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Certification procedure

Getting certified under the Investment Promotion Act (IPA) for Class A and B investments/priority investment projects– criteria, procedures and promotion measures

 

The Investment Promotion Act (IPA) and the Regulations for Application of the Investment Promotion Act (RAIPA) introduce a system of promotion measures for initial investments in tangible and intangible fixed assets and creating new employment linked thereto, according to the European Commission Regulation (EC) No. 651/2014.

 

For attainment of Certificate for class Investment (Priority investment project) the following requirements must be fulfilled:

  • the investments must be related to the setting-up of a new enterprise, to the extension of an existing enterprise or activity, to diversification of the output of an enterprise or activity into new additional products or to a fundamental change in the overall production process of an existing enterprise or activity;
  • they must be implemented in the following economic activities specified in the Regulations for Application of this Act with the corresponding codes, identified according to the effective Statistical Classification of Economic Activities in the European Community (NACE Rev.2):

a) Industrial sector:

  • Manufacturing industry excluding economic activities under Chapter I, Art. 1, paragraphs 2 and 3 of Regulation № 651/2014;

b) services sector:

  • High technology activities in the field of information technologies and services; software publishing;
  • Aсcounting and auditing services and tax consultations;
  • Scientific research and development and professional activities of head offices;
  • Human health care and medical social care;
  • Education;
  • Warehousing and support activities for transportation, which includes supporting production activity services (operation of warehouses and transport infrastructure - airports, ports etc.)
  • Administrative and office support activities, activities of call centres and business support activities;
  • Architectural and engineering activities, technical testing and analysis.

c) All economic activities for priority investment projects

 

Other requirements for the investments:

  • at least 80 per cent of the future income must be from the products produced by the economic activities listed above;
  • at least 40 per cent of the eligible costs of the investment must be financed by the investor’s own or borrowed resources;
  • the tangible and intangible fixed assets acquired must be new and purchased at market conditions from third parties independent from the investor;
  • the investment must be maintained for at least five years for large enterprises and three years for SMEs, reckoned from the date of implementation of the investment;
  • the investment must lead to a net increase in the number of employees in the establishment/organisation concerned, employment must be maintained for at least three years for SMEs and five years for large enterprises.
  • the period of implementation must not exceed three years, reckoned from the date of award of an investment class certificate.

Promotion shall not be extended to:

 

-          the investment of any person who has been convicted by an enforceable sentence, unless rehabilitated;

-          investment in enterprises experiencing difficulties;

-          any investments for the performance of privatisation contracts under the Privatisation and Post-Privatisation Control Act, or for the performance of concession agreements for extraction of natural resources under the Concessions Act , or for extraction of subsurface resources under the Subsurface Resources Act , and in performance of compensatory (offset) arrangements;

-          activities in the coal sector, steel sector, shipbuilding sector, synthetic fibres sector, activities in the fishery;

-          activities related to the primary production of agricultural products listed in Annex I to the Treaty establishing the European Community, under Regulation № 651/2014 of the European Commission for the implementation of Art.87 and 88 of the Treaty to national regional investment aid.

Depending on their value and/or the jobs created, investments are divided into classes A, B and Priority investment projects.

 

 

 

The required threshold amount, stipulated in the Regulations for Application of the Investment Promotion Act for Class A and B certificates is as follows (in BGN):

 

In general case of investments within a single establishment in the economic activities of the industrial sector – manufacturing industry:

Class A: BGN 10 million;

Class B: BGN 5 million.

The threshold amount of investments within a single establishment in the economic activities of the services sector as: warehousing and support activities for transportation, office administrative and support activities, activities of call centres and other business support service activities not elsewhere classified:

Class A: BGN 3 million;

Class B: BGN 1.5 million.

Where the initial investment is implemented entirely within the administrative boundaries of municipalities where the rate of unemployment for the year last preceding the current year is equal or higher than the national average, the threshold amount of investments within a single establishment is:

Class A: BGN 4 million;

Class B: BGN 2 million.

