In 2014 with amendments to the Ownership and Use of Agricultural Land Act (OUALA) the legislator reduced the opportunities for foreign individuals and legal entities to acquire agricultural land in Bulgaria. More specifically, the prohibition on ownership over agricultural land was imposed on:
- Bulgarian companies having as direct or indirect shareholders foreign companies registered in jurisdictions with preferential tax regime;
- Bulgarian companies having as shareholders foreign individuals, who are not nationals of EU / EEA Member State, or respectively having as shareholders foreign entities, which are not registered in an EU / EEA Member State, and
- Joint stock companies registered in Bulgaria, which have issued bearer shares.
In other words, Bulgarian legislator prohibited foreign individuals and legal entities with registration outside EU/EEA and/or with registration in off-shore zones to own and acquire agricultural land in Bulgaria. The jurisdictions with preferential tax regime (off-shore zones) are defined in the Bulgarian Corporate Income Tax Act.
The prohibition applies to all companies registered in Bulgaria, including public companies, such as the Real Estate Investment Trusts, whose statutory scope of activity includes the acquisition of real estate property. Pursuant to the legislative amendments, as currently approved by Parliament, the prohibition applies regardless of the percentage share participation of the foreign individuals and/or entities with registration outside EU/EEA and/or with registration in off-shore zones in the capital of the Bulgarian company.
By virtue of the latest amendments to the OUALA, which were approved by the Parliament on 11 February 2015, sanctions were introduced for all Bulgarian companies breaching the above discussed prohibition. Initial monetary sanction of BGN 100 (one hundred Bulgarian leva) per each 1 000 square meters agricultural land owned by the breaching company will be imposed. If the breach is not remedied within a period of 3 (three) months after the first sanction, new increased sanction will be imposed at the amount of BGN 100 (three hundred Bulgarian leva) per each 1 000 square meters agricultural land. The increased sanction will continue to be imposed as long as the breach continues, until it is remedied.
The provisions introducing the new sanctions shall enter into force from 1 May 2015 The Bulgarian companies, which are in breach of the said prohibition shall have less than 3 months to undertake the necessary remedial legal actions, in order to become compliant and to avoid the statutory fines.
Currently there is strong negative feedback to the legislative amendments by business organization and the Bulgarian Stock Exchange. The President of the Republic is entitled within 15 days to impose a veto on the law amendments, which will require new voting in the Parliament. In case this happens, the Parliament can override the President’s veto by a majority vote of more than 50% of all members of the Parliament.