Bulgaria’s amended Investment Promotion Act, passed by Parliament at the second reading on November 28, has sparked controversy related to incentives given to the film industry.
The bill, in the works for more than a year, is meant to introduce new incentives for prospective investors in the country, most notably a provision offering partial reimbursements to investors for social security payments for new employees.
But the most contentious amendment, tabled between the two readings in Parliament, was a provision stipulating financial aid for film-makers, or, as the bill put it – “non-material assets representing items of intellectual copyright”, meaning that other projects falling under that broad characterisation could apply for funding.
The law did not stipulate what shape those incentives will take – this is to be clarified in regulations that would be drafted jointly by the finance and culture ministries. Companies will be eligible to receive state aid if they spend more than 400 000 leva in Bulgaria.
Initially, the threshold was set at 1.5 million leva, a figure that some local film-makers said was too high for domestic productions (usually low-budget) and would benefit only a handful of foreign-owned studios.
The MP who tabled the amendment, Dian Chervenkondev of ruling party GERB, said that he had no business interests in the film industry – that was in reply to accusations from his critics that it was his latest lobbyist amendment tabled in Parliament – but that he wanted to draw investors in the film industry to the country.
Film industry sources, quoted in Bulgarian media, said that the lack of clarity on what shape the incentives would take. Macroeconomist Georgi Ganev, from think-tank Centre for Liberal Strategies, was quoted as saying that the financial outlay was unlikely to threaten Bulgaria’s Budget, but it showed a unwelcome trend for state intervention in the economy.
Other amendments to the law will now enable municipalities to issue certificates for B class investments and to come up with other incentives. This measure is in line with the policy of Bulgaria’s current centre-right government to decentralise the country’s administration, including by increasing the powers of municipalities.
Currently, investment in the acquisition of assets to the value of at least 20 million leva means a Class A investment certificate and 10 million leva means a Class B certificate. These thresholds are lowered in cases where investments are made in areas where unemployment is high.
A new criterion for certification of an investment is created by the proposed bill, in the services sector – especially in regard to outsourcing – where the amount of the investment is not particularly high but the number of jobs created can be significant.
The amendments also are to mean fast-tracking of applications by foreigners from non-EU countries for permanent residence or citizenship in cases where the foreigners are making large-scale investments in Bulgaria. The criteria that such foreigners must meet will be set out in regulations by the Economy Ministry.
(Bulgarian Parliament. Photo: Clive Leviev-Sawyer)