The threshold amount of investments within a single establishment in the high technology activities of the industrial sector of the economy is:

Class A: BGN 4 million;

Class B: BGN 2 million.

 

The threshold amount of investments within a single establishment in the high technology activities and knowledge based activities of the services sector is:

Class A: BGN 2 million;

Class B: BGN 1 million.

Criteria for certification of investment projects class A and class B when new jobs are created:

Where the investment project  plans to create and maintain full time jobs, the threshold amounts for the Investments are decreased, as follows:

 

For the economic activities of the Industrial sector:

Class A: BGN 4 million and 150 new jobs;

Class B: BGN 2 million and 100 new jobs.

For the economic activities of the Services sector:

Class A: BGN 1 million and 150 new jobs;

Class B: BGN 0.5 million and 100 new jobs.

Where the initial investment is implemented entirely within the administrative boundaries of municipalities where the rate of unemployment for the year last preceding the current year is equal or higher than the national average, criteria for certification is the number of establishing and maintaining employment, which shall be not less than:

25 new jobs – for Class А

10 new jobs – for Class B

Where the initial investment is implemented in the high technology activities of the industrial sector of the economy criteria for certification is the number of establishing and maintaining employment, which shall be not less than:

25 new jobs – for Class А

10 new jobs – for Class B

Where the initial investment is implemented in the high technology activities of the services sector of the economy criteria for certification is the number of establishing and maintaining employment, which shall be not less than:

50 new jobs – for Class А

25 new jobs – for Class B

Priority investment projects

Priority investment projects shall be investment projects which concern all sectors of the economy according to the requirements of Regulation (EC) No 651/2014 and are particularly important for the economic development of the Republic of Bulgaria or for the functional regions in Bulgaria. The threshold amount of investments within a single establishment and the minimum average annual number of people employed, as from the date of the completion of the investment are as follows:

 

  • In general case: BGN 100 million and 200 employees.
  • Within the administrative boundaries of municipalities where the rate of unemployment for the year last preceding the current year is equal or higher than the national average: BGN 50 million and 100 employees.
  • In the economic activities of the industrial sector – manufacturing industry (code 10 – 33.2 under NACE Rev.2): BGN 50 million and 200 employees.
  • within the high technology activities of the manufacturing industry: BGN 30 million and 100 employees.
  • Within the high technology and knowledge-intensive services – education, R&D, IT, human healthcare, and professional activities: BGN 20 million and 50 employees.
  • For the development of an industrial zone and its development into an industrial park through attracting of investments: BGN 15 million and 15 employees.
  • For the establishment of the technology park: BGN 15 million and 50  employees;

The threshold amounts for the investments can be decreased with the increase in employment with the following ratio:

  • for each 100 persons employed the threshold amount of the investment required shall be reduced by 10 per cent in the general case, in the municipalities with high unemployment rate, in investments in high technology activities of the industrial sector;
  • For each fifty employees more, the threshold is decreasing with 10% in high technology and knowledge-intensive services.

The certificate determines the investment class and the rights of the investor under the law

According to the measures established by the Investment Promotion Act, investments are promoted through:

 

1. shorter term for administrative services: Class A and B;

2. individual administrative services for implementation of the investment project: Class A;

3. sale or establishing, against a consideration of limited real rights of private state or private municipal immovable property, without conduct of an auction or a competitive bidding procedure: Class A and B;

4. sale, exchange of property or establishing, against a consideration, of limited real rights over immovable of Sole proprietor companies with state or municipal participation, as well as commercial companies, whose capital is owned by sole proprietor companies with state participation  without a tender procedure or competitive bidding, at market or lower price Class A and B;

5. financial support for construction of physical infrastructure elements needed for the implementation of one or more investment projects: Class A or two or more certified investment projects implemented within the territory of an industrial zone, based on competitive procedure for evaluation and selection of investment projects;

6. Financial support for vocational training for attainment of professional qualification by the hired staff, including interns from the higher schools in Bulgaria, who have occupied the new jobs created upon implementation of the investment project (only for investments in municipalities with high unemployment rate or in the field of Hi tech activities): Class A and B, based on the competitive procedure for evaluation and selection of investment projects;

7. financial support for partial reimbursement of the contributions made by the investor for obligatory state social insurance, supplementary pension insurance and mandatory health insurance for newly hired employees for the implementation of the project: Class A and B, based on the competitive procedure.

