Investment Climate and Business Opportunities in Bulgaria

Explore the investment climate and business opportunities in Bulgaria as of June 2014. Discover reasons to invest, government incentives, foreign direct investment (FDI) inflows, trade relations, and the benefits of investing in Bulgaria including political stability, low taxes, skilled workforce, and access to various markets.

• Bulgaria
• Investment
• Business Opportunities
• FDI
• Trade Relations

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1. Bulgaria Investment climate and business opportunities June 2014

2. Investments and economic relations Why invest in Bulgaria? Government incentives

3. Investments and economic relations FDI Inflow: In million euro 10000 9052 9000 8000 6728 7000 6222 6000 5000 4000 2437 3000 1330 2000 1151 1092 1070 1000 0 2006 2007 2008 2009 2010 2011 2012 2013 Source: Bulgarian National Bank

4. Investments and economic relations FDI Inflow: FDI by Host Country, 1996-2013 ( mln.) FDI flows by industry, 1996-2013 ( mln.) 1347.2 Switzerland 3207.8 Other 1401.6 Italy 2647.4 Telecom 1439.7 USA 2948.3 Construction 1855.3 Russia 3490.6 Energy 2089.4 Cyprus 2383.6 7056,2 UK Manufacturing 2745.4 Germany 7059,5 Trade 3560.1 Greece 7479,3 Finance 5750,9 Austria 7936,9 Real Estate 6306,2 Netherlands 0 2000 4000 6000 8000 0 1000 2000 3000 4000 5000 6000 7000 Source: Bulgarian National Bank

5. Investments and economic relations The role of Italy as a trade partner for Bulgaria: 1981.4 1925.9 2000 1872.3 1763.8 1760.8 1892.8 1800 1626.3 1695.9 1675.2 1511.2 1600 1392.2 1334.4 1318.4 1458 1400 1271.9 1216.5 1141.6 1092.6 1200 1132.5 1043.2 1000 800 600 400 200 0 2004 2005 2006 2007 2008 Export 2009 Import 2010 2011 2012 2013

6. .. Bulgarian trade relations Why invest in Bulgaria?

7. 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

8. Why invest in Bulgaria? Real GDP Growth: 8 6.5 6.4 6.2 6 3.4 3.2 4 2 1.8 1.7 2 0.9 0.6 0.4 0.4 0.1 0 2006 2007 2008 2009 2010 2011 2012 2013 -0.4 -2 -4 -4.5 -5.5 -6 EU Bulgaria Source: Eurostat

9. Why invest in Bulgaria? Taxation in Bulgaria: Income Tax (%) Corporate 10 15 16 10/19 19 19 20 23 23 27.5 30 30-33 (effective) 33.33 Social Security (%) Employer 17.9-18.5 16.9 28.45 28.5 34 22.14 27 34.8 13.8 30 29.9 Country VAT (%) Individual 10 10-20 16 16 22 18/32 15-35 19-25 0-45 23-43 24, 75-52 Employee 12.9 16.9 16.5 18.5 11 13.7 15 13.4 12 10 6.35 Bulgaria Serbia Romania Hungary Czech Rep. Poland Turkey Slovakia UK Italy Spain 20 20 24 27 21 23 18 20 20 21 21 Germany 14-45 19.7 20.6 19 France 5.5-41 50 20 19.6 Source: Worldwide - tax

10. Why invest in Bulgaria? Business costs 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

11. Why invest in Bulgaria? Business costs in Bulgaria: /GJ, 2013 /kWh, 2013 Electricity prices for industrial users in Europe Gas prices for industrial users in Europe 0.124 12.23 Slovakia Germany 0.101 11.03 Czech Rep. France 0.094 10.65 EU Average Spain 10.56 0.090 Hungary EU Average 0.090 10.53 Romania Italy 0.089 10.70 Turkey Austria 0.086 10.06 Germany Poland 9.89 0.084 Estonia Bulgaria 0.080 9.00 Bulgaria Czech Rep. 0.000 0.020 0.040 0.060 0.080 0.100 0.120 0.140 0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00 Source: Eurostat

12. 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

13. Government incentives

14. 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

15. 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)

16. Government incentives Investment incentives under the Investment Promotion Act: 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

17. Government incentives Legal framework for investing in Bulgaria: 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

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