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. Currency brokerage;
7. Acquisition of credit claims and other forms of financing (factoring, forfeiting, etc.);
8. Issuing electronic money;
9. Acquisition of shareholdings;
10. 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.

The Credit Institutions Act sets out the following common requirements for the applicants:

1. To have a commercial registration in the Republic of Bulgaria as a limited liability company, joint stock company or a limited partnership with shares;
2. The scope of activity of the company shall not include services / activities different from those listed above;
3. Company’s own capital shall be in structure and in the amounts determined by Ordinance No 26 of 23.04.2009 for financial institutions, whereas only registered shares are allowed;
4. Main business activity shall be conducted on the territory of Republic of Bulgaria;
5. Managers and representatives of the company shall have the necessary qualification, experience and reputation, and the people who directly or indirectly hold the majority of the shares shall match certain criteria for reliability, financial stability and good reputation.

There are certain requirements to the person managing or representing a financial institution licensed in Bulgaria as well as natural persons who directly or indirectly hold a qualifying shareholding in the capital of a financial institution, beneficial owners, and persons who by law represent legal persons holding directly or indirectly a qualifying shareholding in the capital of a financial institution. Any such person shall:

1. Have a higher education;
2. Have at least 3 years of experience in economics, law, finance, IT;
3. Have not been convicted of a crime of general nature, unless rehabilitated;
4. For the last two years have not been a member of a management or supervisory body or a general partner in a company terminated due to bankruptcy in case unsatisfied creditors are left;
5. Have not been deprived from the right to hold responsible positions;
6. Have not been included in the list under art. 5 para. 1 of the Law on Measures Against Financing of Terrorism.

For registration and enlistment of a financial institution in the National Bank Register the capital of the company should be paid (in the form of cash contributions) in amount of BGN 1 000 000 (one million). The contributions to the minimum required capital must be paid in cash and should have been effected with own funds. A registered financial institution shall at all times maintain equity capital of not less than BGN 1 000 000. Equity shall be the sum of the registered and paid-up capital, the company’s reserves formed in accordance with Article 246 of the Commercial Law, retained earnings for previous years and current earnings as at the relevant reporting period, reduced by the loss for previous years and the current loss as at the relevant reporting period. In the case of repurchased shares, the company’s equity is reduced by the amount of the repurchased shares.

The administrative fee for processing the application and registration of financial institution and its entry in the register of the National Bank is BGN 3000 (three thousand). Additional fees are also payable for issuing certificates and making changes in the registered circumstances.

With the above in mind, small and individual players in the crypto market usually do not take any measures to comply with legislation, and this is somewhat justified because it requires additional costs. However, for slightly larger and medium-sized players in the virtual currency market, it is advisable to take preventive measures that can save them a lot of hassles with all sorts of government institutions in the future. Even if cryptocurrencies are not comprehensively and precisely regulated in the current Bulgarian and European legislation, this does not mean that e.g. Bulgarian National Revenue Agency (NRA) will not carry out a tax audit, within which it will establish by an audit act considerable income and therefore unpaid taxes on the part of the obliged person – crypto trader. Or the Financial Intelligence Unit will not knock on the door in connection with measures against money laundering, not taken even on paper. Or the Commission for Personal Data Protection (CPDP) for requesting from the obliged person documentation of compliance and fulfilment of legal requirements.

It is perhaps unnecessary to mention at all that the first mandatory step in this respect is the registration of a limited liability company (LTD) or a joint stock company (JSC), because according to Bulgarian Commercial Act (CA), persons who carry out commercial activities on a sole proprietorship basis, even if they have registered absolutely nothing, are presumed to be sole traders (sole proprietorship). And in the case of a sole trader, firstly, taxation is less favourable and, in addition, the trader is liable with all his personal assets for his obligations.

