AML contact person + new declaration for companies in Bulgaria (foreign-owned)

Money laundering – through banks, real estate, nominees or other schemes – is a crime according to Bulgarian Criminal Code as it is all over the world.  In connection to this in 2018 Bulgaria launched a new Law on Measures Against Money Laundering which totally repealed the previous one in force. The new law fully complies with European standards and in particular with Directive (EC) 2015/849 on the Prevention of the Use of the Financial System for Money Laundering or Terrorist Financing. The changes are mainly related to the imposition of new obligations to those who are defined as “obliged entities” – these are all natural and legal persons, who are committed to the observance and implementation of the anti-money laundering and anti-terrorist financing measures referred to in the same law.

One of the main obligations under the new Bulgarian Anti-Money Laundering Act is related to all companies, including branches of foreign commercial companies registered in Bulgaria. When entering into business relations with their clients / contractors obliged entities must apply measures for comprehensive check of their client, including identification of the beneficial owner of their clients – legal entities. By virtue of this law “a client” is any natural or legal person or other legal entity that enters into business relations or performs a random business transaction with an obliged person. In case a client appears not personally, but through a nominee, in order to be able to perform this identification, the obliged person must consult the relevant Bulgarian register (Trade Register, BULSTAT register) as well as to obtain an official document (contract, certificate or other) showing who the beneficial owner is.

The new Anti-Money Laundering Act requires that legal entities  submit to the relevant public register (Commercial Register, BULSTAT Register) a specific declaration about their beneficial  owner. The declaration is required to be presented by the legal representative / the manager of the company. It is this particular declaration and its submission that is a subject of the most discussions. At first glance, it appears that all companies must submit a declaration to the relevant registry, regardless of the form of their company. But as you read the law, you can see that this declaration is not necessarily needed for natural persons. This means that  a Ltd. company, which has a natural person registered as the sole owner of the capital, is not obliged to declare and prove again that this person is the real owner of the respective commercial company. This is not the case, however,  if the owner of the company is not a physical person, but another legal entity, whether Bulgarian or foreign. In this case the respective national public register does not show directly who the primary beneficial owner is and therefor the submission of a declaration in this case is mandatory.

When it comes to a Limited Liability Partnership, the obligation for declaration of the actual owner is more logical as there are at least two partners (natural or legal persons). For a company in which we have, for example, two associate natural persons holding 50% of the capital each there isn’t a obligation for declaration of a beneficial owner as the names of both are disclosed and are visible in the register. When there are more partners – physical persons in the association, some of which hold less than 25% of the capital, the latter shall not be declared as beneficial owners. If the minority partners with shareholding less 25 % are legal entities, however, their beneficial owners should be declared regardless of the fact that their share is minoritary.

Along with the declaration of a beneficial owner, the new law introduces another obligation for all Bulgarian companies. Every company shall declare a contact person (sort of AML officer) for communication with tax and state authorities which person must be permanently residing in Bulgaria. This is a practical problem for all Bulgarian companies founded by foreign shareholders.  Additional difficulty to foreign company owners will be the fact that the contact person must express his consent by a special notary certified statement. Upon giving such statement, a number of obligations will arise for the contact person, such as an obligation to receive, dispose of and provide appropriate and accurate information and data about the beneficial owners. The contact person  can be fined  between BGN 100 to BGN 1,000 for non-fulfillment of this obligation, and in case of a repeated violation – the fine shall be from BGN 200 to BGN 2,000.

According to the new law, the deadline for filing the declaration of the beneficial owner and contact person of the legal entity is February 1, 2019. However, information appeared in the media that this period may be extended as the Regulation on Application of Anti-Money Laundering Measures is not ready yet and some of the forms have not been published. For the moment, however, there is no clear and accurate information whether this will happen.  

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:

  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

    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:

  2. Requirement towards the directors (managers) – they must be professionals of good reputation, with proper higher education and experience in the field
  3. 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
  4. Capital adequacy requirements
  5. Requirements towards staff, organizational structure
  6. Requirements towards internal control, audit
  7. Technical requirements
  8. read more

Relocating to Bulgaria or move business after Brexit

Relocating to Bulgaria after Brexit is an option considered by more and more Britons. Moving business to Bulgaria is another option which more and more European and worldwide businessmen are taking advantage of.

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.

Registration and licensing of recruitment / employment agency in Bulgaria

The procedure of registration of recruitment / employment agencies in Bulgaria is regulated under Bulgarian Employment Promotion Act and Ordinance on the Terms and Conditions for Conducting Mediation in Employment.

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.

