The EU Recovery Plan Effects For Bulgaria

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Startup visas incentives for digital nomads and more scale-up companies included in the recovery plan of EU 

Introduction of a clear procedure for startup visas, incentives for Bulgaria to become a destination for digital nomadism, more ” scale-up companies ” – all these reforms for improving of the business environment in high-tech companies are set in the latest version of the draft National recovery plan.

Startup visa 

The introduction of a startup visa took place in February this year with the adopted changes in the law on foreigners in Bulgaria, but the ordinance for its issuance is still under process. The law stipulates that long-term residence permits can be obtained by those foreigners who have a certificate issued by the Ministry of Economy for a high-tech and/or innovative project called a “startup visa” and  after issuing a long-term visa they have become shareholders in a Bulgarian commercial company with ownership of not less than 50 percent of the company’s capital. The draft of the Bulgarian plan, which will absorb the BGN 12 billion from the EU Reconstruction Mechanism, states that the procedure for a startup visa will follow the best practices of the European Union and will be entirely an online process, involving representatives of the local startup ecosystem in the evaluation process. 

More scale-up companies and digital nomads 

Along with the great growth of startups in the national plan, there is an increase in the so-called scale-up companies in the Bulgarian economy. They are relied on to contribute to greater growth of GDP. Scale-ups are companies with an average annual growth in the number of employees (or turnover) greater than 20% per year for a period of 3 consecutive years, with at least 10 employees at the beginning of the observation period.  

A curious detail is that the “boom” of scale-up companies is associated with more investment opportunities than pension funds. The plan envisages changes in the Social Security Code, related to the investment opportunities of pension funds. It is specified in details that the changes should allow pension funds to invest 5% of their portfolio in alternative investment funds. And also, to enable pension funds to invest in registered funds throughout Europe, as well as to determine the allocation of money in this direction.  

In the field of high technologies, our country will fight for becoming a destination for the so-called “digital nomads”. However, in order to succeed, numerous changes would have to be made in the Social Security Code in order to start regulating distance working, which is increasingly applied as a modern form of employment. The popular digital nomadism is in fact most often associated with the activities of highly innovative companies and those working in programming. Their employees usually work remotely by choosing beautiful places around the world where they stay for months or years. 

More incentives for employees 

The reform of the business environment, called “Expansion Bulgaria”, also envisages the elaboration and adoption of legal changes for the introduction of a new commercial company in the Commercial Law. This is planned to happen by the last quarter of 2022. The reason – this Commercial Law does not allow companies registered in Bulgaria to use a number of necessary tools for business development such as convertible loans, employee options (option pools), vesting contracts etc. Mentioned vesting contracts are getting concluded more often in the technology sector. The employer provides company shares to the key employees, but it is not uncommon for such incentives to be an addition to the civil contracts as well. Between 5-10% of the company’s capital gets set aside to stimulate and retain the most capable employees of the company. Depending on the qualities and importance of the individuals for the functioning of the business, they can receive shares in the organization from 0.1% to 5% .

Should you need additional information and/or assistance please do not hesitate to contact Ms. Vesela Valcheva, Senior Accountant in Eurofast Bulgaria, at sofia@eurofast.eu.          

Eurofast is a regional business advisory organisation employing local advisors in over 23 cities in South East Europe & the Middle East . The Organisation is uniquely positioned as one stop shop for investors and companies looking for professional services inTax & Transfer Pricing – Payroll & Employment –Accounting & Audit –Advisory & Corporate.  

8/9/21