Bulgarian tax residency for EU, non-EU and British citizens

Tax residency in Bulgaria, where both personal and corporate income tax rates are 10 %, is a popular option for quite some time for many EU and non-EU citizens. Recently British citizens doing business and travelling in EU countries are anxious about their rights after Brexit. Over one million Brits are now already living outside the Island all over Europe.

The draft Withdrawal Agreement between the UK government and the EU envisages that British citizens will keep the right to live and work in the country where they reside at the time of the withdrawal. Both parties confirm that this has been surely agreed and further amendments in this section of the Withdrawal Agreement are not expected. Moreover, the negotiators agreed that there shall be a transitional period of 21 months (from 29 March 2019 until the end of 2020) before UK leaves the EU completely. So, according to the last draft of the Withdrawal Agreement, UK citizens residing on the basis of EU law before the end of the transitional period will maintain the residence rights they currently enjoy, under the currently applicable conditions and limitations. This protection includes also rights which are in the process of being obtained: citizens will be able to acquire the right to permanent residence after five years of lawful residence, even if the five-year period is completed after the end of the transition period. So, if you are a British citizen trading with EU partners, travelling around Europe or you are self -employed, providing services to EU clients, or you simply need to lower your taxes, and you wish to become a Bulgarian (tax) resident benefiting from current EU laws and the rights they give, you have a little time to do it. read more

Bulgarian citizenship by investment – 2019 fast track bonds option

Bulgarian citizenship by investment

Buy Bulgarian citizenship by buying government bonds

Fast track Bulgarian citizenship – straightforward and financed options

Bulgarian citizenship by investment has never been easier to obtain following 2017 latest amendments to the Foreigners in the Republic of Bulgaria Act and to the Bulgarian Citizenship Act, adopted by the National Assembly. These amendments allow non-EU citizens to practically buy Bulgarian citizenship by investing certain own or loaned amounts in the economy of the country. Current legislation offers various Bulgarian citizenship ‘for sale’ options depending on the size and type of the made investment. read more

Bulgarian Forex license – fast obtaining and EU passporting

Obtaining Forex license in Bulgaria

Bulgarian Forex broker MiFID EU passporting

Bulgarian Forex license gives right to the broker to operate within the entire EU either by free providing of services or through opening a branch.

Companies that want to operate Forex business platforms in Bulgaria should be registered as investment intermediaries and licensed by Bulgarian Financial Supervision Commission. They work under the European MiFID which has been implemented in Bulgarian legislation and financial institutions are regulated by the directive with some national specifics.

There are two types of Forex licenses in Bulgaria which are applicable to brokers, depending on the type of activity: read more

Distribution of votes, profits and dividend in Bulgarian LLC and JSC

Participation is a commercial company implies various rights to the shareholders, the main being the right to dividend. According to Bulgarian Commercial Act shareholders in a Limited Liability Company are entitled to receive part of the profits in the form of dividends. Distribution of interim dividends (based on current year profits) is prohibited. Companies are allowed to distribute only accumulated profits from past fiscal years.

In the common practice the balance profit is distributed among the shareholders in proportion to their shares. In other words, if in a limited liability partnership there are two partners each holding 50 %, that means that they will receive equal share from the profit, unless otherwise agreed. “Unless otherwise agreed” is a key phrase here, as it gives opportunity to shareholders to stipulate different shares of profit. These stipulations shall be made in writing on the company’s Articles or Operating Agreement. So, practically there are no legal limitations to disproportional distribution of profits in a Limited Liability Company, in case all shareholders agree on that. In all cases, in order to be effective and legally binding, the decision for distribution of profits in the form of dividends should be taken by the General Meeting of Shareholders and duly recorded in writing in the company’s documentation. read more

Open bank account in Bulgaria for offshore company

Opening a bank account in Bulgaria for an offshore company? This is not a problem since Bulgarian offshore company formation followed by opening a bank account is a straightforward process which takes only a week time. The costs are minimal too.

But first one should know that Bulgaria is not a typical offshore zone. It is more of a tax haven. In simple words – you get the best from an offshore and a ‘normal’ company registered in EU. From legal point of view Bulgarian offshore companies are ‘normal’ companies, publicly registered and legally operating all across Europe and the world. They are registered under EU jurisdiction which means that they benefit from all EU financial and tax regimes. And from purely psychological point of view they are much more prestigious – because everyone would prefer to deal with an EU based company, which is publicly registered and strictly regulated under EU legal framework – rather than deal with a typical offshore company, which by default hides many details about its business activities, real owners, etc. read more

Financial license Bulgaria – regulation of financial institutions

Financial license in Bulgaria can be obtained quickly and at quite reasonable costs. Bulgarian financial institutions are governed by the Credit Institutions Act and in accordance with its Art. 3, a financial institution is a legal entity different from a credit institution or an investment intermediary. Main activity of licensed financial institutions in Bulgaria is performing one or more of the following:

  1. Providing payment services under the Payment Services and Payment Systems Act;
  2. Issuing and administering other means of payment (travellers checks and letters of credit) as far as this activity is not covered by item 1;
  3. Financial leasing;
  4. Guarantee transactions;
  5. Trading on your own account or for account of customers in foreign currencies and precious metals with the exception of derivative financial instruments on foreign currency and precious metals;
  6. Provision of services and / or activities under Art. 5 para. 2 and 3 of Markets in Financial Instruments Directive;
  7. Currency brokerage;
  8. Acquisition of credit claims and other forms of financing (factoring, forfeiting, etc.);
  9. Issuing electronic money;
  10. Acquisition of shares in a credit institution or other financial institution;
  11. Lending funds, that are not raised through public deposits or other repayable funds.

Financial institutions are subject to registration with BNB (Bulgarian National Bank) public register. A very important detail in this regard is that if there is a specific activity under a special law – the arrangements for licensing a Bulgarian financial institution are different. For example, a financial institution that issues electronic money should be registered and licensed under the Payment Services and Payment Systems Act. read more

PSD2 license for payment institution, e-money and payment system providers in Bulgaria

E-money, payment institutions, payment systems, online payment system providers – at a first glimpse all these terms look similar, but in fact they refer to different issues regulated by:

  • Bulgarian Law on Payment Services and Payment Systems,
  • Directive 2007/64/EC of the European Parliament and of the Council of 13 November 2007 on payment services in the internal market (amending Directives 97/7/EC, 2002/65/EC, 2005/60/EC),
  • Directive 2009/110/EC of the European Parliament and of the Council of 16 September 2009 on the taking up, pursuit and prudential supervision of the business of electronic money institutions (amending Directives 2005/60/EC and 2006/48/EC and repealing Directive 2000/46/EC) and
  • Latest PSD2 Directive 2015/2366/EU of the European Parliament and of the Council of 25 November 2015 on payment services in the internal market, amending Directives 2002/65/EC, 2009/110/EC and 2013/36/EU and Regulation (EU) No 1093/2010, and repealing Directive 2007/64/EC.

The above documents regulate the requirements to the payment service providers which, apart from banks, inclusive European Central Bank and the national central banks of the member states, can be two types:

  • Payment institutions
  • Electronic money institutions

From 13 January 2018 all EU member states are obliged to apply the rules of PSD2. In October 2017 Bulgarian government proposed amendments to payment service legislation which are expected to be adopted by Parliament by the end of the year. Since new procedure and requirements have not been announced yet, the article below gives only basic guidelines on the matter based on current laws. read more

Debt collection Bulgaria – debt recovery proceedings

Bulgarian debt collection proceedings is the final step for effective collection of business and personal debts and in most cases they are preceded by successful court litigation proceedings. Without this final step the rights implemented in a court judgment or a writ of execution cannot be materialized.

Bulgarian debt collection proceedings are not completely codified which unfortunately leaves many loopholes and opportunities for various legal interpretations. Debt recovery proceedings in Bulgaria are officially conducted by bailiffs (public or private enforcement agents). Debt collection agencies in Bulgaria could also help but in the end the role of a debt recovery lawyer is frequently most important. The regulations in force, especially of the registration of real estates, has many imperfections which can be used to sabotage the entire debt collection process. An experienced Bulgarian debt collection lawyer can undertake an investigation and carry out a number of researches in many different institutions with the aim of discovering all assets of the debtor. If the assets are not enough, sold or burdened, the solicitor can undertake specific legal actions for the return of sold or donated property back to the ownership of the debtor and thus they can be used to cover all amounts on the creditor’s writ of execution. read more

Publication of annual financial statements in Bulgaria

Although the obligation for publication of annual financial reports of companies is a common rule in almost all European countries, there are numerous differences among the legislation of the member states. In most countries this obligation is only for companies that match certain criteria – certain activity throughout the fiscal year, annual turnover, type of company, etc.

That is probably the reason why many entrepreneurs that have set up companies in Bulgaria make the mistake not to publish their annual financial statements wrongly assuming that they do not fall among the entities that have this obligation. According to Art. 40 of Bulgarian Accounting Act enterprises are obliged to publish their annual financial statements and their annual management reports as adopted by the General Meeting of partners / shareholders. read more

Corporate income tax in Bulgaria – advance installments

There are new rules for making advance installments as per amendments of Corporate Income Tax Act as of 2013. According to Corporate Income Tax Act some legal entities are obliged to make advance installments of corporate tax. Whether an entity falls within this obligation depends on the net revenues of the previous year. In case the net revenues for 2012 are below BGN 300 000, advance installments are not due, for net revenues between BGN 300 000 and BGN 3 000 000 advance payments are due on quarterly basis and in case the revenues go above BGN 3 000 000, the advance installments must be on monthly basis. read more