Permanent residence by investment obtained under the pre-2021 law

Your questions about Bulgarian investment residence answered

A lot has changed in the Bulgarian legal framework regarding immigration and citizenship. The Bulgarian citizenship law and the Bulgarian foreigner’s law were both seriously amended in 2021 and 2022. Today, we will shed some light on one very important topic for many foreigners who have obtained Bulgarian permanent residence through investment.

What will happen to Bulgarian permanent residence holders by investment, who are not obtaining Bulgarian citizenship yet?

Many citizenship/residence investors in Bulgaria were caught in catch-22 after the legislation changed in 2021 and 2022. And many were left with the option to eventually retain their Bulgarian permanent residence cards, but not being able to (immediately) proceed with their citizenship applications. So what will happen to them now? Can they simply keep their residence permits and then eventually apply for citizenship later? And do they have to keep their investment intact or they are allowed to liquidate it? We will answer these questions below.

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Can you, as Bulgarian permanent residence by investment holder, liquidate your investment while retaining your residence rights?

There are two main scenarios, which we will have to analyze in the light of the latest legal amendments. The main difference is whether the permanent residence card has been obtained on basis of the legislation before or after March 2021.

In the vast majority of the cases, the residence card has been received on basis of investment in Bulgarian government bonds (or in rare cases, through other investment instruments). This was possible under the old (pre-March 2021) law.

In other cases, the permanent residence status may have been obtained on basis of investment in Exchange Traded Funds (ETF) or other, more sophisticated instruments. Such options were made possible after March 2021. These cases will be still forthcoming as many investors are currently applying full speed for permanent residence under the new law.

The permanent residence is obtained under the NEW amendments of March 2021 (investment in ETFs, etc.)

If this is the case, you must hold your investment intact for 5 years from the date of obtaining your permanent residence permit. This is made clear by the new legal texts, enforced on 18.03.2022:

The investments under par. 1, items 6, 8 and 16 must be maintained above the minimum amount required by law for a period of 5 years from the date of granting the right of permanent residence. Foreigners granted the right of permanent residence in Bulgaria shall immediately declare to the Bulgarian Investment Agency, respectively the Ministry of Innovation and Growth, any change in the circumstances of their investments and provide evidence thereof.

Art. 24, par. 11 of the Bulgarian Foreigners’ Law

Additionally, now the investors are obliged to declare any changes made to the investment. This must be done even if the change doesn’t affect the eligibility of the investment (ie the ETFs are moved from one account to another under the same name).

Additionally, the investor may not use the investment as collateral (neither in Bulgaria nor abroad). This restriction was introduced in 2021:

The acquired rights and assets as a result of the investments under par. 1, items 6 and 8 may not be used as collateral for loans to credit and financial institutions for the term under par. 11.

Art. 24, par. 12 of the Bulgarian Foreigners’ Law

Although the law doesn’t explicitly specify that, the investment can be liquidated after 5 years and the permanent residence will remain valid. At that point, the investor can also apply for Bulgarian citizenship, as per the conditions of the citizenship law.

The permanent residence is obtained under the OLD pre-2021 law (investment in Bulgarian government bonds, etc.)

Currently, almost all of our clients are trapped in this situation. From what we have written already, it is obvious that the investment needs to be retained in order for the residence permit to remain valid. The problem however is that according to the foreigners’ law, these residence permits (with investments under the pre-2021 law) may be cancelled anyway:

Withdrawal of the right of residence of a foreigner in the Republic of Bulgaria is necessary when there are no more grounds under … art. 25, para. 1, items 6, 7, 8, 13, 16 and 17, …, as well as when the investment for which the foreigner has received a permanent residence permit is terminated or transferred to another person within the term under Art. 25, par. 11 or if it is reduced below the minimum amount required by law, or ceases to meet the requirements of Art. 25, par. 12, regardless of the grounds for termination, transfer or reduction.

Art. 40, par. 1 of the Bulgarian Foreigners’ Law

The current law doesn’t have any provisions to Bulgarian government bonds (or similar investments as per the old law). The cancellation of these permanent residence permits may be therefore “necessary“. There are few things that need to be considered though.

First and foremost, to our best knowledge, there are no reported cases of such cancellations yet. Secondly, the term used in the law (the cancellation is “necessary”) is not 100% imperative. The law doesn’t state that the permits “are cancelled” or “must be cancelled“. This may give certain legal freedom to the authorities for interpretation.

Last, but not least, the legal uncertainties around the amendments of the Foreigner’s Law of 2021 and 2022 are of such magnitude, that the administration will need few years to only start comprehending the idea of the deputies. This is of course only if they knew their idea themselves, which should be the subject of another article.

What to do?

This is the one million dollar question. We recommend the following:

• All investment permanent residence holders should stick to their investments (bonds, ETFs, etc.). They should refrain from any operations with the investments;
• If any operations are done with the investment, these should be immediately declared with both the Investment Agency and the Ministry of Innovation and Growth;
• Permanent residence holders under the pre-2021 law (bonds, etc.), should try (if they can afford it) to invest in ETF under the new law. And this, without liquidating their positions in the old investment. Once this is accomplished, further steps must be taken with the authorities to “transform” their legal status (with our assistance). After all that, the old positions may be liquidated;
• All permanent residence holders can apply for Bulgarian citizenship after 5 years. They should do that as the advantages of the Bulgarian passport and EU citizenship are countless.

For any additional questions, please don’t hesitate to contact us.