 

Under the Investment Promotion Act (IPA), the certified priority investment projects may be promoted by the package of measures – all the measures that apply for class A and B plus the following:

1. Sale or establishing, against a consideration, of limited real rights over immovable - private state or private municipal property without a tender procedure or competitive bidding, at market or lower price but not lower than the tax assessment of the property and no state fees shall be paid in the event of changing the land use for the purposes of implementation of the project;

2. Sale, exchange of property or establishing, against a consideration, of limited real rights over immovable of Sole proprietor companies with state or municipal participation, as well as commercial companies, whose capital is owned by sole proprietor companies with state participation without a tender procedure or competitive bidding, at market or lower price, but not lower than the tax assessment of the property;

3. institutional support or public-private partnership;

4. providing grant financial aid n the following cases and under the following conditions:

a)        up to 50 % maximum aid intensity for investments in education and scientific research (Codes P 85 and M 72 according to NACE Rev.2), where at least 25 % of the threshold amount of the investment implemented up to the third year from the start of the works / activities under the investment project;

b)       up to 10 % maximum aid intensity for investments in the manufacturing industry where at least 50 percent of the threshold amount of the investment is implemented up to the third year from the start of the works / activities under the investment project.

Promotion measures under the IPA apply only to investors who have received an investment class certificate or certificate for priority investment projects. The certification requirements for the investment project are provided in the Regulations for Application of the Investment Promotion Act.

Application for award of certificate

Any investor wishing to obtain an investment class certificate or certificate for priority investment project  shall submit an application to the InvestBulgaria Agency before starting work on the investment project*.

The application is integrated document containing information about the applicant, the investment project, promotion measures, a number of declarations, etc. The application lists all documents that should be attached to it (* under § 1. Item 8 of the Supplementary Provisions of the IPA "Starting work on an investment project" shall be the start of construction activities or the ordering and delivery of tangible and intangible fixed assets, with the exception of technological and economic pre-feasibility studies).

Some of the required documents are listed below:

  1. A standard declaration form about the category of the undertaking - defined as a "small and medium-sized enterprise" or a "large enterprise" based on the information about the financial year preceding the year of filing the application; in the case of newly-established enterprises whose accounts have not yet been approved, the data is determined according to the value of the indicators for the current financial year.
  2. A declaration in a standard form for the state aid acquired by the company.
  3. Documents certifying the financial position of the person: annual financial statements for the last completed calendar year or the interim financial statements, where the person has carry out activity for less than a year.
  4. Documents certifying the capacities to finance the investment project and the sources of financing of the investment project:
    а) own resources;
    b) loan contracts;
    c) bank and other guarantees;
    d) financial lease contracts under Regulation № 651/2014, which contains an obligation to purchase the asset at the expiry of the lease, taking into account the funds for the asset only 3-year period of implementation of the investment project;
    е) letters of commitment whereby the owners of the capital undertake to finance the project;
    f) other documents required for  financing or  furnishing security.
  5. A conviction status certificate (when it may be issued in Bulgaria or countries - members of the EU) or affidavit (in other cases), issued not earlier than three months before the deadline for its submission for: sole owners of capital, managers; board members, and if the members are legal persons - for their representatives on the governing body.
  6. Opinion of the competent environmental authority on the admissibility of the investment project towards regimes defined in the approved plans for the river basin management plans and management of flood risks, as well as to the admissibility against the regime of activities in protected areas and / or protected areas, as well as the procedure applicable under Chapter Six of the Enviromental Protection Act and / or art. 31 of the Biological Diversity Act.
  7. Document certifying the absence of obligations to the state.
  8. 8. Document certifying the absence of obligations to the municipality.
  9. Under Art. 22a of IPA - a document certifying the prior consent of the property owner.
  10. Others documents stated in the application.

