Investments in Bulgaria are one of the main source of income of the country. They form a large part of the country’s GDP and this is why the foreign direct Bulgaria investments are very important for the economy of the state. Even though Bulgaria appears to be less appealing for investments that Romania, a large quantity of foreign Bulgaria investments still flows in the country in various sectors like food processing, IT, logistics and many others because of the many advantages they receive in Bulgaria.
The term “investment” comes from the Latin word “investitio” which means to invest. The investment in Bulgaria is a long term putting money or capital into acquiring a financial tool or other assets in order to achieve a profitable return in the form of interest, other income or increased value of the instrument. The investment in Bulgaria is the action of putting money or assets to achieve practical actions for income growth or other effects.
Depending on the source, the Bulgaria investments can be foreign and domestic.
- The foreign Bulgaria investments is putting money from a foreign natural or legal persons or a branch in a particular business like manufacture, expanding office, real estate, bonds, stocks, credits, intellectual property, licenses and many others. The foreign Bulgaria investments can be then separated in 2 branches – direct and indirect.
- The domestic Bulgaria investments are those, made by different natural or legal persons or institutions in the country. They are the main source of retained earnings.
The indirect foreign Bulgaria investments are those, who give the investor the right to control a certain part of the profit. They don’t provide him with long term relations with the business or the manufacture. The main purpose of indirect foreign investments is to participate in the division of incomes and purchasing corporate bonds, stocks and obligations. The indirect foreign Bulgaria investments are not strong enough to give the investor major control over the company and its management.
The direct foreign Bulgaria investments are the most common type of investments and one of the main instruments to influence global economy. They are investments in Bulgaria usually in the forms of a controlling ownership in a business or manufacture established in one country and that is controlled from an entity, based in a different state. The direct foreign Bulgaria investments feature the movement of capitals with which an investor is granted property and long-term interest in a business or a firm in the economy of another country. Usually direct Bulgaria investments include many types of operation like merges, acquisitions, establishment of new facilities or offices, reinvesting profits and others.
The foreign direct Bulgaria investments can be divided in two main branches – organically and inorganically.
- The inorganically direct Bulgaria investments are those, which involve buying the whole company in the country targeted. This means a foreign investor buying a whole manufacture or business, established in the Republic of Bulgaria.
- Organically Bulgaria investments are those, that include expanding operations of an existing business or manufacture in a particular country, in this case Bulgaria.
The politics, that encourage direct foreign Bulgaria investments are in help of the development of the country’s economy. Some of the main motives of the Legislative organs in Bulgaria come from the idea that the foreign investors will share experience with the local businesses. This is the example of joint venture companies as direct foreign Bulgaria investments. The other thing is that former employees of businesses with direct foreign Bulgaria investments, can decide to relocate in the country and start a local firm. That will make the labor market more dynamic. Other benefits from the direct foreign Bulgaria investments is the collaboration between foreign investors and local contractors. When investing in the manufacture the foreign investors need to collaborate with contractors which will provide them with the resources needed. This gives the local providers the opportunity not only to communicate with businesses interested in direct foreign Bulgaria investments but to sign contracts and work with them.
The flow of direct foreign Bulgaria investments leads to the creation and development of different segments of the manufacture and other businesses. These activities have a favorable influence on the Bulgarian economy. Through the direct foreign Bulgaria investments, we can achieve the transfer of new knowledge and technologies, creation of jobs and raising the qualifications of the labor force. The direct foreign Bulgaria investments have a positive influence over specific branches of the manufacturing process, regions or the overall economy of the country.
The direct foreign Bulgaria investments have a great impact on the country. They are very important for every state with open economy and low income level. In the period before 1997 the foreign direct Bulgaria investments are almost non existing. The period between 1991 and 1997 is very difficult for the Bulgarian economy with the lack of investments in Bulgaria in general. In the next 5 years (between 1997 and 2002) the foreign Bulgaria investments are around 6% if the total GDP of the country. In the period of vast economic growth (between 2003 and 2008) the share of the foreign Bulgaria investments is almost 18% of the GDP of the country. With the beginning of the economic crisis the foreign Bulgaria investments drop with almost 4% of the GDP. These numbers show that the country is a preferred place to invest and establish new branches and facilities.
