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Bulgarian Government Moves to Lure Hi-Tech Investors with State Aid
Date: 14/07/2010
Bulgarian Government Moves to Lure Hi-Tech Investors with State Aid

Bulgaria’s Cabinet has approved legislative measures providing for state aid and other incentives for foreign investments in projects entailing hi-tech industries, and research and development.

The Borisov government has adopted amendments to the Regulations for the Application of the Investment Encouragement Act.

The changes provide for a state aid to foreign investors reimbursing them with up to 50% for their spending on educational and research and development activities, and a subsidy of up to 10% of the investments in processing industries.

The state aid from the Bulgarian government will be granted if at least 50% of the planned investments have been realized by the beginning of the third year of a respective project; this requirement is lowered to 25% for projects entailing education and research and development activities. This is complemented by a requirement that the foreign investor train at least 50 people in Bulgaria.

These amendments correspond with the changes to the Investment Encouragement Act adopted in March 2010 allowing for increasing the amount of aid from Bulgaria’s state budget to foreign investors meeting certain conditions.

Thus, the legislative changes permit state subsidies not only to Class A and Class B investors but also to any kinds of specific investment projects on an ad hoc basis as long as they are defined by the Cabinet as a “priority investment project” based on the volume of the investment but also on its input into hi-tech industries, research and development activities, and the number of the created new jobs.

Investors in “priority projects” will be able to purchase properties owned by private persons, the state or municipal authorities without tenders and at a price which is lower than the market price but is higher than the tax price. They will be exempt from the required fees for changing the status of the properties.

A further benefit will be providing administrative support for the priority projects but setting up inter-institutional groups on part of the Bulgarian authorities to aid the foreign investor with any specific issues.

The measures adopted by the Borisov Cabinet Wednesday have lowered three times the requirements for receiving a Class A and Class B investor status.

Thus, in the general cases, foreign investors can achieve a Class A investor status certification in Bulgaria by investing at least BGN 20 M (the requirement initially was BGN 100 M, and was subsequently lowered to BGN 60 M), and a Class B status by investing at least BGN 10 M.

Yet, if the investments are in hi-tech industries, the thresholds are lowered further – BGN 7 M for Class A, and BGN 4 M for Class B; and even further for investments in knowledge-based manufacturing activities – BGN 4 M for Class A, and BGN 2 M for Class B.

A legal provision allows for even lower minimum requirements for investor status based on the volume of the investment if a higher number of new jobs are created with the respective project.

Topic: FDI in Bulgaria

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