Bulgaria’s FDI Screening Regime: Key Compliance Considerations for Cross-Border Transactions
18 December 2025Recent geopolitical shifts have compelled the European Union to rethink its openness to foreign capital, balancing economic needs against national security. Bulgaria, historically one of the more accessible markets in the bloc, has now firmly closed the regulatory gap. With the full implementation of the amendments to the Investment Promotion Act (IPA) and the adoption of the necessary secondary legislation in July 2025, Bulgaria’s Foreign Direct Investment (FDI) screening mechanism is officially operational.
For international investors and legal practitioners, this marks a paradigm shift. The days of closing transactions involving non-EU capital with solely merger control clearance are over. Below, we analyse the new framework, the practicalities of the screening process, and the potential pitfalls that remain in this nascent regime.
The Legislative Basis: EU Alignment with a Local Twist
The Bulgarian framework is built on Regulation (EU) 2019/452, but it is not a mere copy-paste exercise. The national regime, established primarily through Chapter Six of the IPA and the Ordinance on the Organisation and Activity of the Inter-departmental Council for Screening of FDI, casts a wide net.
While the primary driver is the EU-wide cooperation mechanism, the Bulgarian legislator has introduced specific “gold-plating” elements most notably a distinct “White List” and “Black List” approach that differentiates it from many peer jurisdictions.
Scope and Definitions
The screening requirement applies to FDI made by foreign investors. However, the definitions are critical:
- The “Foreign Investor“: This generally encompasses natural persons from non-EU countries and entities registered in non-EU jurisdictions. Crucially, the definition extends to indirect control, capturing EU-registered entities if they are ultimately controlled by a non-EU national or entity.
- The “White List” Exemption (section 27, paragraph 9): In a pro-business move, Bulgaria has carved out a list of “low-risk” jurisdictions. Investors from the United States, United Kingdom, Canada, Australia, New Zealand, Japan, South Korea, the UAE, and Saudi Arabia are generally treated on par with EU investors. This effectively exempts them from the mandatory screening regime, provided there is no circumvention intent. The legislation also includes a mechanism for the list to be expanded. The National Assembly (Parliament) has the power to add other countries to this list via a resolution, based on a proposal from the Council of Ministers. This was designed to allow Bulgaria to quickly align with future strategic partners without amending the entire Act.
- The “Black List“: Conversely, specific provisions target investors from Russia and Belarus. Investments originating from these jurisdictions are subject to screening regardless of value or sector.
The exact definition of a “Foreign Investment” is:
a) a person who is not a citizen of a European Union member state, or whose registered office is not located in a member state, who has made or intends to make a foreign direct investment in Bulgaria;
b) a legal entity whose registered office according to its constitutional document is in a European Union member state, which has made or intends to make a foreign direct investment in Bulgaria, in which control is exercised directly or indirectly by: one or more natural persons who are not citizens of a European Union member state, one or more legal entities whose registered offices are not in a European Union member state, or another legal formation organized under the laws of a state that is not a member of the European Union;
c) a legal entity or other legal formation whose registered office according to its constitutional document is in a European Union member state, which has made or intends to make a foreign direct investment in Bulgaria, in which by virtue of a contract or internal rules one or more natural or legal persons established in states outside the European Union have direct or indirect control over the specific investment, or which by virtue of a contract or multilateral transaction makes a foreign direct investment falling within the scope of this law, in its own name but on behalf of a person under points “a” and “b”.
Triggers and Thresholds
The regime is suspensory. If an investment falls within the scope, it cannot be completed without prior clearance.
Sectoral Scope
The screening focuses on the sensitive sectors outlined in Sec. 4 of the EU Regulation, including:
- Critical Infrastructure: Energy, transport, water, health, media, and data processing/storage.
- Critical Technologies: Artificial intelligence, robotics, semiconductors, cybersecurity, and dual-use items.
- Access to Sensitive Information and Media Freedom.
The Quantitative Thresholds
For most non-EU investors (excluding the “White List”), notification is mandatory if the investment targets a sensitive sector AND meets one of the following criteria:
- Acquisition of at least 10% of the capital of a target company in Bulgaria; OR
- The value of the investment exceeds €2,000,000.
For high-tech activities, the 10% threshold applies regardless of the investment value in some interpretations, though the €2M floor is the general rule. Investors with state participation (SWFs, SOEs) face scrutiny even at lower thresholds (5% for listed companies).
The Procedural Framework
The competent authority is the Inter-departmental Council for Screening of FDI, composed of ministers and representatives from the intelligence services (SANS, State Intelligence Agency).
The Process:
- Submission: Applications are filed in Bulgarian and English via the Bulgarian Investment Agency (IBA), which acts as the front desk.
- Timeline: The standard review period is 45 days, extendable by a further 30 days if the case is complex or requires EU-level coordination.
- Tacit Approval: A significant feature for deal certainty is the tacit approval mechanism. If the Council fails to issue a decision within the statutory deadline, the investment is deemed cleared.
Potential Issues and Grey Areas
Despite the clarity of the thresholds, several issues warrant caution for transaction planners:
The Ex Officio Wildcard
Perhaps the most concerning aspect for legal certainty is the Council’s ex officio power. The Council can call in for review any investment – even those below the €2M threshold or involving “White List” investors – if it believes there is a threat to national security or public order. There is currently no clear limitation period (“sunset clause”) in the primary act for how long after closing this power can be exercised, creating a potential tail risk for smaller transactions.
The “Bureaucratic Paradox”
While the secondary legislation was adopted in July 2025, ensuring the regime is applicable, the practical machinery – specifically the appointment of Council members and internal secretarial workflows – has faced delays due to political rotation. Investors filing today must factor in potential administrative inertia despite the statutory deadlines.
Indirect Change of Control
The broad definition of “foreign investor” means global M&A transactions where a Bulgarian subsidiary is merely a small part of the package could trigger a filing requirement. If a US parent company (White Listed) is acquired by a Chinese entity, the indirect change of control over the Bulgarian asset would likely trigger the screening.
Conclusion
Bulgaria’s FDI regime is now a live compliance hurdle with “teeth” – penalties for non-compliance include fines of 5% of the investment value (min. € 25,000) and potential unwinding of the deal.
Everybody should conduct due diligence on the ultimate beneficial owner (UBO) early. Do not assume that a European SPV exempts you from scrutiny. If your capital originates from outside the EU and the “White List,” and you are touching anything resembling infrastructure or technology, a 45-day pause for clearance must be built into your transaction timetable.