Investment in Bulgaria kpmg.com/bg KPMG in Bulgaria Investment in Bulgaria Edition 2015 © 2015 KPMG Bulgaria OOD, a Bulgarian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative 4 | Investment inBulgaria2015 4|Investment (“KPMG International”), a Swiss entity. All rights reserved. Investment in Bulgaria 2015 | 5 Preface Investment in Bulgaria is one of a series of booklets published by firms within the KPMG network to provide information to those considering investing or doing business internationally. Every care has been taken to ensure that the information presented in this publication is correct and reflects the situation as of March 2015 unless otherwise stated. Its purpose is to provide general guidelines on investment and business in Bulgaria. As the economic situation is undergoing rapid change, further advice should be sought before making any specific decisions. For further information on matters discussed in this publication please contact Gergana Mantarkova, Managing Partner. KPMG in Bulgaria Sofia Varna Burgas 45/A Bulgaria Boulevard 3 Sofia Street, floor 2 2B Serdika Street, floor 2 1404 Sofia 9000 Varna 8000 Burgas Bulgaria Bulgaria Bulgaria Tel: +359 2 96 97 300 Tel: +359 52 699 650 Tel: +359 56 826 086 Fax: +359 2 96 97 878 Fax: +359 52 611 502 Fax: +359 2 96 97 878 [email protected] kpmg.com/bg © 2015 KPMG Bulgaria OOD is a Bulgarian limited liability company and a member firm of the KPMG network of 5 independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. © 2015 KPMG Bulgaria OOD, a Bulgarian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative 6 | Investment inBulgaria2015 6|Investment (“KPMG International”), a Swiss entity. All rights reserved. Investment in Bulgaria 2015 | 7 Contents Chapter 1 General Information 13 Geography and climate 13 Population and language 13 Infrastructure 14 Communications 17 Currency 18 Labor force 18 Political system 19 Opportunities created via EU funding 19 Bulgaria and NATO 20 Economy 21 Chapter 2 Opportunities for International Investors 25 Protection and promotion of foreign investments 25 Eligibility for investment incentives 29 Profit and capital repatriation 30 © 2015 KPMG Bulgaria OOD is a Bulgarian limited liability company and a member firm of the KPMG network of 7 independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 8 | Investment in Bulgaria 2015 Establishment of new business entities or acquisition of shares in existing entities 30 Branches 31 Representative offices 31 Capital markets 31 Concessions 32 Licensing 33 Renewable energy 34 Banking and finance 38/39 International private law 40 Chapter 3 Company Law 42 Rules applicable to all forms of business association 42 Limited liability company (OOD) 46 Joint-stock company (AD) 49 Other forms of business association 52 Commercial Register 53 Chapter 4 Real Estate 55 Types of ownership over real estate 55 Condominium ownership management 56 Evidence of title 57 Acquisition of real estate 57 8 © 2015 KPMG Bulgaria OOD is a Bulgarian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Investment in Bulgaria 2015 | 9 Project development 59 Participants in the development process 63 Chapter 5 Accounting and Auditing 66 Accounting 66 Auditing 70 Chapter 6 Taxation 73 Corporate tax 73 Taxation of individuals 84 EU social security 89 Property transfer, gift, inheritance and tourist taxes 90 Value added tax 91 Customs duties 104 Excise duties 106 Insurance premium tax (IPT) 107 Chapter 7 Employment Regulations 109 Legislation 109 Employment contracts 109 Working hours 111 Holidays 112 Medical check-ups 113 © 2015 KPMG Bulgaria OOD is a Bulgarian limited liability company and a member firm of the KPMG network of 9 independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 10 | Investment in Bulgaria 2015 Healthy and safe working conditions 113 Termination of employment contracts 114 Foreign nationals working in Bulgaria 114 Chapter 8 Foreign Nationals 115 Legislative framework and general principles 115 Visas 117 Residence permits, residence certificates and residence cards 119 Work permits 124 “EU Blue Card” residence and work permit 126 Chapter 9 Government Control 127 Public procurement 127 Concessions 129 Public-private partnerships 132 Competition and antitrust regulations 134 Supervision of the Bulgarian National Bank over the activities