REPUBLIC OF BULGARIA NATIONAL ASSEMBLY ECONOMIC ACTIVITY OF FOREIGN PERSONS AND PROTECTION OF FOREIGN INVESTMENT A C T Promulgated State Gazette No. 8/28.01.1992 Amended SG No. 92 & 102/1995 Purpose Article 1 (1) This Act shall establish the terms and procedures under which foreign persons may undertake economic activity in the Republic of Bulgaria, and under which foreign investment shall be protected. (2) The Council of Ministers may decree that the provisions of this Act shall be wholly or partially inapplicable to economic activity and investments by foreign persons from countries which discriminate against Bulgarian companies or citizens. Foreign Persons Article 2 (1) For the purposes of this Act, a foreign person shall mean: 1. a legal person which is registered abroad; 2. an association which is not a legal entity and is registered abroad; 3. a natural person - foreign citizen who permanently resides abroad. (2) A Bulgarian citizen, who is also a citizen of another country, shall adopt either Bulgarian citizenship or foreign citizenship within the meaning of this Act. Right to Undertake Economic Activity Article 3 (1) A foreign person may carry on economic activity in this country and may acquire shares or interest in companies under the procedures established for Bulgarian citizens and legal persons, and shall have equal rights with them, unless otherwise provided by this Act.
(2) A company with foreign participation shall have the same rights as those of a company with no foreign participation, except in cases provided for in this Act. (3) No restriction may be made on the maximum amount of foreign participation in a newly formed or existing company. (4) A foreign natural person shall procure a permit for permanent residence in this country if such person: 1. registers as a sole trader; 2. participates in a co_operative association; 3. participates in a general partnership; 4. is an unlimited liability partner in a limited partnership or a partnership limited by shares. (5) A foreign person may be deprived of permanent residence by the Minister of the Interior only in cases provided for by law. The administrative action, whereby the right to permanent residence is revoked, shall be subject to appeal under the Administrative Procedure Act. (6) A foreign natural person or a company, which is not a legal entity under its national law, may register a branch if registered for the purpose of undertaking economic activity (as a trader) under its national law. Commercial Agencies Article 4 (1) A foreign person, which has the right to undertake commercial activities under its national law, may open commercial agencies in this country which shall be registered with the Bulgarian Chamber of Commerce and Industry. (2) The agencies under the foregoing paragraph are not legal entities and may not carry on economic activities. (3) Transactions between a foreign person and local persons for the purposes of a commercial agency registered by such foreign person pursuant to paragraph (1) shall be subject to procedures governing transactions between local persons. Restrictions Article 5 (1) A foreign person may acquire ownership of buildings and limited property rights in real property. A foreign person may not acquire a home otherwise
than by building right exercised by such person, or under a procedure established by law. (2) No foreign person, neither through a branch, nor as a sole trader, may acquire ownership of land. No company with more than fifty percent foreign participation may acquire ownership of agricultural land. (3) A foreign person or a company where such person, directly or through other companies with foreign participation, holds a majority of votes or the power to prevent decisions from being taken, needs to obtain permission in the following cases: 1. (Amended, SG No. 102/1995) manufacture of arms, ammunition, and accoutrements; 2. banking and insurance activities, and participation in banking and insurance companies; 3. acquisition of real estate in particular geographic areas designated by the Council of Ministers; 4. Repealed, SG No. 92/1995; 5. participation, with voting majority or powers to prevent decisions from being taken, in a company which undertakes activities, or owns property, covered by these items. (4) Transactions inconsistent with this Article, or such as effected by misrepresentation, shall be declared null and void by court ruling on a prosecutor's appeal or a claim of parties concerned. In this case, what has been contributed by the party in bad faith shall be confiscated for the State. Applications for Permission Article 6 (1) Permission required by paragraph (3) of the previous Article shall be given by the Council of Ministers, or an agency authorized by the Council of Ministers. Permission for banking activities and for participation in banking companies shall be given by the Managing Board of the National Bank of Bulgaria. (2) The Council of Ministers, and the National Bank of Bulgaria respectively, shall publish in the State Gazette (SG) the conditions which need to be met for permission to be given under paragraph (3) of the previous Article. (3) The Council of Ministers shall consider applications within forty_five days of receipt. The National Bank of Bulgaria shall consider requests for banking activities within six months of receipt, and in the case of requests for
participation in a banking company, within three months of receipt. Reasons shall be given for the denial of an application. Priority of International Treaties Article 7 Where an international treaty, to which the Republic of Bulgaria is a party, provides more favourable terms for the undertaking of economic activities by foreign persons, such more favourable terms shall be applied. Subsequent Amendment of the Law Article 8 Lawful economic activity and lawful investments may not be affected by subsequent statutory restrictions. The same shall apply to activities initiated, and rights acquired, under statutes preceding this Act. Foreign Investment Article 9 (1) For the purposes of this Act, foreign investment shall mean any investment made by a foreign person, including such an investment as made through a branch or in the capacity of a sole trader, or made by a company with more than fifty percent foreign participation, in: 1. shares and interest in companies; 2. ownership of, and limited property rights in, real property; 3. ownership of an enterprise; 4. bank deposits; 5. bonds, treasury bills, and other securities issued by the Government or Bulgarian legal entities; 6. longer than five-year term credit. (2) The acquisition of ownership of real property by companies with more than fifty percent foreign participation shall be deemed foreign investment as well. (3) Foreign investment shall also mean gains in the value of any investment under these paragraphs. Protection of Foreign Investment
Article 10 (1) The property of a foreign person within the meaning of this Act shall not be subject to expropriation except for particularly important state needs which cannot otherwise be satisfied. Expropriation may not be caused by any subenactment. (2) Expropriation and compensation are effected by an order of the Minister of Finance. (3) The expropriated property and the property granted in compensation shall be valued at market prices current at the date of expropriation. (4) The property granted in compensation shall be equivalent to the expropriated property and situated in the vicinity thereof or, subject to the owner's consent, elsewhere. (5) Possession of the expropriated property may not be taken unless the owner has been duly compensated. (6) Where compensation is in the form of another property, any difference between the value of that and the value of the expropriated property shall be paid by the State or the owner, as the case may be. (7) Subject to the foreign person's consent, compensation may be monetary. (8) An expropriation order shall be subject to appeal before the Supreme Court under the Administrative Procedure Act, affecting the grounds for expropriation, and the appraised value of the property, the type of compensation, and any other element of such an order as well. Registration of Foreign Investment Article 11 (1) Foreign persons shall register their investments made in this country, and any related changes, within thirty days of the date that such investments or changes occur. Bank deposits shall not be subject to registration. (2) Foreign investments shall be registered by statement before the Ministry of Finance according to a sample form as approved and published by the same. Claims of Foreign Persons Secured Article 12 The claims of foreign persons in levs or foreign currency may be secured by pledge or mortgage. A pledge shall be valid, even if the debtor retains possession of the subject property, provided that a written contract, duly dated, exists. No permission shall be required for the recording of a mortgage.
