Many wealthy foreigners in Bulgaria in risk of being expelled from the country over currency law violations
So what do the wealthy foreigners living in Bulgaria risk if they do not comply with the currency regulations? Read on to find out what the risks are and how to mitigate them.
Foreign tax residents in Bulgaria have more responsibilities than merely paying their taxes
It’s not a secret that many affluent foreigners have chosen Bulgaria as their second homeland. Many of them have settled in Bulgaria because of the ultra-low 10% flat tax rate and have become Bulgarian tax residents. Especially those with passive investments in stocks, bonds, ETFs, etc. have found out that the fiscal regime in Bulgaria is quite beneficial. And since the investment ecosystem in Bulgaria is mainly focused on Bulgarian real estate, the opportunities for using Bulgarian financial institutions for investments in the financial markets are quite limited. Therefore, logically most of these foreigners are holding their assets through a non-Bulgarian banks and brokerage firms. But there may be a problem, a serious problem that potentially may lead to the expulsion of the foreigner, due to a seemingly minor compliance violation.
A foreigner shall be refused a visa or entry into the country if there is evidence that he/she has violated the border, passport, visa, currency or customs regime of the Republic of Bulgaria during the past 5 years;
Art. 10, par. 1, p. 10 of the Bulgarian Foreigners Law
Bulgarian currency law and Ordinance 27 of the Bulgarian National Bank
Bulgarian currency law requires from tax residents to declare certain foreign investments. The provisions of the currency law, reflected in Ordinance 27, stipulate that:
Resident natural persons shall annually report before the Bulgarian National Bank in statistical forms their receivables from or liabilities to non-residents on financial credits, receivables on accounts opened in other countries, as well as investments in securities made without intermediation of a resident person – investment intermediary, by 31 March in the year following the reporting year.
The statistical forms under paragraph 1 shall be submitted provided:Art. 13 of Ordinance 27 of the Bulgarian National Bank
- the total amount of all receivables on financial credits, accounts in other countries and investments in securities made without intermediation of a resident person – investment intermediary, is equal to or exceeding BGN 50,000 or its foreign currency equivalent as of the end of the reporting year;
- the total amount of all liabilities on financial credits is equal to or exceeding BGN 50,000 or its foreign currency equivalent as of the end of the reporting year.
In simple terms, any investments in ETFs, mutual funds, stocks, bonds, bank accounts, etc., held abroad (ie with Revolut, Interactive Brokers, Charles Schwab, any foreign bank, etc.), should be declared to the Bulgarian National Bank. This is of course if these investments total to more than 50 000 BGN. From our experience, virtually all foreigners, living in Bulgaria, who hold investments abroad, have more than 50 000 BGN.
The consequences for not submitting annual statistical forms to the Bulgarian National Bank
Failure to declare foreign holdings was a criminal offence in the past. The notorious art. 251 of the Bulgarian Penal Law was previously foreseeing a jail term of up to 6 years for certain violations of the currency regime. Luckily the Bulgarian parliament has amended the norm and now there is only an administrative penalty. The recent new amendments of art. 251 of the Penal Code are again quite frightening, but they don’t concern directly the non compliance with the statistical reporting to the National Bank. You can read more about the latest legal changes (in Bulgarian) at: Article 251 of the Penal Code – is the repression coming back?
Consequences for the foreigners, living in Bulgaria
While non compliance with the currency regulations as per Ordinance 27 will only result in hefty penalty for Bulgarians, the consequences for the legal foreigners in Bulgaria may be much more serious. As quoted above, art. 10, par. 1, p. 10 of the Foreigners Law foresees that foreign offenders of the currency regime will be refused entry into the country. And this ban should be applied for 5 years after the violation. Please also note that the legal term for the ban was recently increased from 2 to 5 years, to comply with the Bulgaria’s Schengen membership. And now, after the Schengen membership is official, the Bulgarian immigration authorities are more than keen to implement this rule without any exceptions, for the sake of their reputation in front of the European partners. Sound scary? Definitely yes.
Revocation of the long-term residence permits
Logically, if the foreigner violates the currency regime, his residence permit will also be revoked. According to the law:
Revocation of the right of residence of a foreigner in the Republic of Bulgaria shall be imposed when the grounds under Art. 10, par. 1, p. 1 – 4, 6 – 11, 14, 16, 20 – 22 and 26, as well as in the cases under Art. 26, par. 3;
Art. 40, par. 1, p. 2 of the Foreigners Law
The solution
So is there a solution if the foreigner has violated the currency regime? We always suggest taking immediate action. And of course, for the discussed in this article situation, trying to solve the issue with the National Bank. It will be a difficult task, especially if there are multiple years, where no statistical forms have been submitted. But with the right approach, the foreigner can eventually ascertain that his file can be put in order. In most cases, we can successfully assist the foreigner into bringing his file in order.
What we also recommend is to look for a more sustainable residency status in Bulgaria. Namely the Bulgarian Golden Visa through ETFs, with path to full citizenship.
For any additional questions, please don’t hesitate to contact us.