Significant growth of foreign Bulgaria investments can be observed in the period from 2005 and 2008. In this period more than 50% of all direct foreign Bulgaria investments, made from 1996 to 2014, are achieved in just 3 years (from 2005 to 2008). In the period after the global economic crisis, the flow of foreign Bulgaria investments has shrunk significantly. Now, slowly but steadily, they continue to recover and restore the growth.
The increasing of foreign Bulgaria investment in the country and in many other Eastern European countries is a trend, that began with the accession of Bulgaria and Romania to the European Union. This has brought new light of interest towards the region and the possibilities of investments in Bulgaria. The foreign investors in Central and Eastern Europe try to use the potential of the European internal market through investments in various fields such as construction, real estate and trade. During the period between 2006 and 2008 Bulgaria investments were widely preferred from foreign investors. In 2007 the direct foreign Bulgaria investments were calculated to be more than 1600 dollars per capita in the country. These numbers outpaced substantially almost all countries in Central and Eastern Europe.
- According to the Bulgarian National Bank, around 25% of all the direct foreign Bulgaria investments in the period between 1996 and 2014 were invested in construction and real estate. This part of the foreign Bulgaria investments is with a total amount of 10,8 billion euros.
- The second branch, that is mainly financed with foreign Bulgaria investments is industry. In the mining and manufacturing industries was invested the amount of 8,8 billion euros or total of 20% of the foreign Bulgaria investments after 1996.
- The financial sector has managed to attract 7,7 billion euros or total of 18% of all foreign Bulgaria investments in the 18-year period. This puts the finances in third place after construction and industry.
- Around 15%, or 6,7 billion euros, from the foreign Bulgaria investments were in different firms and companies, working in the trade sector.
- The foreign Bulgaria investments in public utilities are around 10% of all foreign Bulgaria investments or 4,2 billion euros.
- As other significant foreign Bulgaria investments can be listed investments in transport and tourism.
In the period after the global economic crisis the share of direct foreign Bulgaria investments in trade, construction, real estate and finance has dropped in comparing with the time before the crisis. On the other side, the share of direct foreign Bulgaria investments in sectors like industry, public utilities, tourism and transportation has grown in numbers. Even though some of the sectors have shrunk their share with direct foreign Bulgaria investments, the industry is still quite attractive for the investors, holding 27% of the invested capital in the country after 2009.
Throughout the years Bulgaria has worked with a lot of investors. Since 1996 one of the biggest direct foreign Bulgaria investments come from countries like the Netherlands, Austria, Greece, Great Britain and Germany. A lot of the countries – members of the Eurozone are not only the main trade partners of Bulgaria but they are also the main contributors to the foreign Bulgaria investments. Some of the biggest Bulgaria investments come from Cyprus, Russia, Switzerland and the United States of America, such as Central European countries such as the Czech Republic and Hungary. After 2009 the influence of Italy, France, Russia, Switzerland and other countries in the foreign Bulgaria investments have increased significantly.
For 2016 the main foreign Bulgaria investments came from Luxembourg, the Netherlands and Great Britain. The share of Luxembourg’s foreign Bulgaria investments is almost 20% or 135,6 million euros. The Netherlands have invested around 18,8% or 128,1 million euros. Great Britain’s share in foreign Bulgaria investments is 17,3% or 118,1 million euros.
According to many experts, direct foreign Bulgarian investments are the main source of economic growth in the country because of their influence on the GDP, the opportunity to create jobs and the stimulation to exchange technologies and knowledge. The country is often preferred for direct foreign Bulgaria investments because of several advantages of the economy:
- Natural resources;
- Labor force – the country can provide relatively high-qualified personnel and at the same time the businesses, interested in Bulgaria investments, don’t need to spend a lot of resources for salaries because of the low wages in the country;
- Macro-economic and political stability for all foreign Bulgaria investments due to the country’s membership in NATO and the European Union.