Repatriation of Funds Article 13 (1) A foreign person shall have the right to purchase foreign currency from Bulgarian banks, for the purpose of transferring such currency abroad, in respect of: 1. lev income derived from investment; 2. compensation for an investment expropriated for state needs; 3. liquidation quota upon termination of an investment; 4. proceeds from the disposal of an investment by sale; 5. lev proceeds from foreclosure of pledge or mortgage to recover a claim in foreign currency so secured pursuant to Article 12. (2) A foreign person may transfer abroad the foreign currency purchased in this manner subject to filing a certificate of taxes duly paid. Employment and Insurance Relations Article 14 (1) Employment relations between a foreign person - a sole trader, a company with more than fifty percent foreign investment, or a branch or an agency of a foreign person - and employees - Bulgarian and/or foreign citizens shall be governed by the rules laid down in this Article. (2) Employment relations between persons under the previous paragraph shall be governed by a contract of employment. Such a contract of employment may not be inconsistent with the provisions of the Bulgarian labour legislation relative to: 1. the written form of such contracts; 2. maximum working hours, the minimum duration of time off_work between week days and between weeks, and of the annual paid leave; 3. the minimum national wages; 4. the minimum notice of contract termination, where such is agreed upon or required by law, and the minimum amount of compensation for contract termination with or without notice; 5. the employer's liability for damage on account of work_related injuries or occupational diseases;
6. occupational hygiene and safety requirements. (3) Bulgarian citizens employed by persons under paragraph (1) shall be fully insured by the employer as required by Bulgarian insurance law. (4) Foreign employees shall be insured by the employer against temporary and permanent disability. The insurance premium shall amount to twenty percent of gross monthly wages. Any additional insurance coverage may be agreed upon by the contract of employment. (5) Foreign employees under a contract of employment with companies with more than fifty percent foreign participation, or with a foreign person registered as a sole trader, or with a branch or agency of such person, shall have the right to purchase foreign currency in respect of up to seventy percent of wages and in respect of any compensations under the contract of employment, and personal insurance received. (6) Labour disputes between employers under paragraph (1) and Bulgarian citizens shall be decided by Bulgarian courts, and where the employee is a foreign citizen, disputes shall be resolved in accordance with the terms of the contract of employment. (7) With respect to any matter of employment and insurance relations with the employer under paragraph (1) not covered by the contract of employment, the provisions of Bulgarian labour and insurance law shall apply. Foreign Currency Transactions Article 15 (1) A foreign person may open accounts and make foreign currency and lev bank deposits, and dispose of shares, bonds and other securities. (2) The transactions of a foreign person, effected through a branch or by such person in the capacity of sole trader, shall be subject to the procedure applicable to local persons. (3) Where local persons have the right to make foreign currency payments abroad for the account of foreign persons, such payments may be made in this country, including payments by cheque, promissory note or bill of exchange. Penalties Article 16 (1) Any foreign person, who undertakes economic activity in this country without obtaining a permission, if it is required, shall be fined an amount equal to twice the amount of profit made in Bulgaria, as established by tax authorities, but in any event not less than 50,000 levs.
(2) Any foreign person, who fails to register his investment according to Article 11, or who misrepresents facts in the process of registration, shall be fined an amount equal to one_tenth of the value of the unregistered investment. (3) The offence shall be ascertained by the competent authorities of the Ministry of Finance, and the fine shall be ordered by the Minister of Finance, which actions shall be subject to appeal under the Administrative Offences and Penalties Act. CONCLUDING PROVISIONS 1 The Foreign Investment Act (SG, No 47/1991; amnd. SG, No 49/1991) is hereby repealed. 2 This Act is hereby referred for enforcement to the Council of Ministers. This Act was passed by the Thirty_Sixth National Assembly on the sixteenth day of January one thousand nine hundred and ninety_two and the State Seal was affixed hereto. Chairman of the National Assembly:Stefan Savov