New Law on Real Estate Loans

On 02 August 2016 a new Law on loans extended in relation to acquisition of real estate properties entered into force. By the said Law the regulations of Directive 2014/17/ EC of the European Parliament and the Council dated 04.02.2014 are being implemented in the national legislation. The Law applies for credit agreements concluded between lenders and consumers after the date of its entry into force. As per the definition of the law, a consumer is considered a natural person acting outside the scope of his/her commercial or professional activity. A real estate loan is considered a loan secured by a mortgage or another comparable security established over real estate property and loan extended for the purpose of acquisition or retention of title over real estate property.

  1. General requirements 

One of the main purposes of the law is to ensure that the consumer makes an informed decision to enter into the loan, that he/she is capable to compare the conditions offered on the market and to assess the impact of the contract on his/her financial state. In this point, the law imposes an obligation on the lenders and credit intermediaries to provide the main information concerning the credit agreement in accessible and clear form including general information about the purpose of the contract, securities, term, levels and types of interest rates, amount of the overall expenses under the credit agreement, overall amount of consumer’s obligations, additional expenses, repayment schedule and possible consequences in case of non-performance of the obligations under the credit agreement.

In addition to the above-described general information, the lender is obliged to present to consumers personalized information about the loan, corresponding to his/her personal needs, financial status and preferences so that the consumer can make an informed decision and compare the offered conditions. The information shall be provided in a standard form representing Appendix to the Law.

  1. Creditworthiness assessment

Another purpose of the law is to prevent over-indebtedness. For that reason, the law arranges an obligation of the lender to assess the ability of the consumer to perform his/her obligations under the credit agreement (the so-called creditworthiness assessment) prior to extension of the loan. The assessment shall be performed on the basis of the information about consumer’s income and expenses and other circumstances of financial and economical matter as the law forbids extension of the loan in case of negative assessment of creditworthiness.

After conclusion of the credit agreement, the lender may not terminate or amend the agreement to the detriment of the consumer, based on incorrect assessment, except for the occasions where the consumer has intentionally concealed information or used incorrect information. In case subsequent agreement on the increase of the extended amount is reached between the parties, the lender shall up-date the available financial information about the debtor and perform a new creditworthiness assessment prior to each significant increase, unless such increase was previously agreed and included in the initial creditworthiness assessment.

  1. Conclusion of a credit agreement 

After positive creditworthiness assessment, the lender shall provide the consumer with a binding offer. A draft credit agreement containing all terms and conditions agreed between the parties is considered as such offer. After obtaining the offer the consumer shall have a term of at least 14 days in order to decide whether to enter into the agreement or not.

The law requires a written form for the validity of the credit agreement. The law also stipulates the obligatory requisites of the contract including its term, total amount of the loan, conditions for utilization and repayment of the amounts, interest rates, annual percentage rate of charge and total amount due under the contract. The lack of any of the said elements shall make the contract invalid.

In case the lender requires conclusion of insurance contract for the sake of extension of the loan, the lender is specifically obliged to accept insurance policies of insurance companies providing the same coverage as the one provided by the insurance company the lender works with.

Regarding the interest rate, in case the credit agreement contains variable interest rate, the lender shall apply a referent rate under a methodology defined by the lender, which shall include clear calculation mechanism and a formula, indicating the type, quantity and relevant weight of each component of the rate (market indices and indicators). The methodology for calculation of the interest rate shall be indicated in the contract and it may not be amended unilaterally by the lender.

  1. Security 

The new law provides additional rules concerning the security established in favour of the lender. The lender shall be obliged to give the consumer the choice between a contract arranging that the entire property of the debtor shall serve for the satisfaction of the lender in case of enforcement, or a contract stipulating that the lender shall fully satisfy itself from the sale of the asset serving as security under the credit agreement.

In addition, the lender shall no longer oblige consumers to issue a promissory note or a bill of exchange, in order for the said instruments to serve as additional security under the contract. However, in case the issuing of such instruments is agreed by the parties, the lender shall up-date the documents and make sure that the actual amount of the debt is indicated after each payment under the loan. The lender shall also be obliged to return the bill of exchange or the promissory note to the consumer immediately after full repayment of the debt.

