Review procedurei Application of exceptions for offshore companies and entities under their control
There are eight groups of exceptions to the prohibitions introduced by the Offshore Companies Act, which could be applied by the offshore companies or the entities under their control to be allowed to carry on the otherwise prohibited activities listed in Section II.i. These exceptions are subject in any case to disclosure of the individuals who are the ultimate beneficial owners (UBOs) of the company. The Offshore Companies Act provides for the following exceptions:
- the shares of the company in which the offshore company participates (directly or indirectly) are admitted to trading on an EU or EEA regulated market or equivalent regulated market;
- the offshore company is part of an economic group the parent company of which is a tax resident of a state with which Bulgaria has concluded a treaty for the avoidance of double taxation or information exchange agreement;
- the offshore company is part of an economic group the parent company of which, or a subsidiary company of which, is a Bulgarian resident entity and its UBOs are announced in the Commercial Register or its shares are admitted to trading on an EU or EEA regulated market;
- the company in which the offshore company directly or indirectly participates is a publisher of periodicals;
- the offshore company is a tax resident of a state party to the Agreement on Government Procurement under the auspices of the World Trade Organization (WTO) or state with which the EU has concluded a bilateral treaty guaranteeing access to the EU's public procurement market (in respect of the activities to which the relevant treaty applies);
- the offshore company is a tax resident of an overseas country or territory under Council Decision 2013/755/EU of 25 November 2013 on the association of the overseas countries and territories with the EU (in respect of the activities to which this decision applies);
- the offshore company is a tax resident of a state with which Bulgaria has concluded international trade or economic agreement, including obligations under the WTO's General Agreement on Trade in Services; or
- the offshore company is part of an economic group the parent company of which is tax resident of a state with which Bulgaria has concluded international trade or economic agreement, including obligations under the WTO's General Agreement on Trade in Services.
The details about the offshore company that will directly or indirectly participate in some of the 27 restricted activities, the particular exception that is relied upon and the information about its UBOs are subject to registration in the Commercial Register. The entries are to be made in the company file of the Bulgarian company controlled by the offshore company. If the offshore company performs the respective activity directly or through a subsidiary that is not registered in Bulgaria, the application of the respective exception serves as a basis for its registration in the Commercial Register.
The registration of the exception in the Commercial Register normally takes three to five business days and the refusals for registration are subject to judicial appeal. The registration of the exception in the Commercial Register needs to be completed prior to taking part in the procedure for carrying out the respective prohibited activity. The competent authority leading the procedure is responsible for overseeing the fulfilment of the requirements imposed by the Offshore Companies Act.ii Certification of investments under the IPA
To be eligible for certification under the IPA, the investments should be related to the setting up of a new enterprise, the expansion of an existing enterprise or business activity, the output diversification into new products or a fundamental change in the overall production process of an existing enterprise.
The Class A or Class B certification requires that the investments are pertinent to one or more of the following business activities specified in the IPA Regulation: manufacturing; software publishing; computer programming, consultancy and related activities; information service activities; accounting, bookkeeping and auditing activities or tax consultancy; activities of head offices; architectural and engineering activities, technical testing and analysis; scientific research and development; education; human health activities and residential care activities; warehousing and storage; office administrative and support activities; activities of call centres; business support service activities. These sector qualification requirements apply only to Class A or Class B certification and not to investments certified as priority investment projects that can be implemented in all sectors of the economy.
Among the other certification requirements, the investors have to implement the investment within three years, maintain the investment and the newly-created jobs for an additional three to five years, acquire fixed assets that are new and are purchased from third parties not related to the investor under market conditions, finance at least 40 per cent of the investment with their own or borrowed funds, excluding state aid.
The IPA Regulation establishes minimum thresholds for certification of the investments on the basis of which the investments are classified into Classes A or B. Depending on the economic sector, the Class A certification requires an investment of between 2 million and 10 million levs. The Class B thresholds are half the size of the Class A thresholds. The creation of a significant number of new jobs (100 for Class B and 150 for Class A) may result in a substantial reduction of the minimum threshold values.
The priority investment projects are investment projects that are particularly important for the national or regional economic development of Bulgaria. In the general case, the issuance of a certificate for a priority investment project requires an investment of 100 million levs and the creation of 150 new jobs. The IPA Regulation, however, introduces certain exceptions where reduced requirements apply.
Before starting work on the investment project, the investor wishing to obtain an investment certificate needs to submit an application to the Invest Bulgaria Agency (IBA) accompanied by, among other things, the investment project. The IBA appoints a working group for each applicant and issues a document obliging the Bulgarian administration to provide full cooperation to the investor in the process of obtaining the documents necessary for the investment certification. Based on the opinion of the working group, the IBA prepares a reasoned proposal for a decision on the application and submits it to the Ministry of Economy within 30 calendar days. The Minister of Economy would then have 14 calendar days to issue the Class A or Class B investment certificates or to reject certification. For priority investment projects, within 30 business days the Minister of Economy submits a proposal to the Bulgarian government for approval of a memorandum of understanding between the government and the investor. Based on the government's decision, the Minister issues or refuses to issue the certificate for priority investment project. The certification refusals are subject to judicial appeal.