Bulgaria’s FDI Screening Regime Now in Effect

It was not until 09 July 2025 that the Council of Ministers adopted the long-awaited Rules on the Application of the FDI Screening Act. These rules were subsequently published in the State Gazette, issue No. 59 of 22 July 2025. With their publication, Bulgaria’s FDI screening regime became fully operational.

This updated Note aims to provide a brief outline of the regime.

Investments caught by the FDI screening regime

What is a “foreign direct investment”?

As outlined in the previous edition of Legal Insights, the FDI Screening Act defines foreign direct investment as follows:

– Foreign Direct Investment (FDI) means an investment of any kind by a foreign investor aiming to establish or to maintain lasting and direct links between the foreign investor and the entrepreneur to whom or the undertaking to which the capital is made available in order to carry on an economic activity in Bulgaria, including investments which enable effective participation in the management or control of a company carrying out an economic activity. A FDI is also the expansion of an existing investment, including the expansion of the capacity of an existing enterprise, the diversification of an enterprise’s production with products not previously produced and the establishment of a new place of carrying out commercial activity or the increase of the capital of the investment target, provided that the shares are acquired by the foreign investor. A portfolio (passive) investment is not a FDI.

The first part of the definition closely follows the definition of FDI under the EU FDI Screening Regulation 2019/452 (the “EU FDI Screening Regulation“) and covers investments leading to positions of control or to the ability to participate in management.

The local definition, however, also catches expansions of an existing investment. The list of possible scenarios is broad and clearly not exhaustive, but arguably these actions need to result from a financial input by the foreign investor (i.e. must be conducted with invested funds, and not with the target’s own funds).

In the general case passive (portfolio) investments, that entail no influence on the target, are not caught.

Further clarity is provided by the secondary legislation in respect of internal restructurings or reorganizations. These are not subject to screening, provided that: (i) there is no change in the ultimate control over the investor or the investment; (ii) no new foreign investor acquires a shareholding; and (iii) the investment is not expanded—such as through increased capacity of an existing undertaking, diversification into products not previously produced by the undertaking, the establishment of a new business location, or an increase in the capital of the investment target—provided that the shares or equity interests are acquired by the foreign investor.

Important Note: The secondary legislation also makes clear that the absence of physical presence of the target in Bulgaria such as a local subsidiary, branch, representative/sales office, etc. is not enough to exclude jurisdiction, i.e. the regime may still apply where the target engages in cross-border business into Bulgaria, even if it operates without any local establishment provided that the applicable thresholds are met and the target is active in the activities listed in Article 4(1) of the FDI Screening Regulation in Bulgaria.

Who is a “foreign investor” for the purposes of FDI screening?

According to the FDI Screening Act:

– Foreign investor means:

(a) a person who is not an EU national or an entity whose registered seat is not located in a Member State, who/ which has made or intends to make a FDI in Bulgaria;

(b) a legal entity, the registered seat of which, according to its constituent act, is in a EU Member State, intending to make or having made a FDI in Bulgaria, in which control is exercised directly or indirectly by: one or more natural persons who is/ are not an EU national(s), one or more legal entity(ies) whose registered seat is not in a EU Member State, or another legal entity existing under the laws of a state which is not a EU Member State;

(c) a legal entity or other legal establishment, the registered seat of which, according to its constituent act, is in a EU Member State, which has made or intends to make a FDI in Bulgaria, in which, by virtue of a contract or internal rules, one or more natural or legal persons established in non-EU countries have direct or indirect control over the specific investment, or which, by virtue of a contract or multilateral transaction, makes a FDI falling within the scope of the FDI Screening Act, on its own name, but on the behalf of the person under points “a” and “b” above.

In addition to non-EU investors, the Bulgarian FDI Screening Act expands the definition of a foreign investor to include FDIs by an EU investor, which is directly or indirectly controlled by a non-EU person or entity. The same applies to EU investors, where the investment itself is controlled by a non-EU person or entity, including in trust or nominee-type structures.