  1. Taxes and fees. Annual percentage rate of charge (APRC)

The law introduces regulations concerning taxes and fees. It allows the lender to collect taxes and fees for additional services related to the credit agreement, but expressly forbids such fees for the utilization of the loan and its management. Second collection of fees for one and the same service is also forbidden. In order to be collected the tax/fee and the service/action it is collected for, shall be clearly indicated in the credit agreement, as the lender may not request payment of amounts of expenses which were not expressly agreed in the credit agreement, as the same rule applies for subsequent amendments and supplements to the credit agreement.

The law stipulates a maximum threshold of the annual percentage rate of charge (APRC) – it may not exceed 5 times the statutory interest rate. The APRC is one of the obligatory elements of the credit agreement. It indicates the overall amount of expenses under the loan, calculated on annual basis upon the overall amount of the loan, according to a formula stipulated by the law. Its calculation is based on the presumption that the credit agreement shall remain effective within the agreed term and both parties shall perform their contractual obligations according to the terms and conditions of the agreement. Clauses, arranging costs in higher amounts, are deemed void. In case payments under such invalid clauses are performed under the contract, the overpaid amounts exceeding the threshold should be offset with subsequent installments under the loan. In case the whole contract is declared void by the court, due to non-compliance with the provisions of the new law, the consumer shall owe payment of the overall amount of the loan, but not any interests and other expenses under the contract.

  1. Changes in the interest rates

In case of changes in the levels of the interest rates the lender shall inform the consumer for each change affecting the interest rates indicating the amount of the repayment installments after application of the new rates, the number and regularity of the installments, in case they are amended. If the interest rate depends on certain referent indicators – whose rates are publicly available, the parties may agree that such information may be provided on a monthly basis together with the information regarding the new amount of the monthly instalments.

In case of changes in the terms and conditions under the credit agreement, the lender shall provide the debtor with a new repayment schedule indicating the change.

  1. A new servicecredit advice

The law also provides and new specific service provided by lenders and credit intermediaries – advice concerning the credit agreement. The law differentiates two types of credit intermediaries: intermediaries related to certain lender/s and independent counsels. Related intermediaries review significant number of credit agreements provided by the lenders they work with, as they shall recommend one or several contracts applicable to the personal needs and financial situation of the consumer. The independent counsels shall review credit agreements available on the market as they shall also recommend one or several loans. The interests of the consumer shall govern the activity of the credit intermediaries.

  1. Changes in the currency of the loan

The consumer shall have the right to exchange the loan extended in foreign currency into the currency in which the consumer receives its incomes and owns assets or the currency corresponding to consumer’s domicile. Unless otherwise agreed, the exchange rate of the Bulgarian National Bank stipulated for the respective date of exchange shall apply. In case of exchange in a different currency used by the bank in its credit agreements, the exchange shall be governed by the terms and conditions arranged by the specific credit agreement.

  1. Pre-payment and delayed payment

The new law introduces clear rules concerning pre-payment of the loan. They stipulate that the loan may be fully or partially pre-paid which shall lead to decrease in the overall expenses under the loan achieved by decrease in the interest and all other expenses due for the remaining period of the credit agreement. Lenders may not refuse full or partial pre-payment as their compensation for the damages arising out of the pre-payment is limited to 1% of the pre-paid amount. Such compensation is due only in cases of pre-payment before 12 monthly installments after the assimilation. As an exception, lenders may seek damages in higher amounts but only if they prove their loss. Such compensation shall not be due after payment of 12 monthly installments.

The rules concerning delays in payment and the damages due provide that the lender shall be entitled to compensation calculated upon the amount of the delayed amount and due for the period of the delay. The damages for delay may not exceed the statutory interest rate, and the lender shall not refuse partial payments.

Lender’s receivables under the credit agreement may be assigned to a third party in case the provisions of the credit agreement allow such action. 