EU Online Gambling Licence from Bulgaria

Gambling licence in Bulgaria is the best and most cost effective solution in the whole EU. Especially when it comes to online gambling which could in fact be managed from abroad and not necessarily from Bulgaria where the licence has been obtained. Bulgarian Gambling Law requires that the owner of the company that will provide online gambling to be either a Bulgarian or an EU national. The same requirement is if the shareholder is a legal entity. If a non-EU company plans to obtain such licence, it should incorporate another EU company first and then the new entity can be the shareholder of the Bulgarian company that will organize the online gambling.

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.

Doing business in Bulgaria from abroad

Doing business in Bulgaria has never been easier. Company incorporation as well as all possible forms of starting business in Bulgaria are entirely covered by the modern and sophisticated corporate legislation adopted by The Republic of Bulgaria which consisting of Codes, Acts, Ordinances, etc. Generally speaking all available applicable laws in force allow miscellaneous commercial and other real life business activities under many various forms. The major and most important of the above mentioned and described acts that do regulate the entire complicated process of doing business in Bulgaria are the Constitution, the Commercial Code, and the Act on Contracts and Obligations. There also exist other acts and laws but they are applicable in specific cases – for example if some type of business requires licensing. Bulgarian economy is very liberal and licenses apply to a very limited number of business activities (for example weapons, gambling, etc.).

If you are a foreign national, permanently living abroad, and you have already appreciated the big benefits of doing business by running a Bulgarian company, then maybe you have already asked yourself the question whether it is possible to incorporate a company in Bulgaria and then run it from abroad or you still have to come to Bulgaria personally.

If you have the option for coming to Bulgaria, no matter the reason why, the best option would be to act personally while setting up your business in Bulgaria. This of course does not mean to prepare all required paperwork and other required documents personally. It means that you will have to sign all related documents that someone, usually a trustworthy Bulgarian business lawyer, has already drafted on your behalf. If all documents have already been exchanged by post or e-mail and certainly approved by the owner/s or respectively shareholder/s, then the latter will only have to sign the documents, some of which before a notary public. All this takes from a couple of minutes to an hour.

If however you are not planning an initial business trip to Bulgaria, then you should bear in mind that there is an option for your new Bulgarian company to be incorporated without your physical presence in the country. In this case you can have the documents posted or e-mailed to you – which, upon receipt, you will sign and post back to your Bulgarian company representative (e.g. a corporate attorney etc.).

The only problem in the above described scenario is the necessity of witnessing some of the documents. As explained earlier, there is an option for these papers to be witnessed by a notary, even a notary abroad. A common problem for many investors who want to do business in Bulgaria is that Bulgarian commercial laws do not allow solicitors to witness signatures on documents as it is in many countries around the world – and only notaries are allowed to carry out this job. Notarizing documents abroad is a little but more difficult because once notarized, the papers then have to be legalized. Which means a little more time and expenses. An exception to this rule are countries Bulgaria has singed legal assistance treaties with – in which case documents get automatically recognized without being legalized. The last option in this regard, which is preferred by foreign citizens, is the company documents to be witnessed in any Bulgarian embassy around the world. Even if you live in Russia, you can still go to the Bulgarian embassy in London, UK, and do this job successfully.

Following the Bulgarian company registration process successful end, owners or shareholders start actively doing business in Bulgaria (as this what they have established the company for after all).

The first question in this regard is related to the scope of business activities of commercial companies in Bulgaria. They can do virtually any kind of business they wish. Or do no business at all – something that is not prohibited but even allowed. In the latter case the company pays no taxes, nor any other sort of contributions to the state. The only expenses on account of the LLC or other type of corporate body are the accounting and / or legal charges which are due annually for filing nil returns.

Upon registration Bulgarian companies declare their business activities with the Trade Register. But are they restricted with the exact activities that they have stated at the time of initial incorporation? No, they are definitely not. Even if a company, at the time of the business start-up, declares production of some sort of goods, later on it can start doing other type of business in Bulgaria, EU or around the world, e.g. dealing with distribution of goods even if this is not explicitly mentioned in the official companies register. But aren’t there any limitations after all? Yes, there are limitations for doing business in Bulgaria of course but they are related to some sectors which are monopolized by the state – e.g. military production, etc. Some other specific commercial activities could be subject to initial licensing – for example production of drugs, etc.

To summarize things up – almost all of the things described above can be done either personally by foreign businessmen who are doing business in Bulgaria or from abroad via proxies – trustworthy lawyers, managers, etc. Many things can also be done over the internet – e-banking, real time business monitoring, etc. Having in mind this, may foreign investors have already developed a successful business in Bulgaria without their physical presence in the country.