The next step is to map out the business model according to which the cryptocurrency trading activity will be carried out in practice. It is highly advisable to consult a lawyer and an accountant. The least advisable option is to try something out to see if it works and, once it is found to work flawlessly (only on the technical side, however), no further legal or accounting measures are taken, at least until the competent authorities come to visit and serve a prescription, administrative infringement, penalty notice or other act. A good compromise option is to test how something works from an individual account that is not subsequently used in the company business activity of crypto trading.

Bulgarian Measures Against Money Laundering Act (MAMLA) is the first piece of legislation to be complied with by cryptocurrency traders in their activities. It also contains the first attempt at a legal definition in Bulgarian legislation of the concept of virtual currencies – “a digital representation of value that is not issued or guaranteed by a central bank or a public authority, is not necessarily linked to a legal currency and does not have the legal status of currency or money, but is accepted by natural or legal persons as a medium of exchange and can be transferred, stored and traded electronically”. Under the most recent paragraphs of Article 5 of the MAMLA, persons who provide exchange services between virtual currencies and recognized currencies without gold backing on a professional basis, as well as wallet providers who offer custodial services (a natural or legal person or other legal entity that provides private cryptographic key custodial services on behalf of its clients for the holding, storage and transfer of virtual currencies) are obliged and therefore subject to sanctions under the law. Depending on the volume and complexity of the transactions carried out by the crypto trader, appropriate documentation should be prepared and made available upon request by the competent authorities.

The next act that should be complied with when trading in cryptocurrencies is the GDPR. It does not explicitly set out requirements for cryptocurrency traders, but they do arise from the activity carried out. Considering that even just email addresses without other accompanying data fall under the category of “personal data”, there is simply no way around the GDPR, even when it comes to trading with an accompanying high level of anonymization such as crypto trading.

Last but not least among the authorities controlling the trade with virtual currencies are the revenue administration authorities in the face of the NRA. In this regard, some would be surprised to know that there is a Regulation of the Minister of Finance, according to which there is a public register at the NRA, in which crypto traders should be registered. However, it should be borne in mind that it is not so important to be formally entered in this register as it is to “spell out” the business model and activities so that the tax administration has nothing to “catch” when exercising control over crypto traders. It is important to note that the registration in question should be carried out prior to the commencement of business.

The definition of “private security activity”, the procedure for obtaining the licence and the necessary documents are specified in the Private Security Activity Act and the respective sub-legislation. Private security companies can provide any of the following services: physical security, security of individuals, protection of property, protection of events, protection of real estate, etc. It is important to note that if the company wants to provide more than one type of security services, it must have an explicit permit for each type of security activity separately. Security activities can be armed or unarmed. The company can be licenced to operate on the whole territory of Bulgaria or only within a specific area. Depending on the above listed options, the licensing fee is different.

Private security activities can be carried out either by registered Bulgarian legal entities (i.e. the first step towards starting this activity is the registration of a Bulgarian company) or such activity may also be performed by a company registered in any of the other EU member states.

The application for a private security licence is filed with the General Directorate “National Police” in Sofia. The application can also be physically filed in any of the Regional Directorates of the Ministry of Interior at the registered office of the company or electronically – with an electronic signature, but in any case, it will be processed and reviewed in the Headquarters in Sofia. Along with the application the applicant is required to present the compliance documentation, including various declarations, and certificates. Some of the compliance documents refer to the partners, for example, a criminal record and a medical certificate for lack of mental illness. Others apply to the company, such as: certificate of absence of tax liabilities, lack of insurance liabilities, etc.

A basic requirement for obtaining the licence is that all company shareholders and members of the management body of the applicant company should have a clean criminal record. Additionally, all of them should present a medical certificate showing that they do not suffer from any mental diseases that might prevent them from understanding the nature and significance of their actions, i.e. not to be “non-compos mentis” or under judicial disability.

Apart from the above, which applies both to directors and owners, the law sets further requirements for the managers/directors or executive. They must be at least 18 years of age, able-bodied, to be of Bulgarian, European or Swiss citizenship, not to have been convicted of a crime of a general nature (either by the prosecution or by private individuals through a lawsuit), to be clinically healthy. Those employed as guards should have a professional qualification of “Security Guard”. The manager of the security company can be an individual which has at least higher education, while security guards are required to have at least secondary education diploma.

