Legislation in BULGARIA

1º.- Corporate Tax.- Its essential characteristics are these:

- Tax rate of 10% applicable to profits shown by accounting results, which has been set

to prevent tax evasion.

- Tax year coinciding with the calendar year.

- Negative results can be compensated during the following five tax years.

- The Taxpayer must deposit funds on account monthly or every three months,

according to the profits declared in the previous tax year (monthly) in which case the

declared profit will be considered the base rate to calculate the monthly payment.

Payment every three months may be made by those Taxpayers who have not shown

profits in the past tax period, and payment shall be calculated on possible profits

obtained from the current tax year.

- Tax returns and payment of taxes are carried out previous to March 31st. There is a

rebate of 1% up to a maximum of 1,000 BGN, for those taxpayers who file their tax

return and cover payment via internet.

- Tax Incentives on Corporate Tax:

For creating jobs, deducting those amounts paid for salaries and the Social Security

Quota that the employer has paid during the first 12 months of existence of the

labour relationship.

For hiring handicapped staff, 100% is deductible, as long as the company is

affiliated with a national Handicapped Organization and the total number of

handicapped persons hired reaches the employment rates set, proportionate to

the entire work-force of the company.

For carrying out productive activities in those municipal areas where

unemployment rates are above the national average. It will depend on if the

municipality has an unemployment rate higher than between 35% and 50% with

respect to the national rates, according to what the Finance Ministry has published

each year.

For promoting employment: During the year in which the job was created, the

company may deduct 100% of quotas contributed to Social Security. The position

must be created in municipalities which fulfil the above-mentioned requirements.

Distribution of dividends. Dividends distributed by a foreign corporation operating

in Bulgaria to another foreign entity, are not subject to taxation.

2º.- VAT.- Exemptions contemplated in this tax refer to specific activity sectors such as:

- Activities related to Health: Medical services, sale of prostheses, transportation of

infirm persons, etc.

- Social services and insurance.

- Education, sports, culture and religion.

- Transfer of Real-Estate properties. Transmission of Land.

- Financial services and insurance.

- Gambling.

- Postal services.

- Import of merchandise contemplated in Article 58 of the LIVA.

The Value Added tax rate contemplates three possibilities:

- A general rate of 20% applicable to delivery of goods, rendering of services and the

importation of goods or services.

- A reduced rate of 7% applicable to services rendered in hotel accommodation when

part of an organised tour.

- A 0% rate applicable to exports as contemplated in VAT Law and in International

Treaties.

3º.- Tax on Real-Estate Property. Owners, tenants or concessionaires of buildings or property

the tax value of which is higher than 858.97€: the tax quota is calculated by applying a 1.5%

rate to the value of the property. Payment may be made every three months in up to four

instalments beginning on March 31 of each year, although those who make a single payment

will receive a 5% discount. Exemptions are applicable, according to the Energy Efficiency Law

and the Building Certification Ordinance, if the building has been granted a Type A certificate

(exempt for 10 years) or Type B (exempt for 5 years).

4º.- Property Transfer Tax. This taxes onerous conveyance of property ownership and the real

rights held on it, as well as the sale of vehicles. The rate will vary between 2% and 4%

depending on the municipality. The tax on Donations is subject to regulation by the Property

Transfer Tax and waivers between 5% and 10%.

5º.- Incentives to Investment in Solar Photovoltaic Energy.

- Law covering Renewable Source and Alternative Energies and Bio-fuels.

Preferential rates for the purchase of electricity.

- Resolution 15/08, of March 31, 2008, by the State Commission for the Regulation of

Energy, regarding electric rates when produced by photovoltaic facilities: 1) MWh in

facilities producing less than kWp: 399,83€; 2) MWh in facilities producing more than 5

kWp: 367,11€. Guaranteed purchase of energy for 25 years, with an annual

fluctuation limited to 95% of the rates of the previous year.

- Financing / Grant Instruments:

Credit lines for Energy Efficiency and Renewable Energies in Bulgaria: an

instrument designed by the European Bank for Reconstruction and Development

(EBRD) together with the Kozloduy International Decommissioning Support Fund

(KIDSF). Promoters of the project can obtain up to 20% of the principle of loans

granted by the EBRD for Small Renewable Energy Projects.

The Bulgarian Energy Efficiency Fund (BgEEF) offers loans at between a 4 and 9 %

interest rate with up to five years period for repayment. The Borrower will

participate outlaying between 10% and 25% of the investment.

Financing from the European Investment Bank: 800 million Euros have been

earmarked for renewable energy projects, of which 50% will be devoted to

electricity.

COFIDES: supports internationalisation projects for Spanish corporations. It offers

to participate in the corporate capital or to loan money with a 3 to 10 year

repayment period and for the first years of the project is interest-free. The

project must be approved by COFIDES.

ICO Internationalization 2009: finances up to 80% of the investment project, up to

a maximum of six million Euros per client per year. Interest rates are maximum

1.89%. Repayment up to 10 years and a grace period on the principal for the first

three years.

EMISSIONS TRADING

Bulgaria, as a signatory of the Kyoto Protocol may benefit from the Joint Implementation

Mechanism since it is included in Annex B (the Parties included in Annex I are listed in Annex B

of the Kyoto Protocol), regulated in Article 6 of the Kyoto Protocol, which permits that a

country listed in Annex I of the Convention (developed countries and countries transitioning to

a market economy) may invest in projects aimed at reducing emissions of man-made

greenhouse gases in another country listed on Annex I. This type of project will permit a

reduction in emissions by sources and removal by sinks of all greenhouse gases.

The investing country shall obtain Emission Reduction Unit allowances (URE) which are

discounted from the emission allowance units assigned to the receiving country and in this

manner the country financing the project will earn UREs at a lesser price that what it would

have cost in the original country and the receiving country will benefit from the investment

made in it.

As a member state of the European Union, Bulgaria participates in the “EU Emissions Trading

Scheme” (EU ETS), which is the main pillar of Climate Policy in the European Union. This

Scheme began in January of 2005 with an initial phase from 2005 to 2007 and a second phase

that will reach from 2008 to 2012 (this Scheme has been defined in European Directive

2003/87/EC).