- Bulgaria also has one of the lowest corporate taxes in Europe (10%) which makes the country very suitable for direct foreign Bulgaria investments. The country also has zero taxation and tariffs on product imports from the European single market. Moreover, there is 0 % withholding tax on dividends and liquidation quotas if you are a legal entity in a country part of the European Union or EEA area.
The foreign Bulgaria investments differ depending on the sector that a business wants to invest in. This is why you need a trusted partner that will provide guidance and legal advice through the process of establishing foreign Bulgaria investments.
We at Mikov & Attorney provide all our clients with help and legal advice on every step in establishing a branch or a company in Bulgaria. We will provide assistance for every foreign Bulgarian investment with drafting the full packages of legally prescribed documents, register the company or the branch in the Commercial Register. We will provide help with obtaining licenses and permits when required by the Bulgarian laws. Our attorneys will provide every investment in Bulgaria with legal advice on the most appropriate form of structuring the business. That also includes tax issues, VAT registration, employment issues and others.
We at Mikov & Attorney will provide assistance with optimizing the governance and management of companies, representing our client at general meetings, drafting managers’ service agreements and other services. Our team provides all our clients with legal advice on commercial deals, drafting commercial agreements and representation during negotiations.
Foreign Bulgaria investments – taxation
We will be your trusted partner when it comes to advising on tax optimization of foreign companies with Bulgarian investments. Our team will provide legal advice on various issues related to corporate tax, withholding tax and other direct or indirect taxes in the Republic of Bulgaria.
Foreign Bulgaria investments – merges and acquisitions
Our team of lawyers will help all businesses and clients interested in Bulgaria investments with merges and acquisitions. We will prepare an adequate form and structure the whole transaction process with regard to every legal aspect and tax issues. We will draft every transaction document for the procedure, including discussion thereof with transaction partners.
Foreign Bulgaria investments – real estate and constructions
We at Mikov & Attorney provide all our clients interested in foreign Bulgaria investments with legal advice on the purchase or sale of real estate assets. We can provide all the foreign investors with various legal advice and service, related with drafting lease agreements and representing clients in negotiations. We also provide full legal service in carrying out construction projects in particular with drafting contractual agreements for construction, financing and other operations.
Foreign Bulgaria investments – energy, environment and administrative law
When it comes to foreign Bulgaria investments in public utilities we can provide all our clients with legal advice on all stages of the realization of a renewable energy project. We can help every foreign investor with conducting legal due diligence in relation to the acquisition or realization of renewable energy projects. We provide legal advice on the principles and rules of the energy market. When it comes to foreign Bulgaria investments in real estate and construction Mikov & Attorney gives every client with additional information and advice on environmental law in relation to the project. We can provide every client with analysis on the environmental legislation in force that can be related with the foreign Bulgaria investments. We also assure our clients with representation and advice on all administrative law aspects of the foreign Bulgaria investment.
During our many years of experience we’ve been working with companies interested in Bulgaria investments. Our attorneys have advised numerous French, Czech, German, Austrian, Spanish and Japanese companies with their Bulgaria investments in various sectors of the economy. We provide legal advice and services to small and medium enterprises. We give to all our clients competent information and advice from our attorneys which are experts in Bulgarian and European law. We at Mikov & Attorney provide small and medium enterprises with advices on every step of their Bulgarian investment starting from local establishments, merges or acquisitions and other steps. Our competent team of lawyers can provide all our clients with advice and legal services in English, French and Bulgarian language.
For every person who wants to expand his business, with an investment of finances and resources in another country, he needs a reliable partner that knows all the legislation in the state he’s going to operate in. We at Mikov & Attorney are that partner to all our clients interested in Bulgaria investments. We provide competent legal advice and solutions for all of your business’s needs!