers during the following month
- The employer submits an application at the local “Employment bureau”
and files a declaration to preserve the employment of the employees
for at least 6 months after the successful end of the training
- In 3 days term after the expiry of the term for application the
Council for co-operation discuss the submitted applications and
propose to the director of “Employment bureau” list of the employers,
with whom contract could be concluded during the respective month
- List of the approved employers is put on the information board
of the “Employment bureau”
The employer has the right to carry out training for acquiring professional
qualification appointing a training organization, within the frames
of the maximal size of resources for training of one person (BGN
450).
3. a) Tax incentive for investments in regions with high
unemployment
As of 1 January 2005 corporate income tax in Bulgaria is
15%.
Regions with high unemployment
Incentives are available for investments in high unemployment regions
included in a list approved by the Minister of Finance. The incentives
are subject to some advance and subsequent filing requirements and
notifications. Where the value of the exemptions/incentives and
other state aids for regional development exceeds BGN 75 million,
a clearance from the Commission for Protection of the Competition
is required. Where the amount of the state grants and subsidies
(excluding the grants provided tax incentives) does not exceed BGN
200,000 in a three-year period, the tax incentives can be used under
less strict conditions.
Tax exemption for manufacturing companies
Manufacturing companies which invest in high unemployment regions
are entitled to complete exemption from corporate income tax,
subject to the following basic conditions:
- All business sites and premises of the taxpayer have to be located
in the respective high unemployment region;
- All assets of the taxpayer (except for cash in bank accounts and
investments in associates and subsidiaries) have to be located in
the respective high unemployment region;
- The taxpayer should not have outstanding and non-disputable liabilities
for taxes or social insurance or penalty interest thereon for the
respective year in which the exemption is claimed;
The amount of the tax credit for each year should be invested
in manufacturing activities within a period of three years after
the end of the year in which the exemption was claimed.
The eligible investment should consist of fixed tangible assets
or licenses, patents and know-how at a value not exceeding 25% of
the costs of the fixed tangible assets. The investor is also required
to invest own funds of at least 25% of the amount of tax credit.
Some other additional conditions are also required to be met. The
assets acquired could not be disposed for a period of 5 years, except
for in cases of merger or reorganization.
The incentive is available for a period of five subsequent
years, subject to meeting its conditions in each respective
year. If during the five-year period the respective region is excluded
from the list of the high unemployment regions, the incentive survives
the exclusion and can be applied until the expiry of its term. Where
a company started preparatory activities for investing in a high
unemployment region, but prior to commencement of manufacturing
the region was excluded from the list, the company is still eligible
to use the incentive for a period of 4 years.
High unemployment municipalities providing opportunities
for corporate tax breaks in 2005 (in green):
3. b) Dividends and liquidation shares, calculated by a
local person in favour of a foreign natural or legal person, local
for an EU member-country, are not subject to withholding tax under
the conditions that:
1. According to the tax legislation of the respective EU member-country
the person is considered as local of this country for tax purposes
and by force of an agreement for avoiding the double tax levying
with a third state is not considered as local person of a state
out of the EU
2. The person is levied with corporate tax, without having right
of choice or exemption from levying with this tax
3. The person is the actual possessor of the income and holds at
least 20% of the shares/stocks of the local entity
3. c) Special preferential VAT regime for imports of goods
necessary for implementation of an investment project
VAT-registered investors performing certain eligible investment
projects are entitled to import assets needed for the project without
effective payment of import VAT. 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 investment rules, the investor
needs to obtain an advance approval from the Ministry of Finance.
In order to receive the approval, the investment project must meet
certain conditions:
- The size of investment should be at least BGN 10 million (EUR
5 m) for a period not exceeding 2 years;
- The period for the completion of the project should not exceed
two years;
- The project should result in creation of at least 50 new jobs;
- The project should be eligible for state aids for regional development;
- The investor should prove an ability to finance the project.
4. Reduction of the corporate tax base with the expenditure
made for research and development (R&D) in cooperation with
research institutes and/or universities
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