Low-risk jurisdictions

According to the FDI Screening Act, certain non-EU countries, which will be additionally approved by the Parliament, along with United States of America, the United Kingdom of Great Britain, Canada, Australia, New Zealand, Japan, the Republic of Korea, the United Arab Emirates, states – party to the Agreement on the European Economic Area, the Swiss Confederation and the Kingdom of Saudi Arabia are to be considered low-risk countries and enjoy the same screening rules as those for EU Member States for the purposes of applying the screening mechanism.
It remains unclear from the secondary regulation whether investments by investors from low-risk jurisdictions should be generally exempt from FDI screening. Until clarity is obtained through the administrative practice of the Council, precautionary notification from such investors would be advisable, if the investment is otherwise caught by the regime.

Which industries and fields are controlled? What are the screening thresholds?

A. General criteria, which trigger a mandatory filling

Investments in the fields of activity listed in Article 4(1) of the EU FDI Screening Regulation:
– critical infrastructure (for example, FDIs related to energy, transport, water, health, communications, media, data processing or storage, aerospace, defence, electoral or financial infrastructure, and others);

– critical technologies and dual use items (for example, FDIs related to AI, robotics, semiconductors, cybersecurity, quantum and nuclear technologies, and others);

– 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;

and meets one of the following conditions:

(i) exceeds the threshold of EUR 2,000,000 or at least 10% of the capital of a target operating in the country will be acquired; OR

(ii) at least 10% of the capital of a target, which operates in the country and is engaged in high-tech activities, will be acquired; OR

(iii) a new investment is made which exceeds the threshold of EUR 2,000,000

should be notified in advance and cleared by the new Interdepartmental Council on FDI Screening.

In addition, a FDI made by an investor that has a direct or indirect public participation in its capital (often referred to as “state-owned enterprises” or “SOEs”) from a country outside the EU, including significant financing by a public authority, would also be subject to a prior mandatory notification and clearance as per the general criteria above, without, however, taking regard to the investment threshold. In the latter case, a minimum shareholding of 5% by the non-EU country would be required if the foreign investor is a company whose shares are traded on a regulated market.

The FDI Screening Act introduces a suspensive screening regime in respect of investments crossing the thresholds above. It consists of an obligation for the foreign investor to notify its planned investment, and a prohibition to undertake the investment until it has received clearance. The notification will be reviewed under a two-step procedure, subject to specific deadlines, which will end in an express or tacit (no-objection) clearance, or an express prohibition, including the possibility for a conditional clearance. This procedure is discussed in more detail below.

FDIs caught in all cases

Certain below-thresholds investments may also be caught by the new screening regime. In that case, the FDI Screening Act provides neither an obligation to notify, nor a voluntary notification regime allowing to obtain legal certainty in respect of such investments:

B. FDIs by Russian and Belarusian Investors. FDIs in petroleum and petroleum products, activities, undertakings or capital of entities

FDIs with a foreign investor from Russia or the Republic of Belarus, as well as all FDIs related to petroleum and petroleum-based products, activities, undertakings or capital of entities forming part of the critical infrastructure of the country according to Article 2, para. 1, item 8 of the Administrative Regulation of Economic Activities Related to Petroleum and Petroleum Products Аct, fall within the scope of the FDI screening regime, irrespective of value.

C. “Ex officio” criteria

The new Interdepartmental Council on FDI Screening has also ex officio powers to review FDIs in the following exceptional cases:
(i) New investments or FDIs that do not exceed the threshold of EUR 2,000,000 upon proposal of a member of the Council, in cooperation with the national security authorities;

(ii) A FDI that may have an impact on security or public order at the initiative of the national security authorities, regardless of whether the general criteria above have been triggered or not;

(iii) Based on the opinion of the European Commission or a notification from an EU Member-States, where no FDI filing has been made and the FDI has commenced within 2 years prior the receipt of the opinion or the report.

