A foreign direct investment screening mechanism entered into force in Bulgaria on 12 March 2024. The mechanism applies Regulation (EU) 2019/452, establishing a framework for the screening of foreign direct investment (“FDI“) into the Union. This is a significant development in the regulatory landscape governing foreign investments in Bulgaria, although some uncertainty remains as to its impact. Due to certain lack of clarity in the final text of the legislation, each investment should be carefully analysed on a case-by-case basis, especially during the transition period.


Investments requiring an FDI approval

According to the bill amending the Investment Promotion Act (“IPA”), an investment in Bulgaria is subject to the new FDI screening regime if four cumulative criteria are met: (i) the investment qualifies as FDI; (ii) the investor is a foreign investor under the meaning of the IPA; (iii) the investment concerns one of the economic activities explicitly listed in the new law; and (iv) the investment meets at least one of the statutory thresholds.


(i)        Is your investment FDI?

FDI is any investment aimed at the establishment or maintenance of lasting and direct links between the foreign investor and the entrepreneur to whom, or the undertaking to which, the capital is provided for the purpose of carrying out an economic activity in Bulgaria, including investments through: (i) the establishment of a new company; (ii) the effective participation in the management or control of a company carrying out economic activity; or (iii) the expansion of an existing investment. A portfolio (passive) investment is not an FDI.


(ii)       Are you a foreign investor?

The IPA adopts a broader definition of a foreign investor as compared to Regulation (EU) 2019/452. In addition to natural persons who are not citizens of an EU member state or legal entities with registered seats outside the EU, FDI subject to screening may also include investments made by:

  • legal entities from the EU that are directly or indirectly controlled by a natural person who is not a citizen of the EU or a legal entity with a registered seat in a non-EU state; or
  • legal entities from the EU that: (i) are directly or indirectly controlled by one or more non-EU individuals or legal entities by virtue of a contractual agreement or internal rules of that entity, and (ii) make the investment to the benefit of a non-EU person or to the benefit of an entity directly or indirectly controlled by such a non-EU person.


(iii)      Are you investing in the explicitly listed activities?

Your investment may require an FDI screening if it concerns one of the areas listed in point 1 of Article 4 of Regulation (EU) 2019/452:

  • critical infrastructure, whether physical or virtual, including energy, transport, water, health, communications, media, data processing or storage, aerospace, defence, electoral or financial infrastructure, and sensitive facilities, as well as land and real estate crucial for the use of such infrastructure;
  • critical technologies and dual use items, including artificial intelligence, robotics, semiconductors, cybersecurity, aerospace, defence, energy storage, quantum and nuclear technologies, as well as nanotechnologies and biotechnologies;
  • supply of critical inputs, including energy or raw materials, as well as food security;
  • access to sensitive information, including personal data, or the ability to control such information; or
  • the freedom and pluralism of the media.


(iv)      Does your investment meet the statutory thresholds?

Your investment meets the statutory thresholds if at least one of the following applies:

  • the investment is an acquisition of at least 10% of the capital of an enterprise that operates in Bulgaria; or the value of the investment exceeds the threshold of EUR 2,000,000 or its equivalent in Bulgarian leva;
  • the investment results in acquiring of at least 10% of the capital of an enterprise that operates in Bulgaria and carries out high-tech activities; or
  • it is a new investment which exceeds the threshold of EUR 2,000,000 or its equivalent in Bulgarian leva.

An investment is subject to approval irrespective of the above thresholds if:

  • as an exception, it is proposed by a member of the FDI authority established with this bill, with competence in the sector relevant to the FDI and agreed with the representatives of State Agency “National Security” and State Agency “Intelligence”;
  • it concerns the production of energy products from oil and of petroleum products in facilities part of or adjacent to critical infrastructure. Such critical infrastructure includes strategic facilities of importance for the national security in the energy sector intended for the production, processing, handling, storage and transfer (including through pipelines) of oil and of energy products that are under the supervision of the Minister of Economy and Industry;
  • it is made by investors from Russia or Belarus;
  • there is information that the FDI may affect the security or public order and a request for screening is made by the State Agency “National Security” and the State Agency “Intelligence”. It is unclear who may provide such information to the competent authorities and whether this scenario only covers cases where the European Commission has received an opinion or a report by another EU member state; and
  • it is planned by foreign investors where there is a direct or indirect participation of a non-EU state, including where the foreign investor has received significant funding from a government body. The law is, however, silent on the amount of funding that will be considered significant. An exception applies for certain low risk countries. Currently, these are the United States of America, the United Kingdom, Canada, Australia, New Zealand, Japan, the Republic of Korea, United Arab Emirates and the Kingdom of Saudi Arabia. The list can be subsequently amended by the Council of Ministers.


Timeline for obtaining an FDI clearance and conditional approvals

The foreign investor should submit an application for prior approval of its investment to the Bulgarian Interinstitutional FDI Screening Council. In case of acquisitions, this would mean prior to the completion of the acquisition. The Interinstitutional FDI Screening Council reviews the application within approximately 6–10 weeks of confirmation that the application is supported by all necessary information or documents.

The Interinstitutional FDI Screening Council issues a decision with which it may approve or prohibit the foreign investment. The investment can also be allowed conditionally subject to limitations such as reduction in the size of the share capital acquisition, mandatory instructions for the protection of personal data or confidential information, or other restrictions.


Consequences of non-compliance with the FDI screening regime

If an FDI is carried out without obtaining a prior approval, the foreign investor may be fined with the amount equal to 5% of the investment value but not less than BGN 50,000 (approx. EUR 25,000). In addition, the Interinstitutional FDI Screening Council may impose restrictive measures to the foreign investor, including reduction in the share capital owned by the investor, change in the control, change or discontinuing of business activity, among others.


Transitional period for investments which commenced after 12 March 2024

There is a transitional period until the Council of Ministers adopts implementing regulations, which must be done within the next six months (i.e., until 12 September 2024). FDIs that have “commenced” after the entry into force of the law, but before the adoption of the implementing regulation, are not notifiable. The wording is not sufficiently clear as to when an investment is considered commenced, i.e., on the signing or closing of the investment or the share acquisition agreement. Accordingly, an FDI screening application may still be required for transactions signed during the transitional period but not completed within this period.