  1. Dispute resolution 

Consumers shall be entitled to file their complaints related to credit agreements at the Consumer Protection Commission (“CPC”), which shall supervise the observance of the act.

Beside complaints addressed to the CPC, each lender and credit intermediary shall arrange an internal procedure for submission of objections, dispute resolution and compensations due in relation to such complaints. Each complaint shall be reviewed by the lender as the latter shall introduce its position within the term of 30 days. Otherwise, or in case the debtor does not agree with lender’s position, the dispute may be referred to the an alternative dispute resolution body – a conciliation committee with the CPC. In case of international disputes the committee shall cooperate with the competent alternative dispute resolution bodies of other member states, by exchanging information and positions.

New Labour Migration and Mobility Act

A new law regulating labour migration and mobility shall enter into legal effect on 21.05.2016 (“LMLMA”).

  1. Main goals of the new law

The new LMLMA aims to harmonize Bulgarian legislation with the acts of the European Union in the area of free movement of employees and employment of foreigners – citizens of third countries outside the European Union (EU) in the territory of Bulgaria. More specifically, the act implements provisions of a number of European directives, regulating the entrance and residence of third country nationals in the territory of the EU. The said European acts are designated to grant the legal rights of the third country nationals wishing to work within the EU, as well as to provide security and balance in the labour market of the accepting member states. The said directives also aim at guaranteeing the equal mobility rights to European employees of all nationalities.

On the other hand, the LMLMA codifies the effective legislation in the area of labour migration and mobility, previously fragmented in various Bulgarian regulations. The LMLMA combines and modifies the provisions, which were so far contained in the Employment Promotion Act and the Ordinance on the terms and conditions of the issuing, rejecting or cancelling of work permits issued to foreigners in Bulgaria.

The LMLMA contains the general rules and the order for granting access of foreign workers – third country nationals to Bulgarian labour market. However, the specific rules shall be developed in separate acts of secondary legislation, including a regulation on the implementation of the LMLMA and a number of new ordinances, which are supposed to be adopted on the basis of the new law.

  1. Access of foreigners to Bulgarian labour market

The LMLMA summarizes the legal grounds for third country nationals to obtain access to Bulgarian labour market:

  • Labour contract with a Bulgarian employer;
  • Sending the foreigner on official business trip to Bulgaria for provision of services;
  • Change of location within internal corporate transfer;
  • Performance of activity as a self-employed person.

The act contains the general requirements to foreigners for granting access to the Bulgarian labour market. They include, among all, preliminary research of the market conditions made by the employer (market test), requirement for 1:10 ratio between foreigners, on one hand, and Bulgarian citizens, EU citizens or other persons having equal rights to them, on the other hand, employed on the basis of labour contracts by the same employer, possession of specific knowledge, skills and professional experience, ensuring labour conditions equivalent to those offered to Bulgarian citizens, etc.

In the event of conclusion of an employment contract with a foreign national or change of location of such within internal corporate transfer, the Employment Agency shall issue a resolution for granting access to the labor market. In case of sending the foreigner on official business trip for provision of services in Bulgaria, the Agency shall issue a work permit. The resolution for access to the labour market and the work permit are issued for a period of up to 12 months, except for the cases of high qualified employment when the permit is granted for the period of validity of the employment contract with the foreigner, which shall be not less than 12 months.

After issuance of a positive resolution for access to the labour market, respectively work permit, the foreigner should apply for a long-term visa (visa type D) and after obtaining such visa, the foreigner may enter Bulgaria and apply for long-term residence permit before the Bulgarian Ministry of Interior.

The LMLMA specifies the categories of foreigners entitled to a free access to the Bulgarian labour market, without the need to undergo work permit procedures. The said categories include foreigners who:

  • are granted a permit for continuous or permanent residence in Bulgaria, as well as the members of their families;
  • are members of the family of a Bulgarian citizen;
  • are members of the family of a citizen of another EU member state, provided that the EU national has used his/her right to move freely within the EU;
  • are granted asylum or international protection in Bulgaria under the terms and conditions of the Asylum and Refugees Act, etc.
  1. Internal corporate transfer

The LMLMA introduces a detailed regulation of the internal corporate transfer as a legal ground for obtaining access to Bulgarian labour market.