It remains unclear whether the ex officio powers of the Interdepartmental Council on FDI Screening to review FDIs due to national security reasons under (i) and (ii) above may be exercised both before and after the investment has been completed. No time limit for exercising this ex officio power has been laid down in the FDI Screening Act. The same would apply to FDIs by Russian and Belarusian Investors and FDIs in petroleum and petroleum products, activities, undertakings or capital of entities.

What is the screening procedure for FDIs, which trigger the notification obligation?

A foreign investor who intends to make a FDI, which triggers the notification obligation based on the general criteria under item 2.3, p. (A) above, is obliged to apply for a prior clearance. The screening procedure has a suspensory effect for such FDIs and the FDI is prohibited before obtaining an explicit or tacit clearance.

A two-stage procedure applies:

The Investments Promotion Agency is responsible for preliminary review of the notification and its attachments. Once the notification is declared complete, the file gets to the Interdepartmental Council on FDI Screening, whose secretariat continues the process during the proper review.

The Interdepartmental Council on FDI Screening has jurisdiction to review, clear, prohibit or take remedial action on national security grounds for foreign investments in Bulgaria, both on ex-ante basis for foreign investments that trigger the mandatory notification requirement, as well as ex-post in respect of already completed investments.

According to the secondary regulation adopted, the proper screening process itself can be considered to potentially include two stages – Phase 1 where in non-problematic case the secretariat recommends to the Council to issue unconditional clearance and Phase 2 where the secretariat recommends, and the Council accepts to open an extended (complex) investigation of the case. The overall review deadline in both cases is the same, but it appears more likely to be extended in the second case.

The decision of the Council needs to be reasoned and can be subject to judicial review in two instances.

Assessment criteria

When assessing the applications for a FDI clearance or reviewing FDIs within its ex officio powers, the Interdepartmental Council on FDI Screening needs to apply the criteria, set out in Article 4 of Regulation (EU) 2019/452.
The secondary legislation further provides that the following factors must also be considered:

(i) whether the FDI is likely to affect security or public order, considering its potential impact on:

– critical infrastructure, whether physical or virtual, including infrastructure related to energy, transport, water, healthcare, communications, media, data processing or storage, aviation, defence, electoral or financial infrastructure, sensitive facilities, as well as land and real estate essential for the operation of such infrastructure;

– critical technologies and dual-use items as defined in Article 2(1) of Council Regulation (EC) No 428/2009 of 5 May 2009 establishing a Community regime for the control of exports, transfer, brokering, and transit of dual-use items and technologies, including artificial intelligence, robotics, semiconductors, cybersecurity, aviation and defence technologies, energy storage technologies, quantum and nuclear technologies, as well as nanotechnologies and biotechnologies;

– the supply of critical resources, including energy or raw materials, covering activities related to oil and oil-derived products, as well as food security;

– access to sensitive information, including personal data, or the ability to control such information; or

– media freedom and pluralism.

(ii) whether the foreign direct investment is likely to affect security or public order, taking particular account of:

– whether the foreign investor is directly or indirectly controlled by a government, including state authorities or armed forces of a third country, whether through ownership structure or significant financing;

– whether the foreign investor has previously engaged in activities affecting security or public order in any Member State; or

– whether there is a serious risk that the foreign investor may engage in illegal or criminal activities.

Sanctions for infringements of the FDI Screening Regime

According to the FDI Screening Act a foreign investor may incur a sanction amounting to 5% of the value of the investment, but not less than BGN 50 000 (c.a. EUR 25 000) for failure to comply with the regime. In addition to the sanction, the Interdepartmental Council on FDI Screening may also impose on the foreign investor restrictive measures necessary to ensure security or public order, including change of control, change and/or suspension of activity, termination of the FDI and other appropriate measures.

By Peter Petrov, Partner, and Denitsa Dimitrova, Associate, Boyanov & Co