June 2014

Bulgaria Investment climate and business opportunities

• Investments and economic relations

• Why invest in Bulgaria?

• Government incentives

FDI Inflow:

Source: Bulgarian National Bank

In million euro

Investments and economic relations

2006 2007 2008 2009 2010 2011 2012 20130

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

6222

9052

6728

2437

1151 1330 1070 1092

FDI Inflow:

Source: Bulgarian National Bank

Real Estate

Finance

Trade

Manufacturing

Energy

Construction

Telecom

Other

0 1000 2000 3000 4000 5000 6000 7000 8000

7936,9

7479,3

7059,5

7056,2

3490.6

2948.3

2647.4

3207.8

FDI flows by industry, 1996-2013 (€ mln.)

Investments and economic relations

Netherlands

Austria

Greece

Germany

UK

Cyprus

Russia

USA

Italy

Switzerland

0 1000 2000 3000 4000 5000 6000 7000

6306,2

5750,9

3560.1

2745.4

2383.6

2089.4

1855.3

1439.7

1401.6

1347.2

FDI by Host Country, 1996-2013 (€ mln.)

The role of Italy as a trade partner for Bulgaria:

2004 2005 2006 2007 2008 2009 2010 2011 2012 20130

200

400

600

800

1000

1200

1400

1600

1800

2000

1043.21132.5

1216.5

1392.21271.9

1092.6

1511.2

1760.8 1763.8

1925.9

1141.6

1318.4

1626.3

1872.31981.4

1334.4 1458

1695.9 1675.2

1892.8

Export Import

Investments and economic relations

……….. – Bulgarian trade relations

Why invest in Bulgaria?

WHY INVEST IN BULGARIA?

Political and business stability− EU and NATO member− Currency board− Low budget deficit and government debt

Low cost of doing business− 10% corporate tax rate (0% in high unemployment

areas)− 10% personal income tax− Lowest cost of labor within EU− Favorable office rents and low cost of utilities

Access to markets− European Union / EFTA− Russia− Turkey / Middle East

Educated and skilled workforce

Real GDP Growth:

Source: Eurostat

2006 2007 2008 2009 2010 2011 2012 2013

-6

-4

-2

0

2

4

6

8

3.4 3.2

0.4

-4.5

2 1.7

-0.4

0.1

6.5 6.4 6.2

-5.5

0.4

1.8

0.6 0.9

EU Bulgaria

Why invest in Bulgaria?

Taxation in Bulgaria:

Source: Worldwide - tax

CountryIncome Tax (%) Social Security (%)

VAT (%)Corporate Individual Employer Employee

Bulgaria 10 10 17.9-18.5 12.9 20Serbia 15 10-20 16.9 16.9 20

Romania 16 16 28.45 16.5 24Hungary 10/19 16 28.5 18.5 27

Czech Rep. 19 22 34 11 21Poland 19 18/32 22.14 13.7 23Turkey 20 15-35 27 15 18

Slovakia 23 19-25 34.8 13.4 20UK 23 0-45 13.8 12 20Italy 27.5 23-43 30 10 21Spain 30 24, 75-52 29.9 6.35 21

Germany 30-33 (effective) 14-45 19.7 20.6 19

France 33.33 5.5-41 50 20 19.6

Why invest in Bulgaria?

Business costs in Bulgaria:Why invest in Bulgaria?

Location Price Q1 2013, EUR/sq m/month

Office prime rent in Sofia CBD Class A 10-12

Office prime rent in Sofia non CBD Class A 8 – 11

Office rent in Sofia Class B 5 – 8

Office prime rent in Plovdiv Class A 4 - 6

Office prime rent in Varna Class A 3 – 6

Office prime rent in Burgas Class A 3 - 5

Prime rent for contemporary industrial space 3-5

Industrial construction Prime industrial and logistics, Sofia region EUR/sq m/ 350-450

Business costs in Bulgaria:

Czech Rep.

Bulgaria

Poland

Austria

Italy

EU Average

Spain

France

Germany

0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00

9.00

9.89

10.06

10.70

10.53

10.56

10.65

11.03

12.23

Gas prices for industrial users in Europe

Bulgaria

Estonia

Germany

Turkey

Romania

Hungary

EU Average

Czech Rep.

Slovakia

0.000 0.020 0.040 0.060 0.080 0.100 0.120 0.140

0.080

0.084

0.086

0.089

0.090

0.090

0.094

0.101

0.124

Electricity prices for industrial users in Europe

€/GJ, 2013 €/kWh, 2013

Source: Eurostat

Why invest in Bulgaria?

Potential fields of collaboration

Services:• Transport and Logistics• Information technologies• Outsourcing of business processes• Health and tourism related to healthy lifestyle

Industry:• Transport equipment and machine building• Electronics and Electrical engineering• Chemical industry• Food and Agriculture

Resources:• Mineral bottled water• Sea and winter resorts• Balneology

Why invest in Bulgaria?

Government incentives

Government incentives

Legal framework for investing in Bulgaria:

• Equal treatment of Bulgarian and foreign investors

• Thresholds of investments that need to be covered in order to apply for investment certificate Class A, B and Priority investment projects

• Business plan and several standard documents required

Government incentives

Investment incentives under the Investment Promotion Act:

• Acquiring state or municipal land without a tender procedure (investments Class A and B)

• Financial support for construction of technical infrastructure elements (only for class A)

• Acquiring state or municipal land without a tender procedure on a lower cost, but not lower than the price evaluation for tax purposes (Priority investments)

• Lower tax rate on changing the status of the acquired land (Priority investments)

The incentives for class A and B could be:• Shortened administrative procedures• Reimbursement of labor costs paid by the employer• Financial support of up to 25% of the entire costs for specific

training of minimum 50 employees

The incentives for Priority investment projects could be:• All the incentives for Class A and B• Financial grants of up to 50% for education and

R&D projects;• and up to 10% for manufacturing projects

Government incentives

Investment incentives under the Investment Promotion Act:

Legal framework for investing in Bulgaria:Government incentives

Tax incentives:

• 10 % corporate tax (flat rate)

• 0 % corporate tax in areas with high unemployment rate

• 10 % personal income tax rate (flat rate)

• VAT exempt for import of equipment for investment projects

Thank you for your attention!

Sofia 1000, 31 Aksakov Str.Phone: (+359 2) 985 5500Fax: (+359 2) 980 1320E-mail: iba@investbg.government.bg Web: www.investbg.government.bg