EU insurance agency – registration of insurance broker or agent in Bulgaria

EU insurance agency can be set up via one of the following two formations in Bulgaria – an insurance broker or an insurance agent. These two types of insurance intermediaries are legally defined in Bulgarian Insurance Code in accordance with current EU legislation.

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:

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

    The benefits of a Bulgarian offshore company start with the lowest corporate tax rate in the whole EU – 10 %. Some typical offshore companies in Europe offer 0 % tax but as explained above this is the price for doing 100 % legal business in the entire EU. And all across the world.

    Offshore companies in Bulgaria however have many things in common with typical offshore companies. To start with – nominee shareholders and nominee directors are not explicitly regulated under Bulgarian law but in practice are quite popular. Plus they are 100 % legal. So in other words any savvy businessman can run even a big business quite legitimately under the protection of and using all benefits of a European jurisdiction – while at the same time no one knows that he is the real owner of that business who remain hidden behind nominee shareholder/s and nominee directors.

    Company in Bulgaria with account is something that every local company is entitled to. Anyone can set up a Bulgarian offshore company and then immediately open a bank account in Bulgarian Lev (BGN), Euro (EUR) or any other popular world currency. The fees that Bulgarian banks charge are very minimal, some even offer this service for free. Monthly fees for a Bulgarian company bank account are also very low – in most cases no more than 5 Euros. Another benefit in this relation is that many EU based large banks have branches in Bulgaria – and many corporate clients who use the services of such bank in their home countries prefer to use the services of the same bank, via its branch of course, in Bulgaria.

    Another very important aspect of bank services in Bulgaria is that almost all banks offer e-banking – operating a bank account over the internet from all around the world. These bank products are highly appreciated by foreign investors who can register an offshore company in Bulgaria but conduct their business from abroad. Any businessman who has activated electronic banking with any Bulgarian bank can make and receive bank transfers like a charm, with only a few clicks on his computer.

    E-commerce in Bulgaria – online store requirements

    Running an online e-store and selling goods or services worldwide while paying the lowest corporate tax in the world? If this idea has already come up to your savvy business mind please search no further – Bulgaria is the place for setting up a limited company and conducting EU based e-commerce activities while paying only 10% tax, no matter where you are selling / shipping goods / services to!

    Just like anywhere around the world, setting up an online web shop in Bulgaria does not require the availability of an offline store although you still have to register a Bulgarian company which will receive payments, issue electronic invoices, etc. The e-store is a computer software that provides the merchant (trader) with the opportunity to easily and quickly publish information for his goods on the Internet – and respectively sell goods / services and make profit. Although most legal requirements for traditional offline commercial activities apply for e-trade, some special rules need to be implemented. Applicable are mainly Bulgarian E-commerce Act and The Consumers Protection Act as well as other laws.

    When making a decision to start or simply move an e-business in Bulgaria you should keep in mind the following:

    Any Bulgaria based e-merchant / provider of services on the Internet shall be registered as a Bulgarian company. It could be a limited liability company with only 1 (one) Euro capital! Once duly formed, this company will be the operator of the online store.

    According to Bulgarian law it is obliged to provide to the consumers and to the competent authorities direct and permanent access to the following information: the name of the merchant; the seat and the registered address; the address where the activity is performed; correspondence details – telephone numbers, e-mails, etc.; Unique Identification Code of the trader; information for the supervising authorities; information for VAT registration – if any; another information required by Bulgarian laws. The online trader is also obliged to inform whether all web shop advertised prices include taxes, fees and other expenses.

    Another requirement demands the online trader to make a registration in accordance with Bulgarian Protection of the Private Data Act or to provide special options before the consumer.

    As for advertisement – the advertisement messages have to be: easily recognized as such; to identify unanimously the addressee; to provide understanding about the characteristics and the conditions of the advertised product. Should you decide to send unsolicited messages you are obliged to clearly and unanimously provide the identification of these commercial messages as unwanted.

    During the process of concluding of an online contract some EU requirements shall be met. They concern: the technical steps that shall be undertaken for the conclusion of the contract; the back up of the contract; the means of searching and correction of any mistakes; the languages that can be used for concluding the contract.

    General terms and conditions to the e-contracts shall be also be presented and made publicly available.

    According to Bulgarian and EU laws by concluding the e-contract, the buyer becomes legitimate owner of the purchased goods. One should bear in mind that according to the Bulgarian Protection of the Consumers Act, the client may cancel the contract, within a 14 day period, without stating any reason and having the right to a full refund. In this case the goods shall be returned back to the merchant and then the said trader shall refund the price that has been paid by the client.