Internal corporate transfer represents a temporary change in the place of work of an employee – foreigner, citizen of a third country, for the purpose of his / her work or education. The employee shall be employed under a valid employment contract by a company, having its seat and management address outside the territory of Bulgaria. Subsequently, the said employee is sent to work within the same company or a company from the same group, to another of its offices or the office of another related company, having its seat and management address in Bulgaria. The act defines the meaning of the term “group of enterprises”, thus indicating the corporate limits for using the option of internal corporate transfer when relocating employees between related companies.

The permit issued by the Bulgarian Employment Agency, granting access of the foreigner to the labour market on the ground of internal corporate transfer, gives the foreign employee the right to perform labour activity only for a specific company or a group of companies and only on specific position, namely – managing position, expert position or a trainee, whereas the law provides a definition of each type of position.

One of the main advantages of the option of internal corporate transfer is the fact that it does not require the performance of a market test, nor compliance with the above-mentioned ratio (1:10) between the employed foreigners and Bulgarian/European citizens, as a prerequisite for issuance of the work permit. The permit is valid for a period of 12 months and it may be extended for an overall period of up to 3 years in the case of employees occupying managing or expert positions.

By introducing amendments to the the Law on Foreigners in Bulgaria, the legislator provided an option pursuant to which a foreigner who has acquired a residence permit issued by another EU member state for the purpose of internal corporate transfer, shall have the right of short-term residence in Bulgaria (up to 90 days within each 6-month period) without the need to undergo any additional administrative procedures.

  1. High-qualified employment

Section III of the second chapter of LMLMA regulates the issuance of work permit for high-qualified employment of foreigners. The act reproduces the already existing regulation previously contained in the Employment Promotion Act and the Ordinance on the terms and conditions for issuing, rejecting or cancelling of work permits issued for foreigners in Bulgaria without any major amendments.

  1. Equal treatment

A separate chapter of LMLMA regulates the equal treatment between the employees of the EU and from third countries, and Bulgarian citizens regarding their general rights concerning their professional development and social and economic life in Bulgaria. Such measures are required in view of the increasing urgency of the matter considering the access to social rights as a measure for attraction of qualified employees from third countries on the territory of the EU in order to cover the deficiency in certain economic areas in the European labour market, more specifically high-qualified and seasonal workers.

  1. Amendment of other acts

The transitional and final provisions of LMLMA rescind provisions of the Employment Promotion Act which previously regulated the access of foreigners to Bulgarian market. They also amend certain provisions of the Law on Foreigners in Bulgaria as the most essential changes concern the implementation of new, detailed rules regarding the issuance of residence permits granted to foreigners for the purpose of internal corporate transfer.

List of professions with shortage of experts

The list of professions for which there is a shortage of qualified employees in Bulgaria has been approved.

The list has been issued on the basis of the latest amendments to the Ordinance on the terms and conditions for issuance and rejection of work permits to foreigners in the Republic of Bulgaria and more specifically with regard to amendments concerning the regime of high-qualified employment of foreigners.

The procedure for issuance of a work permit to foreigners for the purpose of high-qualified employment in Bulgaria has been simplified, whereas the requirement for the employer to perform market search shall not apply, if the foreigner will hold a position included in the approved List of professions.

The professions included in the list are predominantly from the sector of IT services. More specifically the following groups of professions are included in the List:

  • Experts for sales in the field of information and communication technologies
  • System analysts
  • Software developers
  • Developers of web and multimedia
  • Application programmers
  • Developers of software and software applications and analysts
  • Designers and administrators of data base
  • System administrators
  • Experts on computer networks
  • Experts on networks and data base.