All documents in a foreign language must be submitted with a translation into Bulgarian language.

Progress of the procedure

Upon receipt of an application for certification with all accompanying documents and its filing, the Executive Director of the Agency or authorized by him officers of the InvestBulgaria Agency isue to applicant warranty in accordance with Annex 2 to the Regulations for Application of the Investment Promotion Act. Upon presentation of the warranty the executive authorities and their administrations  are obliged to render assistance to the investor to obtain the documents necessary for issuance of an investment certificate, and notify the agency about officers which shall provide information services.

 

Upon receipt of an application for certification, the Executive Director of the Agency or an official empowered by him designates officers of the Invest Bulgaria Agency to verify the plan for implementation of the investment project and the documents attached.

 

On the basis of the assessment performed, the empowered person prepares an opinion on the award of an investment class certificate conforming to the terms established by the Investment Promotion Act and the Regulations for Application of the Investment Promotion Act. In case the empowered officers ascertain any non-conformities and/or deficiencies in the application and the documents, the investor shall be notified in writing of the said non-conformities and/or deficiencies and shall be allowed up to two months from the submission of the application to cure the said non-conformities and/or deficiencies. On the basis of the opinion so prepared, the Executive Director provides the Minister of Economy and Energy with a reasoned proposal to award or to refuse to award a certificate within thirty days after receipt of the application.

 

The Minister of Economy, Energy and Tourism or an official empowered thereby shall examine the proposal herein and Shall issue or shall refuse to issue a Class A or Class B certificate within fourteen days of the receipt of the proposal, or Shall return the proposal and the documents attached thereto for re-assessment in the cases of non-conformity with any of the requirements of the IPA and these Regulations. The relevant investment class certificate is awarded by the Minister of Economy, Energy and Tourism or by an official empowered by him/her.

The procedure for awarding of Priority investment project is similar to the procedure for Investment class certificate up to the point where the empowered officials have prepared the positive opinion on the conformity of the project with the requirements of IPA and  RAIPA and after that the Minister of Economy and Energy shall lay before the Council of Ministers a motion for approval of a memorandum or agreement of understanding between the Government of the Republic of Bulgaria and the investor applying for the performance of a Priority investment project with the proposed package of incentives.

After the memorandum or agreement has been approved by a Council of Ministers Decision, a certificate for a priority investment project will be released by the Minister of Economy and Energy or another authorized person, in accordance with the Council of Minsters Decision.

Investment projects of municipal importance, for which a Class C certificate has been issued

 

Projects of municipal importance are promoted by investment class B when implemented within the administrative boundaries of the  specified municipality, and can be implemented in all sectors, except those mentioned in Art. 13a Item 3 of the IPA; the amount of investment certificate class C should not exceed the minimum amount of  Class B under Article 3 of the RAIPA – BGN 2 million.

 

For the promotion of investments with municipal importance, the Municipal Council shall adopt an ordinance establishing the terms and procedure for the issuing of a Class  C certificate and application of the incentives. Any investor wishing to obtain an investment C class certificate shall submit an application to the Mayor of Municipality where the incentives which would like to receive should be clearly specified

The certificate is issued by the mayor based on the decision of the Municipal Council. Investments of municipal significance, received a certificate of class C are encouraged to implement the investment project by:

  • shorter term for administrative services provided by the municipality within the territory whereof the investment is implemented;
  • individualised administrative services provided by the municipality within the territory whereof the investment is implemented;
  • acquisition of a right of ownership or limited rights in rem to immovables constituting private municipal property according to the procedure established by Art. 22a (1) Items 2 and 4 of the IPA.