Банкеръ Weekly

Briefs

TAXES BAN PHILIP MORRIS AND ADDIDAS FROM BULGARIAN FREE ZONES

Since 1994 the interest which Addidas, Philip Morris and a number of other foreign companies have shown in the Russe Free Zone is confronted by the high tax barrier placed by the Ministry of Finance. Although they are named 'free' these territories are practically not free at all. They are only duty free for goods designed for re-export.
After the Russe Free Zone were established five more - near Plovdid, Bourgas, Svilengrad, Vidin and Dragoman. Thanks to the powerful customs duty lobby at the Ministry of Finance and other institutions, the privileges they had were gradually reduced. For two years now the only relief for Bulgarian free zones is the excluded VAT and import duties. This, however, is valid for all other Bulgarian companies, which declare that they are effecting temporary import, as well as those producing goods for export.

Addidas was recently studying the possibilities for moving part of its Far East production facilities to Russe Free Zone. Representatives of the company visited the free zone and even asked whether they will be able to employ two thousand qualified workers in the region, but when they found out that they will have to pay tax on profit, they hurriedly left. Addidas materialized the idea in Turkey.
Some time ago an offer from Philip Morris was also rejected. The US company wanted to store its production destined for Russian, Ukrainian and other CIS markets in Russe Free Zone. Later they understood that it is forbidden to store goods subject to excise tax in the Bulgarian free zones, and Philip Morris moved to Turkey.

The draft Law on free economic zones has been aging at the Ministry of Finance since the end of 1998. According to it should be re-establish the situation before 1994 - the companies, operating inthe free zones should be reliefed from paying tax on profit, and then theey pay just a certain part of it. After the draft was presented it was put on discussion, but a high ranking official cooled down the enthusiasm.
At present there are 14 free zones operating in Turkey, which give full preferences both for taxes and duties, while in Romania there are two free zones - in Gjurgju and in the Black Sea port Sulina. Furthermore the Romanians offer the most liberal law in the region - not only complete tax and duty free zones, but concessioning of the territory for 50 years. Just for comparison - in the Bulgarian free zones the territory can be concessioned for 10 years. That is why an increasing number of companies, operating in the Russe Free Zone, both foreign and joint ventures dominantly Bulgarian-German and Bulgarian-Austrian, are moving to Gjurgju.

Югославия също направи летящ старт. Свободни зони вече Yugoslavia also had a fast start. There are free zones functioning near Belgrade and Nis. A free zone will be opened these days near Skopje.
It is logical that especially at the Balkans foreign investors feel more secure at the free zones. Many of them prefer to start from there, study the market, tax laws and other legislation, the conditions and the qualification of the workforce, establish some business contacts and only after that undertake some more considerable investments.

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