Where the partners and the manager of the security company are foreign persons, all documents must be issued by the relevant authority in their country of residence, accompanied by apostille and official translation into Bulgarian.

A further prerequisite for obtaining a licence is to submit samples of service card, uniform and logo of the security company.

The licence fee must be paid to the moment of submitting the application. According to the type of security activity and according to the territory on which it will be carried out, the fee varies between BGN 500 and 6,000. Usually the application is processed within one month from its filing. However, if there are any incompliances with the legal requirements, the regulator will send a notification to the applicant giving the latter 45 days to correct the identified discrepancies.

The licence application can be filed either personally by the company manager or via an authorized licensing lawyer who can convey the whole procedure via a power of attorney.

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:

1. Brokerage license  – BGN 250 000 (approx. EUR 125 000) minimum required investment capital – that type of license gives the investment intermediary the opportunity to hold clients’ money and securities and to provide any of the following services:
   1. Reception and transmission of orders in relation to one or more financial  instruments, including intermediating for conclusion of transactions in relation to  financial instruments
   2. Provision of investment advice to clients
   3. Execution of orders on behalf of clients
   4. Portfolio management
2. Full (Market Maker) license – BGN 1 500 000 (approx. EUR 750 000) foundation capital – that type of Forex license gives Bulgarian investment intermediaries the right to deal on their own account.

In both cases 25 % of the minimum required capital must be deposited with a bank before filing the application for licensing in Bulgaria and the remaining amount within 14 days from receiving the approval by the Financial Supervision Commission.

Apart from the capital requirement, there are other requirements that can be summarised in several categories:

• Requirement towards the directors (managers) – they must be professionals of good reputation, with proper higher education and experience in the field
• Requirements towards the shareholders and the origin of funds of the share capital – as above shareholders can be persons/companies of good reputation, showing clear criminal record and clear origin of investment capital
• Capital adequacy requirements
• Requirements towards staff, organizational structure
• Requirements towards internal control, audit
• Technical requirements

The Forex licensing procedure in Bulgaria is relatively fast and takes approximately 6 months. The applicant needs a couple of months prearrangements and legal work for preparing the application documents before filing the application with FSC. The Commission charges a fee for reviewing the application and issuing the investment intermediary license (different depending on the type of license) and comes up with a decision within 3 months from the date of application.

There are some new moments which any company applying for Bulgarian Forex license should take into consideration. They are related to the newest 2017 requirements and recommendations by the European Securities and Markets Authority and include the following issues: EU passporting of services and cross-border operation, poor practices in this relation, involving third parties in acquiring retail clients, operating in different jurisdictions without branches, etc.

From 2018 on all Bulgarian non-profit organizations shall be entered into a special Non-profit Legal Entities Public Register of Bulgarian Registry Agency. Presently registration is made at the District Court by the seat and registered address of the entity and there is not one unified register where the status of the non-profit entities can be checked.

The new register shall include and make public a number of important data such as:

• Name, main objectives and means to achieve them;
• Headquarters and official address of the non-profit organization or foundation;
• Names and personal details of all members of the managing board;
• Foundation act; statute;
• All decisions regarding changes in circumstances;

Announcement of any of the above listed circumstances should be made no later than one month from the day of occurrence of the relevant circumstance.

Re-registration of non-profit organizations and foundations in Bulgaria is a totally new legal phenomenon. It concerns those foundations and organizations registered with the district courts before the amendments. All existing Bulgarian foundations and non-profit organizations shall undergo a re-registration procedure under the new rules. By the end of 2020 all those entities are obliged to file an application for re-registration accompanied by a certificate of good standing issued by District Court by their seat and a BULSTAT registration certificate.

The same requirements apply to branches of Bulgarian non-profit organizations and foundations.

There is an option changes of circumstances to be filed together with the re-registration application, regardless of the nature of the new circumstance, including dissolution of Bulgarian non-profit organizations or foundations.