New Accountancy Act

On 1 January 2016 a new Accountancy Act shall enter into force as it shall introduce numerous amendments and supplements to the existing regulations concerning financial statements, independent financial audit of Bulgarian companies, announcement of annual financial statements and regulatory periods for storing of accounting information

1. Categories of enterprises 

The new law introduces several categories of enterprises. Falling within certain category is defined by the value of respective indicators as at 31 December of the current financial period. The category of the enterprise determines the contents of its annual financial statements, the obligation to undergo financial audit, the obligation to prepare annual activity report, as well as the obligation to announce the financial statements. The categories are the following:

a) Micro enterprises – enterprises, which do not exceed at least two of the following three indicators as at 31 December of the current financial period: a) book value of the assets – BGN 700 000; b) net incomes from sales – BGN 1 400 000; and c) average number of personnel – 10.

b) Small enterprises – enterprises, which do not exceed at least two of the following three indicators as at 31 December of the current financial period: a) book value of the assets – BGN 8 000 000; b) net incomes from sales – BGN 16 000 000; and c) average number of personnel – 50.

c) Medium enterprises– enterprises which are not small and which do not exceed at least two of the following indicators as at 31 December of the current financial period: a) book value of the assets – BGN 38 000 000; b) net incomes from sales – BGN 76 000 000; and c) average number of personnel – 250.

d) Large enterprises – enterprises, which exceed at least two of the following indicators as at 31 December of the current financial period: a) book value of assets – BGN 38 000 000; b) net incomes from sales – BGN 76 000 000; and c) average number of personnel – 250.

In case an enterprise ceases to correspond to the required two out of three indicators for the respective category for the last two financial periods, the company shall change its category as at the beginning of the next (third) financial period. If over two consecutive financial periods an enterprise corresponds to indicators of two different categories, it shall be classified in the category corresponding to the indicators for the last financial period.

2. Groups of enterprises 

The preparation of consolidated financial statements depends on the category, to which a group of enterprises belongs. The group category also determines the contents of the annual financial statements, the obligation for performance of independent financial audit and the preparation of consolidated activity report. The group categories are the following:

a) Small groupsgroups of enterprises which overall sum of indicators according to their annual financial statements on consolidated basis, as at 31 December of the current financial period does not exceed the thresholds of the following three indicators: a) book value of the assets – BGN 8 000 000; b) net incomes from sales – BGN 16 000 000; c) average number of personnel – 50.

b) Medium groups – groups of enterprises, which are not small groups, and which overall sum of indicators according to their annual financial statements on consolidated basis, as at 31 December of the current financial period does not exceed the thresholds of the following three indicators: a) book value of the assets – BGN 38000 000; b) net incomes from sales – BGN 76 000 000; c) average number of personnel – 2

c) Large groups – groups of enterprises, which overall sum of indicators according to their annual financial statements on consolidated basis as at 31 December of the current financial period exceeds the thresholds of the following three indicators: a) book value of the assets – BGN 38000 000; b) net incomes from sales – BGN 76 000 000; c) average number of personnel – 2

3. Requirements to the Annual Financial Statements (AFS) and the Consolidated Financial Statements

The requirements for the minimal contents of the AFS depend on the category of the company, respectively of the group as described in points 1 and 2 above.

Effective from 01.01.2016 the minimal contents of the AFS shall include balance sheet, profit and loss account and attachment. The form, structure and contents of the full set of the annual financial statements shall depend on the applicable accounting standards, whereas each enterprise may prepare and announce the full set of documents (not only the minimum contents) upon its own discretion.

The AFS of the sole proprietors, whose incomes from sales do not exceed BGN 200 000 for the current financial period and who are not subject to mandatory independent financial audit, may comprise only profit and loss account.

The AFS of micro-enterprises may include only a short-form balance sheet and a short-form profit and loss account, except for investment companies and financial holding companies.

The AFS of the small enterprises may include a short-form balance sheet, short-form profit and loss account and attachments.

The AFS of the medium and large enterprises as well as the public interest entities shall comprise of the full set according to the applicable accounting standards.

