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Varadinov & Co.
Legal Bulletin

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Ordinance on implementing the Law on Promotion of Investments
The Council of Ministers approved with a decree (OG 88/13.11.2015) the amendments in the Ordinance on implementing the Law on Promotion of Investments (LPI) according to the European Regulations under Articles 107 and 108 of the Treaty on the Functioning of the European Union. The Ordinance encourages investments in economic activities under Articles 12 and 22e (LPI) as a scheme for multisectoral regional investment aid and scheme for educational aid. The classification of the economic activities, under which the investment is made, is determined based on the planned for production products (commodities and services), corresponding to the specific economic activity, the revenues of which must be at least eighty percent of the future common revenues that have resulted from the implementation of the investment.
The areas in which investments are not encouraged are listed exhaustively, as well as the conditions, regarding those investments that are being promoted. When the investor carries out activities in eligible areas, as well as in excluded ones, the latter ones will not be promoted and the investor is obligated to keep a separate accounting that ensures the separation of the activities and/or the differentiation of the costs so that the excluded areas are not a subject of promotion. Investments of an enterprise against which a recovery order was issued due to a previous decision of the European Commission under which the aid was declared unlawful and incompatible with the internal market are not promoted.
When the investor files an application for aid he is obligated to indicate which data can be found in public registries but is not obligated to submit documents – originals or transcripts –that have been provided to the Bulgarian Investment Agency under other procedures. The provisions, concerning the defining of the average eligible costs of the aided activities, have been amended so that the annual budget of the scheme for regional investment aid has been set to 150 million euro. Should this sum be exceeded, the Ministry of Economics will devise a plan for evaluation of the scheme which will be sent to the European Commission not more than twenty days after the coming into force of the amendment of the budget.
Rules for trading with electric energy
The amendments in the Ordinance on Trading with Electrical Energy (OG 90/11.20.2015) have been approved by the Commission for Energy and Water Regulation. The need for its actualization has emerged after the last amendments of the Energy Act and the Act on Renewable Energy as well as due to the problems in the practical implementation of the Rules since the summer of 2014. The amendments are aimed primarily at creating an additional regulatory framework that regulates with a greater precision the conditions for participation in the organized stock market for electrical energy as well as the rights and obligations of the operator of the stock market and the commercial participants. The goal is to increase transparency and competition in the electrical energy market domestically, to provide prerequisites for maintaining the balance between production and consumption of electrical energy as well as to guarantee safe and reliable functioning of the electrical system.
Particular attention is paid to the participation of manufacturers of energy from renewable sources and manufacturers of energy from highly efficient combined production of thermal and electrical energy on the free market. The practical implementation of the new legal regime removes some of the former limitations. Serious amendments have been prepared, concerning the regime on changing the supplier of energy and the balancing group coordinator. The section, concerning regulation of the terms and conditions for consumers who have declared a desire for changing their supplier of a service of public interest, without installed electric meter, at freely negotiated prices, is completely new.
There is a plan for introduction of new obligations for the independent transmission operator, concerning the preparation of the internal instructions for defining the expenditures which are not a part of the forming of the balancing energy prices.

It is also envisaged that the coordinators of the balancing groups have a right to ask from ESO, or from the specific network operator, a temporary suspension of energy transmission to an object of a participant in the balancing group, provided that he has not paid all sums, concerning the balancing liability. This right is reciprocal to the right of the suppliers of energy and the network operators, under the Energy Act, and its goal is to ensure the execution of the financial obligations of the commercial participants in respect to the balancing coordinators.

The regulatory companies will deliver to ESO hourly prognoses on the consumption of their clients as a measure for avoiding an imbalance between the prognoses and the consumption, the price for which is paid by all users. CWER recommends the implementation of a uniform standard for invoices of final customers for transparency, effectiveness and comparability of information. The invoices should clearly reflect the expenditures of the suppliers for balancing the electric network.

The Law on Excises and Tax Warehouses

Reducing the administrative burden and the expenditures for the economic operators is the goal of the amendments in the Law on Excises and Tax Warehouses (OG 92/27.11.2015). An opportunity for a direct release from payment of an excise is implemented and given to the persons that use in their activity a denatured, under a special method, ethyl alcohol. The hypotheses, concerning the opportunities on movement of excisable goods, with excise labels, to another tax warehouse of the same licensed warehouse holder, have been simplified. The time limit for restoring an excise on electric energy has been reduced.

There is a change in the excise calendar of tobacco products so that for the year 2016 the specific excise on cigarettes will be reduced from 101 leva to 70 leva for 1000 pieces. Simultaneously, the proportional excise is being raised to 38 percent, from the purchase price, for the next year, to 40 percent – in 2017, to 42 percent – in 2018. In accordance with the European practice, the excise rates on energy products, used as a heating fuel, are being raised. The excise on gas oil and kerosene will be raised from 50 leva to 646 leva for 1000 liters while the excise on heavy fuels and heating oils – from 50 leva to 400 leva for 1000 kilograms. A zero rate is introduced for liquefied petroleum gas and for biogas for one gigajoule. The production of brandy in registered specialized small distilleries (with vessel storage amount up to 500 liters) can be executed only during the period of July 1st to December 31st.
The methods for control, used by the customs authorities for effective prevention and counter reaction to the unlawful sales of tobacco products, are being improved. Measures are being taken in order to stop the practice of people, who have obligations towards “Customs” Agency, evading payment of public receivables by transferring the debtor company to landless persons and creating new companies, operating under the law. Keeping, transferring and transporting manually rolled cigarettes or cigarettes made from billets with filters, in a quantity over 40 pieces, is being forbidden and the administrative penalties are being increased as well.