After their re-registration with new register, Bulgarian non-profit organizations and foundations and their foreign branches will be excluded from the BULSTAT register and the BULSTAT code will be changed with an Unified Identification Code of a non-profit legal entity. After the re-registration the legal entity will keep its current name.

The good news is that the re-registration will be free of charge, including for branches. The same re-registration process was carried out a few years ago for the commercial companies when the public commercial register was created.

Bulgaria is an EU member since 2007. Continued financial stability, lowest corporate income tax in Europe (10%), lowest cost of labour force combined with highly educated work force are only a few of its credits. That is why it is not a surprise why UK and other EU companies already started to study the opportunities to use Bulgaria as a safe harbour for relocation of their business.

The EU is the UK’s largest trade partner. Free movement of goods within the EU is one of its best achievements – no border control, no duties, no VAT payable on import. Brexit puts too much uncertainty about how UK export-import companies will be affected. Some are optimistic that new trading arrangements will be achieved allowing Britain to continue to benefit from free trade even after Brexit but largest European member states already implied that such scenario is unlikely to happen. That means that UK trading companies and manufacturers could face significant difficulties and it may happen that they will not be able to run their European businesses from the UK. Relocating to Bulgaria a working business is not an easy job, that is why most businessmen prefer to wait and monitor the consequence of events before making a decision. Waiting is not a wise option as any last minute relocation could result in negative due diligence reports and decline in reputation; some top corporate UK solicitors and consultants already advised that relocating to the EU should be considered in the wake of Brexit as moving will allow such companies to get round potential trade barriers.

Most uncertain is the statute of regulated companies, such as financial institutions, transport companies, investment brokers, etc. Now most global regulated companies do business in the EU through their UK based companies using the right to passport their service in other member states. For example, largest Forex brokers are UK based and London is the largest Forex trading hub in Europe. According to statistics over 40 % of foreign exchange trading volumes worldwide are generated in London. Large market makers will definitely relocate to other big financial centres such as Frankfurt, Dublin or Paris but for a medium Forex broker Bulgaria is the perfect relocation option. A number of new emerging brokers already chose Bulgaria for their licensing even before Brexit mainly due to the low cost of the initial investment for the licensing and low cost of the post-licence support. Bulgaria also offers perfect conditions for haulage companies licensing as well. Procedures are fast and insurance and guarantee are much cheaper as compared to the UK. Now UK transport companies use one licence of the Community which allows them to carry cargo across the EU. The negative impact of Brexit is expected to be most severe for trucking companies, not only because of the EU regulations but due to the fact that 80 % of the truck drivers in the UK are immigrants and shortage of workforce is forecasted as inevitable, if not now, surely in a few months or years.

Bulgaria is still not among the top relocation jurisdictions for big corporations but its advantages for small and medium sized businesses are unquestionable and perspicacious entrepreneurs have already noticed the chance to insure their business future by setting up a Bulgarian company. Having companies in both the UK and Bulgaria is a wise business decision for many reasons, the main of which is the fact that the initial company setup is very cheap and then running a dormant company costs a couple of hundred euros per annum. A Bulgarian dormant company can be quickly turned into an active commercial company at any time if its owner(s) decide to start doing business in Bulgaria – and this would then be a company with business history, although it has been dormant for that time. Some have already moved their whole businesses in Bulgaria while some have only cloned their businesses – moving only 10-20% of their business activities just to see how well they will perform while keeping their main business activities in the UK. In any case setting up a Bulgarian company is definitely beneficial to British businessmen, no matter what exactly the business consequences of Brexit will be.

