Bulgaria Has a Fully Operational FDI Screening Regime

As previously reported, the Bulgarian Parliament last year adopted the final text of a bill amending the Investment Promotion Act (the "Act"), implementing the screening mechanism outlined in Regulation (EU) 2019/452 (the "EU FDI Screening Regulation").

The Act entered into force on 12 March 2024 but became fully applicable on 22 July 2025, after the second implementing regulation – for the implementation of the Investment Promotion Act – was adopted.

General screening criteria

The Act borrows heavily from the EU FDI Screening Regulation. It requires prior screening of any foreign direct investment that directly or indirectly originates from a non-EU investor, as well as from an EU investor with ultimate non-EU control. A mandatory FDI filing is triggered if the FDI targets any of the industries listed under Article 4, para 1 of the EU FDI Screening Regulation, namely: 

• critical infrastructure, whether physical or virtual, including energy, transport, water, health, communications, media, data processing or storage, aviation, defence, electoral or financial infrastructure, sensitive facilities, as well as land and real estate that are critical to the use of such infrastructure;
• critical technologies and dual-use items (such as AI, semiconductors, robotics, aerospace, defence, energy storage, quantum and nuclear technologies);
• supply of critical inputs, including of energy and raw material, and activities related to oil and petroleum products, as well as food security;
• access to sensitive information, including personal data, or the ability to control such information; and
• freedom and pluralism of the media,

when the investment:

• involves the acquisition of at least 10 % of the capital of an enterprise operating in Bulgaria; or
• exceeds EUR 2m / in value. 

Drawing from the EU FDI Screening Regulation, the Bulgarian FDI regime includes any FDIs aimed at establishing or maintaining a lasting and direct link to conduct business in Bulgaria, including effective participation in the management or control of a company doing business in Bulgaria. In addition, it captures the expansion of an existing investment and "new" (greenfield) investments. The Act explicitly excludes passive (portfolio) investments from the scope of the FDI regime.

In addition, foreign direct investments, which would otherwise fall within the scope of the new regime, are subject to screening regardless of the investment thresholds (EUR 2m and 10 % of the capital) in case of direct or indirect non-EU state participation in the foreign investor, including significant financing by a public authority.

Definition of foreign investor for the purpose of FDI screening

The Act provides the following definition of "foreign investor":

(i) a person who is not an EU national or an entity with a registered seat outside an EU Member State, that has made or intends to make an FDI in Bulgaria;

(ii) a legal entity with its registered seat, as stated in its constituent documents, in an EU Member State, that has made or intends to make an FDI in Bulgaria, and in which control is exercised, directly or indirectly, by one or more natural persons who are not EU nationals, by one or more legal entities with a registered seat outside the EU, or by another legal entity established under the laws of a non-EU country;

(iii) a legal entity or other legal establishment with its registered seat, as stated in its constituent documents, in an EU Member State, that has made or intends to make an FDI in Bulgaria, and in which one or more natural or legal persons, established in non-EU countries, have direct or indirect control over the specific investment by virtue of a contract or internal rules, or which makes an FDI by virtue of a contract or multilateral transaction that falls within the scope of the FDI Screening Act and is made in the entity's own name but on behalf of the persons referred to in points "i" and "ii" above.

As noted above, the FDI Screening Act also expands the definition of a foreign investor to include FDIs by a legal entity registered in an EU country, which is directly or indirectly controlled by a legal entity registered in a non-EU country (ultimate non-EU control).

FDI screening triggered in all cases – specific foreign direct investments

Irrespective of whether the above thresholds are met, certain investments trigger an FDI screening under the new regime in all cases. Subject to screening are all FDIs:

• related to the production of petroleum energy products and petroleum products at facilities that are part of or adjacent to critical infrastructure;
• that may affect national security and public order;
• where a non-EU State directly or indirectly holds a stake in an investor's share capital or has provided significant financing to the investor; and
• all FDIs made by foreign investors from Russia and Belarus.

More specifically, "foreign investors from Russia and Belarus" include:

• a natural person who is a citizen of Russia or Belarus;
• a legal person that is registered in Russia or Belarus;
• a legal person that is registered outside Russia and Belarus, in which 25 % or more of the ownership belongs to one or more of the persons referred to in point (i) or another legal entity organised under the laws of Russia or Belarus.

Low-risk jurisdictions

In addition to EU investors, certain non-EU countries are deemed "low-risk" and will be included in a list to be adopted by the Bulgarian Parliament. This list includes the USA, the UK, Canada, Australia, New Zealand, Japan, South Korea, the United Arab Emirates, Saudi Arabia, Switzerland and any country that is a member of the European Economic Area (EEA) (collectively, "low-risk states"). Investors from these states may benefit from an exemption from the screening mechanism, although it remains to be seen how this exemption will be applied in practice.

Assessment

Any foreign direct investments subject to screening under the Act are to be approved by the newly established Interministerial Council for Screening of Foreign Direct Investments (the "FDI Screening Council" or the "Council") in charge of administrative control under the Act and chaired by the Deputy Prime Minister.

An application, addressed to the Council through the Invest Bulgaria Agency ("IBA"), must be submitted using a designated form (available on the Invest Bulgaria Agency's website, along with guidance on the required documentation), which is largely based on Form B [1]. At a minimum, the application must include information such as: the ownership structure of both the foreign investor and the target undertaking, including details of the ultimate investor and capital participation; the approximate value of the FDI; the products, services and business activities of both the foreign investor and the target; the Member States in which they operate; and other relevant details.

Upon receiving a complete application for the approval of a foreign direct investment, the Council will have 45 calendar days to conduct the screening and issue a decision. The review period may be extended by an additional 30 days. The FDI Screening Council will either grant or refuse permission for foreign direct investment in accordance with the requirements of the law and regulations. More specifically, the FDI Screening Council may issue an unconditional clearance, issue a conditional clearance (subject to behavioural or structural measures) or prohibit the investment entirely.

Notably, the bill explicitly provides that the absence of a decision within the designated timeframes is construed as tacit approval of the investment.

Ex officio screening

As an exception, the FDI Screening Council may initiate an ex officio screening of FDIs in the following cases:

(i) upon the proposal of a member of the competent authority in the respective sector in which the investment is to be made – applicable to "new" FDIs or those not exceeding the EUR 2m threshold;

(ii) at the reasoned request of the national security authorities – for FDIs that do not meet the general screening criteria but for which there is evidence of a potential impact on national security or public order;

(iii) based on an opinion of the European Commission or a notification from a Member State containing sufficient information – for FDIs which could be subject to screening and for which no application has been made, and which have been initiated up to two years prior to the receipt of the opinion or notification.

Sanctions

For failure to comply with the regime – i.e. providing inaccurate, incomplete or misleading information in an application for foreign direct investment or making an investment without the required approval from the FDI Screening Council – the investor will be subject to a fine of 5 % of the value of the investment, but no less than BGN 50,000 (approx. EUR 25,500).

In addition, the investor may be subject to restrictive measures, necessary to ensure national security or public order, including, but not limited to change of control, change and/or suspension of activity, termination of the FDI and other measures.

As a next step, the Council of Ministers is expected to appoint the members of the competent FDI Screening Council. In the meantime, FDI notifications should be addressed to the Invest Bulgaria Agency, which will conduct the initial screening. 

[1] https://circabc.europa.eu/ui/group/be8b568f-73f3-409c-b4a4-30acfcec5283/library/b64b1f9f-80f6-4152-8d53-2cade4d95659/details?download=true

By Volker Weiss, Partner, and Yoana Strateva, Attorney at Law, Schoenherr