of credit and financial institutions 136 Investment intermediaries in Bulgaria 137 Insurance companies and insurance intermediaries in Bulgaria 137 10 © 2015 KPMG Bulgaria OOD is a Bulgarian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Investment in Bulgaria 2015 | 11 Limitations of cash payments 138 Foreign exchange regime 138 Appendix A 142 Bilateral Agreements for the Mutual Protection and Encouragement of Foreign Investment Appendix B 143 Double Taxation Treaties to which Bulgaria is a party Appendix C 146 Bilateral Social Security Agreements concluded by Bulgaria © 2015 KPMG Bulgaria OOD, a Bulgarian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International a Bulgarian limited liabilityand member firm of the KPMG network independent firms affiliated company KPMG Bulgaria OOD, © 2015 All rights reserved. entity. (“KPMG International”), a Swiss Cooperative 11 © 2015 KPMG Bulgaria OOD, a Bulgarian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative 12 | Investment inBulgaria2015 |Investment 12 (“KPMG International”), a Swiss entity. All rights reserved. Investment in Bulgaria 2015 | 13 Chapter 1 General Information Geography and climate Bulgaria is situated in South-Eastern Europe, in the eastern part of the Balkan Peninsula. It borders Romania to the north, the Republic of Serbia to the west, the Former Yugoslav Republic of Macedonia to the southwest, Greece to the south and Turkey to the southeast. The Black Sea is to the east of the country; it enables direct maritime links with the Russian Federation, Ukraine and Georgia. To the north, the Danube River separates Bulgaria from Romania. Bulgaria is strategically located along key land routes from Europe to the Middle East and Asia. Bulgaria’s total area is 110,910 sq km, with 1,808 km of land borders and 354 km of coastline. The country’s terrain is partly mountainous, with lowlands in the north and the southeast. The climate is Continental Mediterranean, it is temperate, with cold, damp winters and hot, dry summers. Population and language As per the results of the latest population census conducted by the National Statistical Institute in February 2011, Bulgaria’s population is approximately 7.36 million. Nearly 73% live in urban areas. The capital – Sofia – is by far the largest urban center having nearly 1.20 million inhabitants. Approximately 18% of the population is under the age of 19, while 63% is between the age of 20 and 64, and 19% is over the age of 65. Ethnic Bulgarians represent almost 85% of the population, while ethnic minorities of Turkish and Roma descent make up another 8.8% and 4.9% respectively according to statistics from the population census in 2011. Smaller ethnic groups in Bulgaria include Russian, Armenian and Jewish among others. Nearly 76% of the Bulgarian population is Eastern Orthodox Christian. Another 10% of the population state they are Islam. Catholicism and Judaism are also represented. Since 1990, the country’s net population growth has been negative (an average annual decrease of -0.7% was recorded for the period 2001 – 2011), in part as a result of significant outward migration, but also due to the country’s aging demographics. © 2015 KPMG Bulgaria OOD is a Bulgarian limited liability company and a member firm of the KPMG network of 13 independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 14 | Investment in Bulgaria 2015 The trend of increase in the birth rate in the country in the period 2004 – 2009 reversed from 2010 onwards and the number of births cumulatively decreased by 17.7% in 2013 compared to 2009 levels further contributing to the decrease in the population. The country’s official language is Bulgarian. Secondary languages closely correspond to ethnic background. English, and to a lesser extent German and French, are used frequently in business. Infrastructure Roads and railways A network of international highways connects Bulgaria to Western Europe, Russia, Asia Minor, the Adriatic, the Aegean, and the Black Sea. The European corridors No. 4 (from Germany to Istanbul), No. 7 (Rhine, Main, and Danube), No. 8 (from Durres, Albania to Varna), No. 9 (from Helsinki, Finland to Alexandropoulos, Greece) and No. 10 (from Salzburg, Austria to Thessaloniki, Greece) pass through the territory of Bulgaria. According to the 2013 annual statistics published by