Regulatory and Legal
Framework to
Investments in Bulgaria
Kamen Shoylev,
New Balkans Law Office
Bulgarian Investment Forum,
Tokyo Chamber of Commerce and Industry,
14 December, 2012
Bulgaria: rule of law
• Stable and predictable rate of domestic
law-making
• Role of EU legislation
• 31 areas of acquis communeautaire
• Role of binding international treaties: a
pure monist approach to international
law
Bulgaria: rule of law
• Civil justice
• Commercial courts are trusted by
parties (€33.7 mn fee revenue vs.
€476 mn in England (2010))
• Regulators
• Administrative justice
Investment opportunities
• Three typical rationales we see:
• as a launchpad to the EU market;
• as a production and knowledge
economy base; and
• because of specific local opportunities
in energy, agriculture, infrastructure.
As an entry point to the EU
• Customs Union between Bulgaria
and the other 26 (soon 27)
countries of the EU
• The 4 Freedoms inside the EU:
• of capital;
• of workers;
• of goods;
• of establishment and services.
As an entry point to the EU
• Low or no regulatory barriers for
doing business within the EU
• An example: passportisation
• Financial intermediaries (brokerdealers)
• Insurance companies
• Banks and other credit institutions
As an entry point to the EU
• Single authorisation or licensing
regimes: eg road haulage, airlines
or e-money providers
• Non-discrimination
• Recourse to a central dispute
resolution system (European courts,
harmonisation of laws)
State aid to certified
investments
• Priority projects can be related to all
sectors, subject to EU State Aid rules
• Subsidies not given in mining, primary
agriculture and shipbuilding
• Special priority projects: ≥€50mn, ≥ 200
new workplaces over 3 years or hightech and R&D: €10m + 50 working
places
• Industrial zones’/technology parks’ setup
State aid to certified
investments
• Benefits:
• Lowest possible cost to acquire gov’t /
municipal land; waived taxes for
planning status changes
• Working group for project support
appointed by the Council of Ministers
• Financial grant scheme for up to 10%
of the investment project cost (50% in
R&D)
As a production and
knowledge economy base
• An established skills base in ICT:
‘Dell’ of the Soviet bloc
• A recent upstream migration of
businesses to higher-end services
and own products
• A cluster of some 1,000 IT companies
in Sofia
Setting up a business
• Ease - density of 7.7/1,000 (2011)
• Types available - 10, of which 2 most
frequently used
• Capital requirements - €1
(GK)/~€12,500 (~KK)
• Post-registration compliance is nononerous
• Cross-border re-domiciliation
Income tax on business
profits
• Flat rate at 10% (joint-lowest in the
EU)
• Simplified rules on reliefs and
deductions
• Withholding tax on dividends
generally at 5%
• Network of 68 DTAs, including Japan
Income tax on business
profits
• Treatment of capital gains as income
• No capital/asset taxes
• Transfer pricing - largely OECD
model
• Profits of partnerships
Other taxes and charges
and tax administration
• Transfer taxes (0.1-3% on real estate,
0.4-6.6% on inheritance estates)
• Local property taxes (0.01-0.45%
p.a.)
• VAT - EU Consolidated VAT Directive
2006
• Filing and administration
Employment
• Flexibility of hiring and firing
• Trade unionisation - shift from high to
low
• Duties of key employees and
directors
• Upholding of restrictive covenants
• Social security contributions burden
Real estate
• Centralised, comprehensive national
property register of titles inc. cadastral
and mapping information
• Use of notary system
• General ease and speed of transfer of
title
Intellectual property
• Membership of PCT, EPC, OHIM,
Berne, Rome, Paris, WIPO and
others
• Copyright - droit d’auteur to economic
rights transition - licensing issues
• Trade mark protection - robust
enforcement, recent move to
opposition procedure for national
marks
Intellectual property
• Patents: national + EPC, mooted
“enhanced coop”
• Design rights
• Database rights
Enforcement of intellectual
property rights
• Civil actions
• Criminal law options
• New initiatives
Establishing security and
financing
• Central Register of Pledges
• Ordinary pledges
• Charges by way of mortgage:
registration
• Role of Company Register
Dispute resolution
• More specialist domestic courts
• Speed
• Quality of judgments
• Costs follow the judgment
Arbitration
• Party to the New York Convention
• Arbitration regularly used both
domestically and cross-border, good
compliance and enforcement
• Multiple domestic tribunals
• ICC/LCIA/AAA/Stockholm/Vienna
popular seats
Thank you.
Questions we can help with?
• For regular updates on Bulgarian
investment topics, please visit
www.newbalkanslawoffice.com