The new Accountancy Act introduces a definition of “public interest entity”. These are any the following entities: entities which issue transferable securities admitted to the trading on a regulated market in a EU member state, credit institutions, insurance and reinsurance companies, pension insurance companies and their funds, investment intermediaries representing large companies, collective investment schemes and managing companies representing large companies, financial institutions representing large companies, Holding BDZ EAD and its subsidiaries, National Company Railway Infrastructure, companies which main activity includes production and/or transfer, and/or sale of electricity and/or heating representing large companies, commercial companies whose main activity includes import and/ or transfer and/or transit of gas representing large companies, companies providing water supply and sewerage services.

The parent company of a small group is released from the obligation to prepare consolidated financial statements for the group, unless the group contains at least one public interest entity.

The AFS of micro enterprises, small, medium and large enterprises shall be based on the National Accounting Standards. They may choose to prepare their AFS on the basis of the International Accounting Standards, provided that no changes have occurred in the accounting base. The AFS of the public interest entities shall be based on the International Accounting Standards. The AFS of companies in liquidation or in bankruptcy proceedings shall be based on the National Accounting Standards.

4. Financial Audit 

The new Accountancy Act introduces new legal requirements for the performance of obligatory independent financial audit, which shall no longer depend on the type of company / legal entity. Subject to obligatory financial audit shall be the annual and consolidated financial statement of the following enterprises:

i           Small enterprises, which as at 31 December of the current financial period exceed at least two of the following indicators: a) book value of the assets – BGN 2 000 000, b) net incomes from sales – BGN 4 000 000, c) average number of personnel – 50.

ii          Medium and large enterprises;

iii         Public interest entities;

iv         Medium and large groups and the groups including at least one public interest entity;

v          Enterprises for which mandatory audit is imposed by a special law;

vi         Joint-stock companies and limited partnerships with share capital regardless of their category, except for such which have not performed any activity within the respective financial period;

vii        consolidated financial statements and annual financial statements of the companies included in the consolidation;

viii       non-profit legal entities performing public services, exceeding one of the following indicators: a) book value of the assets as at 31 December – BGN 1 000 000, b) net incomes from commercial and non -profit activities for the current year – BGN 2 000 000, c) total sum of financing received during the current year and financing received in previous years but not used as at 31 December of the current financial year – BGN 1 000 000.

ix         non-profit legal entities performing public services including intermediation within international adoption proceedings. 

5. Deadlines for announcement of the AFS and the annual activity reports 

The new law provided unified term for announcement of the AFS, consolidated financial statements and the annual activity reports in the Commercial Register, respectively the Central Register of the Ministry of Justice, an economic edition or the Internet. The deadline is 30 June of the year following the reported year.

Small enterprises which are not subject to obligatory financial audit shall not be obliged to publish their profit and loss accounts as well as their activity reports.

Limited liability companies (OOD), joint-stock companies (AD), and limited partnerships with share capital (KDA), which represent medium or large enterprises or which are public interest entities, shall announce, together with their AFS, information regarding proposals for distribution of profit or covering losses from previous years, as well as the resolutions of the general meeting of shareholders regarding the manner of distribution of the profit or covering of the losses from previous years.

Sole proprietors who are not subject to mandatory audit shall not be required to announce their AFS.

The head of the enterprise shall be in charge for the due preparation and announcement of company’s financial statements, execution of the financial audit and the general compliance with the legal requirements. The law considers as head of the enterprise the person or persons managing solely or collectively the enterprise in their capacity of owners, managing directors or authorized persons, liable for the entire economic activity of the enterprise before its owner or owners, shareholders, the municipality or the state. Breaches of the legal requirements may lead to financial sanctions.

No FIT for biomass projects after 01.01.2016

According to the current legislative provisions only new power plants which correspond to the below -mentioned requirements could benefit from the compulsory purchase of electricity at preferential prices. These are power plants with combined cycle and indirect use of biomass which shall be constructed in urbanized territories, agricultural sites and production area and

a) Have installed capacity up to 1,5 MW and indirect use of biomass, whereas 60% of the overall weight of the biomass shall be animal manure, or

b) Have installed capacity of up to 500 kW for production of energy with indirect use of biomass of plant waste from own production.