Offering any of the intermediation employment and recruitment services listed below requires obtaining a registration certificate before starting the activities. These activities are:

• Consulting job seekers and employers
• Professional training
• Referral to appropriate employment programs
• Support to job seekers for starting work
• Offering job positions on behalf of various employers

The certificate of mediation activity is issued by the Minister of Labour and Social Policy but the application is actually filed with Bulgarian Employment Agency. Along with the application form, the recruitment agency applicants should provide a list of documents proving that their company matches the requirements prescribed by Bulgarian and European legislation such as: education of manager and employees of the company, certificate of good standing, certificate of clean tax record of the company, certificate of registration with the Personal Data Protection Commission as well as drafts of the intermediation contracts the company will offer to employers and job seekers.

There is a state fee payable at the time of application. The fee is BGN 400 if the recruitment company will operate only on the territory of Bulgaria and BGN 900 if the employment company wants to operate in other countries as well.

The whole process of registration of an employment agency in Bulgaria takes minimum three months. Actually the application is reviewed by the competent authority within 14 days so this stage is relatively fast. However, the preparation of required legal documentation which should be filed together with the application form takes at least two months.

Once the company has been registered as an recruitment agency it has the obligation to display the registration certificate prominently in all its offices as well as to quote its registration number in all its job ads and publications. The mediator can publish ads or announce job vacancies only if he has a contract with an employer.

Bulgarian Law explicitly stipulates that recruitment services shall be provided for free to job seekers. Any agency fees shall be paid by the employers. Agency fees cannot be deducted from the salary of the employees.

The first major requirement is a minimum amount of the investment. There are two applicable components – BGN 600 000 (a little more than EUR 300 000) is the amount which must be invested in hardware, software, etc. plus BGN 1 000 000 free capital for the purpose of paying clients, i.e. real money available ‘at hand’. The documents proving that the company has the required funds (BGN 1 600 000 BGN) are shown together with the application for the licence. The origin of all funds must be proved as the Commission explicitly checks for this.

Another mandatory requirement concerns the online communication equipment and respectively the central computer system. The rule is that they must be physically located on the territory of Bulgaria. However, they can be managed or maintained from a distance, i.e. even though in Bulgaria, servers and other equipment can be run from abroad. The central computer system of the online casino must be connected to the Bulgarian National Revenue Agency for real time transfer of information directly to the National Revenue Agency.  Every transaction is online registered in the Agency’s system. And finally the gaming software should be approved by the Bulgarian State Commission on Gambling

When it comes to payment applicants should bear in mind that licensed companies organizing online gambling must open a special bank account for depositing stakes and paying out winnings with an EU or a Swiss licensed bank operating in Bulgaria.

The time frame for obtaining an online gambling licence is 2 months from the date on which all required documents have been filed with the Commission. If there are any discrepancies or if the Commission requires more documents, then the applicant has another month. The fees for reviewing the applicant’s documents are BGN 40 000 for sporting events and horse/dog racing or BGN 70 000 for online poker and casino. A licence can be issued for 5 or 100 years and in order to be maintained the company organizing the online gambling should annually pay BGN 100 000 plus 20% on the net profit.

The first option includes receiving of excise goods (like fuel) on the territory of Republic of Bulgaria, which have been released for consumption on the territory of an EU member state. This means that the excise needs to be paid to the member state from which the excise goods are bought. After the goods arrive in Bulgaria and the excise is paid again to the Bulgarian authorities (it is obligatory and in order to be avoided the double payment of the excise) the seller could return back the paid excise. Then the seller could return this amount to the buyer – the actual payer of the excise. In this case:

1. It is not required the Bulgarian commercial company to possess special registration (for diesel and gasoline trade);
2. It is not required to be concluded an agreement with excise storehouse;
3. It is not required a special license for importing of excise goods from member states;
4. It is required a payment of the excise to be done to the member state from which the goods are bought;
5. It is required a payment to be done to the Bulgarian authorities.

In the second option it is possible the excise goods to be delivered directly from the storehouse of the seller to a licensed storehouse on the territory of Republic of Bulgaria. In this case the goods will be received after paying the excise fee (in Bulgaria). An agreement with the Bulgarian storehouse shall be concluded.

The third option includes receiving of excise goods as a registered receiver. In this case it is not necessary a preliminary payment of the excise fee to be done and contrary to the first option the excise goods could be bought from the foreign trader without paying the excise fee in the foreign member state. In this case:

1. It is required a special procedure and special requirements to be met in order the registration to be fulfilled;
2. It is required an agreement with licensed excise storehouse to be concluded;
3. It is required a permanent security to be provided;
4. It is not required a special license in order goods to be imported from EU;
5. The registered receiver may not pay the excise fee, it provides as an evidence not the paid excise fee but a document for the provided security;

The last and most used option for fuel trade in Bulgaria is where the trader is registered as a temporary receiver. In this case the trader may import fuel to the territory of Republic of Bulgaria once in two months. For each import a set of documents shall be drafted. In this case the excise fee shall be paid to the relevant Bulgarian authorities. It is possible the goods to be delivered directly to the consumer.

Any foreign or Bulgarian companies dealing with oil and other excise goods should bear in mind that in options 3 and 4 the goods are not required to enter into an excise storehouse. The goods could be directly received by the consumer.

And finally, when making a strategy for trading with fuel it shall also be taken into account the final value of the goods (incl. price, excise, custom fees, transport), then a profit percentage shall be included and finally the VAT, then you should decide whether the goods that you will offer to the market are competitive.

The figure of EU insurance broker registered in Bulgaria includes more options for independent work with many insurance companies and for that reason the requirements for its registration are stricter. They differ from the requirements imposed to the insurance agents. The most specific requirements imposed to Bulgarian insurance brokers are connected to the financial security and financial stability of the broker. First of all the broker must permanently provide the obligatory Professional Liability insurance valid on the territory of the entire European Union. The minimum insured amount shall be at least BGN 2.2 million for each insured event or BGN 3.3 million for all the insured events for one year. The second requirement relates to the financial stability of the broker. According to Bulgarian Insurance Code the performance of the obligations of the broker shall be secured by one of the following means:

1. By maintaining personal financial funds in amount of 4 % of the total value of the insurance premiums under insurance agreements concluded throughout the previous year but not less than BGN 33 606 or
2. By opening a special clients bank account where all the insurance premiums or insurance compensations shall be transferred to.

Except for the above listed requirements there are some other important conditions that shall be met. Special professional requirements are imposed to insurance broker’s representatives and to the management bodies of insurance brokerage companies. They are as follows:

1. Certificate of higher education
2. Professional experience or successfully passed professional exam
3. Clean criminal record
4. Entitlement to occupy materially responsible positions
5. Not to have been declared insolvent

The registration process of EU insurance brokers commences with filing an application and finishes with registration of the respective insurance broker with the relevant Bulgarian Financial Supervision Commission (FSC) register. Special documents shall be enclosed to the application. The Commission shall come up with a decision within 1 month. If any issues with the application is found, at least 15 days should be given to the applicant to fix all issues with the documentation. The government fees are BGN 7500 for registration with the Commission and BGN 200 for a certificate.

The other possible option to provide insurance intermediary services in the entire EU is by registering an insurance agent in Bulgaria. The main difference between the figures of the insurance agent and the insurance broker is the fact that the insurance agent can represent only one insurer or reinsurer. There are a few exception to the rule though. Insurance agents shall meet lower professional requirements. Firstly, the requirement for higher education is lowered down to high school education. The requirements for lack of insolvency and Professional Liability insurance are the same as these for insurance brokers with the exception that any insurance company can accept to bear all the responsibility for its agent’s actions and thus the requirement for professional insurance shall be deemed met. Where an insurance company authorizes any of its agents to operate with its own bank accounts, the requirement for opening a special clients bank account shall also be deemed met. And finally, unlike insurance brokers which apply before the Commission personally, the registration of an insurance agent with the FSC is undertaken by an insurance company which interests the agent represents.

And last but not least EU investors should bear in mind that both insurance brokers and insurance agents that have been registered in Bulgaria can perform their professional services on the territory of the entire European Union. In this case no additional licensing is required but there is an informative procedure for providing services in other EU member states which takes no more than a month.