The above preference shall cease to apply for new biomass projects, which shall be put into operation after 1 January 2016.

Amendments to the preferential purchase prices of electricity from biomass, cancelling all preferences for all biomass power plants that are not commissioned until 01.01.2016 were introduced with the transitional and final provisions of the Bill for Amendments to the Agricultural Lands Protection Act, which was promulgated in the State Gazette on 18 December 2015.

Meanwhile, the Energy and Water Regulatory Commission (EWRC) announced new lower prices for electricity produced from biomass projects. The affected plants are those having installed capacity up to 1,5 MW and indirect use of biomass, whereas 60% of the overall weight of the biomass of animal manure. The new purchase prices became effective from 01.12.2015, and they are the following:

  • BGN 376,78 per MWh – for power plants having installed capacity up to 500 kW; and
  • BGN 347,46 per MWh – for the power plants having installed over 500 kW to 1,5 MW.

Due to changes in the pricing elements according to EWRC’s report, the preferential purchase price for electricity produced from power plants with combined cycle and indirect use of biomass from plant waste from own production having installed capacity up to 500 kW was also decreased – from BGN 397,09 per MWh to BGN 349.06 per MWh.

The lower prices shall apply for new biomass plants commissioned in the period 1 – 31 December 2015.

High-qualified employment of foreigners

By virtue of amendments to the Ordinance on the terms and conditions for issuance and rejection of work permits to foreigners in the Republic of Bulgaria, which were promulgated in the State Gazette, issue 80, dated 16.10.2015, the legislator introduced certain amendments to the regime of high-qualified employment of foreigners. The purpose of the amendments is to ease the procedure for issuance of a work permit to foreigners for the purpose of high-qualified employment in Bulgaria.

The requirement for performing market test and for searching adequate candidates Bulgarian or EU nationals for the respective position shall be cancelled in the cases, where the foreigner shall be hired at a position included in a specific List of professions for which there is a shortage of qualified employees in Bulgaria. The List should be approved by the Minister of labour and social policy by 31.01.2016. The List may be revised annually by 31 January.

In order to receive positive resolution from the Employment Agency for high-qualified employment without performing preliminary market search, the foreigner and the local employer should comply with the following conditions:

  • The foreigner should have university degree acquired after a course of education of minimum 3 years carried out by a licensed higher education institution;
  • The gross salary of the foreigner specified in the labour contract should be at least three times higher than the average salary in Bulgaria based on information for the preceding 12 months, and
  • The labour contract should be concluded for a period of not less than 1 year.

Amendments to the Energy Act

The latest amendments to Bulgarian Energy Act (“EA”) entered into force as at 24 July 2015. The announced purpose of the amendments is to improve the financial status of Bulgarian energy system by applying new measures for compensation of financial deficits in the National Electricity Company (“NEC”).

Setting up of “Security of the Energy System” Fund

The first newly adopted measure is the setting up of a special Fund – “Security of the Energy System” that shall cover NEC’s losses accumulated as a result of the purchase of electricity at preferential prices. The amounts in the Fund shall be raised by: monthly installments due by producers and traders importing electricity and their amount shall be 5% over the income from electricity sales, net of VAT; income realized by auctions for sale of quotas under the Restriction of Climatic Changes Act; income formed by accrued interests including such due over the abovementioned installments; donations and income formed by statistical transfers of renewable energy.

The monthly installments due by the producers and traders shall represent public obligations and shall be collected by the National Revenue Agency following the procedure arranged by the Tax and Social Security Procedure Code. Payments shall become due as at the 15-th day of the month following the month the income was realized, whereas by the 5-th day of each month producers and traders shall be obliged to declare their income for the preceding month. Those installments are acknowledges as current expenses for the purpose of taxation. However, such expenses shall not be considered by the Energy and Water Regulatory Commission (“EWRC”) for the purpose of price regulation.

Transactions at freely negotiated prices

The amendments explicitly provide the possibility for renewable energy producers to sell the amounts exceeding the net specific production of electricity on the free market. On the other hand NEC shall be able to sell at freely negotiated prices the energy produced from high efficient cogeneration, as well as renewable energy purchased from the end suppliers.

The Act for amendments also provides additional obligations for the transmission system operator and the distribution system operators. They shall also be obliged to pay the non-recoverable expenses and community obligations under the prices determined by the EWRC.

Amendments to the Renewable Energy Act

The Act for amendments to the Energy Act introduces also certain amendments to the Renewable Energy Act.

Amendments concerning biomass power plants

In order to benefit from the priority regime of work incentive, plants with combined cycle and indirect use of biomass 60% of whose overall weight shall be animal manure, shall prove the registration of stock-breeding farm under the meaning of the Veterinary Practice Act at least three years prior to filing the application for connection of the plant to the grid. They shall also prove that they own a specific minimum number of registered animals and birds and produce 1 kWH electricity form their manure.

The law amends the parameters of biomass plants which shall be put into operation in the future and which could benefit from the compulsory purchase of electricity under preferential price. Those incentives shall remain open for: (a) plants with installed capacity up to 1,5 MW for production of energy with combined cycle and indirect use of biomass, whereas 60% of the overall weight of the biomass is animal manure, constructed in urbanized territories, agricultural sites and production areas, under the abovementioned requirements for registration of stock – breeding site, and (b) plants having installed capacity of up to 500 kW for production of energy from biomass of vegetable waste from own production.

The incentives (mandatory purchase of electricity produced at preferential prices) for biomass power plants covering the abovementioned requirements shall remain until 30 June 2016. Power plants commissioned after the abovementioned date shall not benefit from such preferences.

New restrictions on purchase of renewable electricity at preferential prices

Additional restrictions were introduced with regard to the quantities of electricity produced from renewable energy sources, which shall be subject to purchase at preferential price. Preferential price shall be paid only for the renewable electricity produced up to the net specific production rate of electricity. The net specific production rate of electricity is defined as an average energy production from 1 kW installed capacity according to EWRC’s decision for determination of the preferential prices after deduction of own costs.

Net specific production rate of electricity shall not apply for biomass power plants corresponding to the requirements described above. In other words, their entire amount of electricity produced by such biomass power plants shall be purchased at preferential prices.

The purchase price for electricity exceeding the amount purchased at preferential prices is also changed. Those quantities shall be purchased by NEC and the end suppliers under the price for excess electricity on the balancing market, unless the producer uses the electricity for its own needs or sells the electricity on the free market.

Changes to the Labour Code

Bill for amendments of the Labour Code has been published in State Gazette, Issue 54. The amendments to the Labour Code entered into force on the date of their promulgations, 17 July 2015.

The employer shall be entitled to terminate unilaterally with a prior written notice the employment contract with an employee, who has acquired the right to retire.

The law introduces the right of mothers to benefit from additional leave for nurturing a fourth or a following child until the child reaches the age of 2 instead of the former possibility of using unpaid annual leave.

Subject to explicit regulations become the labour contracts for a short-term seasonal and agricultural work. Such contracts can be concluded with a register farmer for a one-day work. The overall period of the contract shall not exceed 90 business days per year. The contract shall include information concerning the parties, job position, place of work, amount of remuneration, date of performance of the obligations, duration and beginning and end of the working day as one business day is equal to 8 hours. Remuneration shall be paid in the end of the working day in cash against receipt signed by the employee. The employees under such contracts are subject to social security for the risks of disability due to general illness, age and death, accident at work and professional disease. Compensation for short-term disability due to accident at work and professional disease shall be paid for a maximum period of 90 calendar days.

Employers shall no longer be obliged to keep and approve a schedule for paid annual leaves for the next year. They are also released from the obligation to develop the rules concerning the healthy and safe working conditions. However, employer shall be required to keep a personal file of each of its employees containing the documents for beginning, existence and termination of their relations, while the employee shall be entitled to receive certified copies of each document kept in the file.

Amendments are introduced in the provisions concerning disciplinary sanctions. Sanctions shall be imposed by employees at managing position authorized by the employer to represent the employer with regard to disciplinary procedures.